A family trust can be useful when assets need to be kept under ongoing management rather than passed outright after a death. It can be used to hold and administer interests in a family business, make provision for younger or vulnerable beneficiaries, and regulate when income or capital may be distributed.
A family trust may be established under the federal onshore regime, the Dubai International Financial Centre (DIFC), or Abu Dhabi Global Market (ADGM). These regimes treat trusts differently, so the governing law should be selected before the structure is documented or funded.
What Is a Family Trust and How Does It Work?
A trust is established when a settlor transfers identified property to a trustee for the benefit of beneficiaries or a permissible purpose. The trust deed specifies the trustee’s powers and responsibilities, names the beneficiaries, and regulates distributions.
A protector may be appointed to approve certain decisions or to appoint or remove a trustee. The protector’s powers are set out in the trust deed and may be binding. The settlor may also prepare a separate letter of wishes explaining preferences about distributions, medical needs, education or participation in the family business. The letter is normally non-binding and cannot override the trust deed.
Trust property may include cash, investments, company shares, intellectual property, and, where permitted, real estate. Signing the deed does not itself transfer every asset. Company registers, bank mandates, custody records, land records, and licensing documents may need separate updates.
How Does a Trust Differ From a Will?
A Will begins to operate on death. It directs how assets remaining in the deceased person’s estate should be administered and distributed, usually through a probate or succession process. It may also appoint an executor and make guardianship arrangements.
A trust established during the settlor’s lifetime operates before death and does not automatically end when the settlor dies. Assets validly placed in the trust continue to be managed under its terms, which may provide for the trust to continue, change or distribute assets after death. Those assets generally do not pass under the settlor’s Will, although a Will may still be needed for assets outside the trust, executor appointments and guardianship.
When Might a Family Trust Be Useful?
Keeping a Family Business Together
A trust can help keep shares in a family business together across generations, either directly or through a holding company. Under the federal regime, the trust owns the shares, while in the DIFC and ADGM the trustee holds legal title. Family members can benefit under the trust without receiving or dividing the shares themselves.
The structure should align with the company’s articles, shareholder agreement, pre-emption rights, financing documents, and licensing requirements. Transferring shares to a trustee does not determine who will serve as director, exercise reserved shareholder powers, or run the business.
Providing for Minors or Vulnerable Beneficiaries
Education, housing, healthcare, or maintenance can be funded by a trust without the beneficiary receiving the entire fund. Capital can be released at the trustee’s discretion, after certain events, or at specific ages, as stipulated in the deed.
This may be appropriate for a minor, a beneficiary who requires ongoing assistance, or an individual who is not yet prepared to manage substantial assets. The deed should specify the method by which need will be assessed and whether specified decisions require the protector’s approval.
Cross-Border Estate Planning
UAE trust documents should be prepared with the laws of each country materially connected to the family or its assets in mind. Nationality, residence, tax status, matrimonial rules and the location of property may affect recognition, taxation and enforcement.
The DIFC Trust Law limits the effect of certain foreign heirship claims concerning a valid DIFC trust. That protection does not displace rules applied by foreign courts and registries to locally situated property, tax liabilities, matrimonial claims, or enforcement proceedings.
How Do the UAE Trust Regimes Differ?
Federal Onshore Trusts
Federal Decree-Law No. 31 of 2023 Concerning Trust took effect on 30 September 2023. It applies to trusts established under the federal regime not apply in financial free zones that have their own trust laws, including the DIFC and ADGM
A federal trust is created through a written trust instrument accredited and registered with the competent authority in the relevant emirate. It becomes a separate legal person on initial registration, with its own financial and administrative independence. This differs from common-law trusts in the DIFC and ADGM, which are legal relationships rather than separate legal persons.
Cabinet Resolution No. 137 of 2023 governs accreditation and registration of the trust instrument. Cabinet Resolution No. 141 of 2023 sets minimum licensing requirements for professional trustees and professional legal persons. Forms, fees, and asset-recording procedures should be confirmed in the emirate concerned.
