In an increasingly complex and uncertain world, planning ahead is essential – especially when it comes to succession and estate matters. Whether you are safeguarding family wealth, ensuring a smooth transfer of assets or simply seeking peace of mind, early and thoughtful planning is key.
If no planning is done, your estate may be distributed according to default legal rules (including forced heirship rules), which may not reflect your wishes and could lead to delays, disputes and unnecessary tax burdens. A legal process will need to be followed in order to appoint an administrator of the estate, and a tax clearance would have to be obtained (which under certain circumstances could be a cumbersome process in the absence of the deceased). This may give rise to substantial delays, which may have an impact on existing business activities and obligations. Such obstacles may also arise in the case where a will has been put in place, given that again a legal process will have to be executed. Trust arrangements offer a suitable solution to the above, provided that a trust is set up during the lifetime of the individual and, therefore, there will be no additional process required to be followed after death or incapacity.
Cyprus has emerged as a leading jurisdiction for the establishment and administration of trusts. Its legal framework, rooted in English common law and enhanced by Cyprus legislation, offers a compelling combination of flexibility, asset protection and confidentiality. The Cyprus International Trust (CIT) is widely used by international individuals and families seeking to structure their wealth, plan for succession and safeguard assets across generations.
Legal Framework and Jurisdiction
The Cyprus International Trusts Law of 1992, as amended, provides the statutory foundation for CITs. It draws heavily on English trust principles while introducing modern features that make Cyprus stand out among international trust jurisdictions. All matters relating to a CIT are governed exclusively by Cyprus law and Cyprus courts have sole jurisdiction. This legal certainty is particularly attractive to international clients who value stability and consistency in cross-border planning.
Formation and Structure
To establish a CIT, the settlor and the beneficiaries must not be Cyprus tax residents during the calendar year preceding the trust’s creation, although they may become residents afterward. At least one trustee must be a Cyprus tax resident throughout the life of the trust. If such criteria are not met, the trust will be deemed to be a local trust and will not benefit from the advantages the CIT legislation offers.
CITs are highly versatile vehicles. The settlor may retain certain powers, such as the ability to amend or revoke the trust, appoint or remove trustees or change the governing law. A protector may also be appointed to oversee the trustees and provide an additional layer of oversight. Trustees who hold and manage the trust property are bound by fiduciary duties and strict confidentiality obligations. The settlor may appoint a regulated service provider to be the Trustee of their trust or the settlor may incorporate a private trustee company (PTC) with family members on the board to be the PTC.
Types of Trusts
CITs can be structured as either fixed or discretionary trusts. In a fixed trust, the interests of the beneficiaries are clearly defined in the trust deed. This type of trust is often used in succession planning, particularly through life interest trusts that allow for long-term planning and smooth asset transition upon death.
In contrast, a discretionary trust gives the trustees full discretion over how and when to distribute the trust’s income or capital among a class of beneficiaries. No beneficiary has a fixed entitlement, which offers flexibility and enhanced asset protection, especially in complex family or financial situations.
Key Advantages of Cyprus International Trusts
Cyprus International Trusts offer several advantages that make them a preferred choice for international clients. There is no perpetuity period, allowing the trust to exist indefinitely. Income can be accumulated without restriction and trusts can be established for both charitable and non-charitable purposes.
CITs are protected by firewall provisions that shield them from foreign inheritance laws, forced heirship rules and matrimonial property regimes. Transfers of property to the trustees of a CIT can only be challenged on the grounds of fraud and, even then, only within two years of the transfer. These features make CITs a powerful tool for asset protection and succession planning.
Trusts in a Globalised World
As families and assets become increasingly international, trusts offer a practical and effective solution for managing wealth across jurisdictions. They provide a structured way to ensure that assets are preserved, protected and passed on to generations. With regulatory landscapes evolving and intergenerational wealth transfers accelerating, the role of trusts in private wealth planning is only set to grow.
Cyprus, with its robust legal framework, experienced professionals and strategic location within the European Union, is well-positioned to support this growth. Whether used for succession planning, asset protection or philanthropic giving, CITs offer a flexible and secure foundation for building and preserving wealth across generations.
By Michael Tsikouris, Partner, Head of Legal Practice, and Natalie Vassiliou Moustaka, Director, In charge of Private Client Department, PwC Legal in Cyprus
- This opinion article first appeared in the 2025 edition of The Cyprus Journal of Wealth Management. Click here to view it. To view the full edition, click here
