What is a Fixed Trust?
A fixed trust (also known as a fixed interest trust) is a trust structure in which each beneficiary has a clearly defined and predetermined entitlement to the trust's income and/or capital. Unlike a discretionary trust, where the trustee decides distributions, in a fixed trust the beneficiaries' rights are established from the outset in the trust deed.
Fixed trusts are commonly used when the settlor wants certainty about how their wealth will be distributed. Each beneficiary knows exactly what they are entitled to receive, which can be expressed as a percentage of the trust fund, a specific monetary amount, or a particular asset.
How a Fixed Trust Works
In a fixed trust, the trust deed specifies exactly what each beneficiary is entitled to receive. The trustee's role is primarily administrative — ensuring the trust assets are managed properly and distributions are made according to the trust deed's terms.
Key Characteristics
- Predetermined shares — Each beneficiary's entitlement is clearly defined (e.g., 50% to spouse, 25% to each child)
- Vested interests — Beneficiaries have legally enforceable rights to their share of the trust fund
- Limited trustee discretion — The trustee must distribute according to the trust deed; they cannot reallocate between beneficiaries
- Transparency — Beneficiaries know their exact entitlement, providing certainty for personal financial planning
- Succession clarity — The trust deed may specify what happens to a beneficiary's share upon their death
Types of Fixed Interests
Income Interest
A beneficiary may be entitled to all or a specified percentage of the trust's income, while the capital is preserved for other beneficiaries or a future date.
Capital Interest
A beneficiary may be entitled to a specified share of the trust capital, which may vest immediately or at a future date (such as reaching a certain age).
Life Interest
A beneficiary receives the income from the trust during their lifetime, with the capital passing to other named beneficiaries (remaindermen) upon their death.
Contingent Interest
A beneficiary's entitlement is subject to a condition being met (e.g., reaching the age of 25), though the share itself is predetermined.
Advantages of a Fixed Trust
- Certainty — Beneficiaries know exactly what they will receive, enabling personal financial planning
- Simplicity — The trust administration is straightforward as distribution rules are predetermined
- Legal enforceability — Beneficiaries can legally enforce their entitlements against the trustee
- Estate planning precision — The settlor maintains exact control over how wealth is distributed
- Transparent governance — Less potential for disputes among beneficiaries regarding distribution decisions
Comparison: Fixed Trust vs Discretionary Trust
| Feature | Fixed Trust | Discretionary Trust |
|---|---|---|
| Beneficiary rights | Predetermined and enforceable | No fixed rights until distribution |
| Trustee discretion | Minimal (administrative) | Full discretion |
| Asset protection | Weaker (vested interests) | Stronger (no fixed interests) |
| Tax planning flexibility | Limited | Maximum |
| Family adaptability | Lower | Higher |
| Certainty for beneficiaries | Maximum | None until distribution |
Tax Treatment in Mauritius
The tax treatment of fixed trusts in Mauritius follows the same general rules as other trust types:
| Trust status | Taxation |
|---|---|
| Non-resident fixed trust | 0% in Mauritius |
| Resident fixed trust (foreign income) | 15% (partial exemption may apply) |
| Resident fixed trust (local income) | 15% |
Establishment Requirements
- Trust deed — Specifying each beneficiary's exact entitlement, whether to income, capital, or both
- Qualified trustee — An FSC-licensed trustee for trusts with GBC status
- Beneficiary identification — Named beneficiaries with specific shares clearly defined
- KYC/AML compliance — Due diligence on settlor, trustee, and all beneficiaries
- Registration — With the Master's Office for resident trusts
Common Uses
- Estate planning — Ensuring specific family members receive exact shares of the estate
- Investment holding — Holding shares in Mauritian GBCs with defined ownership
- Life interest arrangements — Providing income to a surviving spouse with capital passing to children
- Employee benefit trusts — Where employees have defined entitlements to trust benefits
- Charitable trusts — Where specific charitable purposes receive predetermined allocations
Professional Trustee Services
Sunibel Corporate Services Ltd provides FSC-licensed trustee services for fixed trusts established in Mauritius. We ensure precise administration in accordance with the trust deed terms, maintaining full regulatory compliance. Contact us to discuss your fixed trust requirements.