A private trust is a way of protecting your wealth and providing for future generations. It ensures that assets are properly protected, managed and distributed well beyond your lifetime. Read on to find out the benefits of a trust, what happens if you have one, and how to go about setting up a trust.
What is a Private Trust?
A private trust is a legal and long-term arrangement whereby the person setting up the trust (the settlor) transfers his assets such as shares, land, cash, valuables, family businesses and property to another party (the trustee) for nominated persons. In other words, you will be legally transferring your assets to a trustee who will be holding and administering the assets for you or your beneficiaries.
Trusts are usually set up to provide for the daily needs of your beneficiaries, such as their living, healthcare or educational costs. Although the trustee will possess legal ownership, your beneficiaries will still hold an equitable interest in the asset.
Who Should I Set Up a Trust for?
Beneficiaries may include family members and loved ones, especially those who might be too young to manage inheritances, or who are spendthrifts or financially immature. Beneficiaries may also include vulnerable persons such as aged parents and persons with special needs.
Some people ensure that their wealth is distributed to direct family members such as spouses, children and grandchildren, while leaving out their children’s spouses and their in-laws.
Individuals involved in high-risk businesses with exposure to potential creditors also set up trusts to protect part of their assets. We have also observed that when family businesses are passed onto the next generation, it may lead to legal implications should any of the siblings receive unequal shareholdings.
Why Do I Need a Trust?
A trust preserves your wealth and protects your loved ones by:
- Setting out a framework for investment, using your assets, which will be handled by a person you appoint
- Stipulating the guidelines for when and how your beneficiaries receive the money, which ensures that the funds will be channelled to your nominated beneficiaries according to your desired criteria
- Preserving wealth for future generations
In addition, there will be no capital gains tax, estate duty tax or withholding tax imposed on beneficiaries when assets are distributed.
Who Can Set Up a Trust?
A common misconception is that trusts are only meant for the well off. However, trusts can be beneficial, no matter your level of income or net worth. In fact, more and more people are now realising that trusts can be useful legacy-planning tools.
What are the Consequences of Not Setting Up a Private Trust?
If you have never planned for asset distribution or did not plan it well, your family members may have to go through lengthy tax, financial, and legal procedures just to locate the assets you have left behind.
Is a Will and a Trust the Same?
A will is a declaration about the distribution and management of your estate, which includes your assets. It takes effect after your death, and passes the ownership of assets to your loved ones.
A trust, however, preserves the assets and wealth for beneficiaries and delays distribution for a certain period of time to ensure that they only receive their inheritance when they reach a certain age or maturity.
Are there Laws Governing Trusts in Singapore?
Under Singapore’s trust framework, you can be assured of high confidentiality due to banking secrecy laws. If you wish, you can choose to play an active role in investment management by retaining powers of investment. In addition, you can appoint a protector to guide or monitor the conduct of your appointed trustees.
How Do I Set Up a Trust?
Before setting up a trust, think about what you want to achieve, and consider which portion of your assets should be in the trust. Consider the possibility of setting up one or more trusts for different purposes and different beneficiaries.
Next, approach a bank or independent trust company. A trust may be created by will (testamentary trusts), deed or declaration (inter vivos trusts) and must contain a/an:
- intention (i.e. the desire to create a trust),
- subject matter (clearly identifiable trust property), as well as
- objects (clearly identifiable beneficiaries).
In order to create a trust, you must execute a trust instrument (a written document) together with the legal transfer of the assets to the trustee. Once the transfer of your assets to the trustee is completed, the trustee will manage the property in the best interest of the beneficiaries as you have specified in the trust instrument.
Should I Set Up a Private Trust Company?
Another way of managing your trusts is to incorporate a Private Trust Company (PTC). This PTC will act as a trustee for your family’s trusts and will own and manage the family trusts. A PTC would provide more control, discretion, as well as a higher level of confidentiality. However, PTCs are still required to appoint a licensed trust company to perform due diligence and comply with the Monetary Authority of Singapore’s measures on anti-money laundering and the prevention of financing of terrorism.
Let Corporate Services Singapore Assist You
Singapore has been the choice location for both locals and foreigners who wish to set up a trust for their families. As a world-class financial centre with a robust regulatory framework, Singapore is home to a thriving wealth management and trust industry.
At Corporate Services Singapore, our experienced professionals have established private trusts for asset protection, succession and tax planning. Whether it is for your family business’ succession planning or preserving your wealth for future generations, turn wealth management in your favour by calling us today.
For advisory and assistance in setting up a trust, call Corporate Services Singapore at 6602 8286 or email email@example.com.