DIFC Trusts
A DIFC trust is governed by DIFC Law No. 4 of 2018, the Trust Law, as amended. The current official consolidated version is dated March 2024. Common-law trust principles and rules of equity supplement the legislation.
The trustee holds legal title to the trust property and administers the property for beneficiaries or a lawful purpose. General registration of a DIFC trust is not mandatory, although specified may be recorded on a private DIFC register. Trustees must still keep trust and beneficial-ownership records and provide them to the relevant authorities when required. Providing trust services as a business in or from the DIFC generally requires Dubai Financial Services Authority (DFSA) authorisation unless an exclusion applies.
ADGM Trusts
ADGM trusts are governed by English common law and equity, relevant English legislation, and the Trusts (Special Provisions) Regulations 2016. An ADGM trust is not a separate legal entity, in this instance, the trustee holds and manages the property for the beneficiaries or a permitted purpose.
The trust itself does not need to be formally registered. Professional trust-service providers operating in or from ADGM generally require authorisation from the Financial Services Regulatory Authority (FSRA). Trustees must also comply with beneficial-ownership, anti-money-laundering and recordkeeping requirements. Since May 2026, ADGM trusts cannot be established for purposes falling within ADGM’s definition of a non-profit organisation.
Asset Protection Has Limits
An asset protection trust in the UAE does not place assets beyond the reach of every creditor. Its effectiveness depends on the governing law, the trust terms, the location of the property, the settlor’s solvency, and the timing and purpose of the transfer.
The DIFC and ADGM trust laws limit the effect of certain foreign heirship claims on trusts validly created under those regimes. These protections do not override rules that foreign courts and registries may apply to property in their jurisdiction, tax liabilities, matrimonial claims or enforcement proceedings.
How Is a Family Trust Established and Funded?
The process should begin by mapping the assets, liabilities, ownership records, jurisdictions, beneficiaries, and existing estate documents. It will usually involve:
- defining the succession, governance, and distribution objectives;
- selecting the governing law and jurisdiction;
- choosing the trustee(s) and deciding whether to appoint a protector;
- drafting the deed, reserved powers, replacement mechanisms, and letter of wishes;
- reviewing UAE and foreign tax, beneficial ownership, source-of-funds, matrimonial, and inheritance issues; and
- transferring each asset through the relevant bank, company, custodian, authority, or registry.
Funding is central to the structure. Assets must be validly placed in the trust and the relevant ownership records updated. Under the federal regime, the trust owns the transferred assets, while under DIFC and ADGM law the trustee holds legal title. If these steps are not completed, the assets may remain in the settlor’s estate and the planned succession result may not be achieved. Business owners may also need to amend shareholder agreements, articles, signing authorities and management-continuity arrangements.
A trust should be reviewed alongside the family’s Wills and other estate-planning documents, corporate arrangements, tax position and the laws of countries in which family members or assets are located. Legal advice should be obtained before selecting the governing regime, transferring business interests or real estate, or imposing long-term restrictions on distributions.
Is a Family Trust Right for Your Family?
A Will may be sufficient where the estate is straightforward, beneficiaries can inherit outright and no continuing administration is needed. A trust may be more appropriate where:
- family-business shares should remain under unified ownership;
- distributions should be staged, conditional, or discretionary;
- beneficiaries are minors or require continuing support;
- assets and family members are located in several jurisdictions; or
- governance should continue during incapacity and after death.
Many families use both. The trust governs property transferred into it. The Will covers assets remaining in the individual’s name, appoints executors, addresses guardianship where applicable, and deals with the estate residue.
Trusts are often used by business owners, internationally mobile families, blended families and families where beneficiaries have differing financial needs or levels of involvement in a business.
They are not automatically suitable for a simple estate. Trustee remuneration, legal and tax advice, reporting, asset-transfer formalities, and continuing administration may outweigh the benefit. A settlor who expects unrestricted personal control may also find that a genuine trust does not match the intended arrangement.
Speak to Our Estate-Planning Team
Book a consultation with our estate-planning team to assess whether a trust is suitable for your family, identify the most appropriate UAE framework, and address the legal, tax, and asset-transfer considerations before implementation.