Private Trust Setup in Singapore

What will happen with your stuff (your wealth and assets) after your passing? If you have never planned for this moment, or you did not plan well, your family members have to go through a lengthy tax, financial, and legal steps just to find out the assets you left behind.

 

An Overview of Private Trust

What is Private Trust?

Precisely speaking, a trust is a legal arrangement where the asset ownership is transferred from the settlor (person who set up the Trust) to the Trustee (other person or corporation) for the benefit of one or more beneficiaries. Although the trustee possesses the legal ownership, the beneficiary will hold an equitable interest in the asset. A Trust can be created by virtue of a statutory Trust or intentionally.

A private trust, as the name suggests, is a trust where the beneficiary (the nominated person or entity to receive the allocated assets) is private and non-charitable. The main purpose of setting up a private trust is to provide for the everyday needs of the beneficiaries (which also includes their educational costs).

Is a Will and a Trust the same?

Difference between a Will and a Trust is quite straightforward. While a Will is set up for distribution purpose, a Trust preserves the assets and wealth. In other words, a Will is a tool to distribute your assets, passing the asset’s ownership to another person while a Trust is a preservation that ensures your loved ones are protected. 

Why do you need a Trust?

Many people still think that a Trust is only meant for the rich. However, this is the misconception. A Trust can be beneficial, no matter what is your income level or net worth of your assets. Here is a list of reasons why you need a Trust to protect your loved ones:

  • Sets out the framework for investment (using your assets) which will be handled by the persons you choose
  • Stipulates the guidelines for when, how, and why your beneficiaries receive the money, according to your values – Trust fund will be channelled to the intended beneficiaries according to the standards you set.
  • It is a wealth preservation for future generations

A Trust offers a slew of benefits, from wealth preservation to protection for family members – a Trust ensures that the allocated funding is sufficient and available for specific needs (such as education and healthcare).

Let us cut the chase: the primary purpose in setting up a Trust is to make sure assets are properly protected, managed and distributed according to your wishes when you are unable to do so yourself.

 

Singapore Trust Law

Singapore trust law is created to resolve problem regarding land ownership and it evolved when modern requirements, international regulatory and compliance standards are incorporated in the law. In Singapore, the governing trust legislation includes the Trust Companies Act, Business Trusts Act, Civil Law Act, and the Trustees Act. In 2004, the Trustees Act was modernized to support and promote wealth management in Singapore.

A snapshot of the key benefits of Singapore’s trust framework:

  • No requirement for formal registration
  • High confidentiality
  • Strict banking secrecy laws
  • A Settlor has an active role in investment management – he or she is free to retain him/her the powers of investment.
  • Settlors can appoint a protector to supervise/monitor/guide the conduct of the trustees
  • Zero estate duty or inheritance tax
  • Zero capital gains tax

 

How to create a Private Trust in Singapore

A trust may be created:

  • by will – such Trust creation has to comply with the Wills Act and it will take effect after the settlor passed away,
  • by deed or
  • by declaration – it must comply with the relevant Civil Law Act (depending on the type of property/assets placed in trust)

Generally, a Trust must have:

  • intention (i.e. the desire to create a trust),
  • subject matter (clearly identifiable trust property), and
  • objects (clearly identifiable beneficiaries).

Generally, in order to create a trust, the settlor must execute the trust instrument (a written document) together with the legal transfer of the property/assets to the trustee. Once the transfer of the property from the settlor to the trustee is completed, the trustee will manage the property in the best interest of the beneficiaries as stipulated in the terms in the trust instrument.

Setting up a Private Trust Company (“PTC”)

Some people use PTCs as trustees of their family trusts. A PTC will provide the settlor with a more control, discretion, as well as higher level of confidentiality over the trust. The PTC, as the name suggests, is a company incorporated for the purpose of owning and managing the settlor’s trusts. The board of directors of the PTC can comprise of the settlor’s family members or trusted advisors.

A PTC enables the family control without compromising the trust’s validity – it is especially useful in the case that a family business has been transferred into a trust, and it requires the Settlor to have a personal and comprehensive knowledge of the family business. In Singapore, PTCs are exempted from licensing requirements as stipulated under Section 15(d) of the Trust Companies Act. Please note that this exemption is based on the fact that the PTC only provides trust services to the family trust with no solicit business from public.

On top of the statutory requirements, a PTC in Singapore is mandated to appoint a licensed trust company to perform due diligence. Such due diligence is to ensure compliance with the Monetary Authority of Singapore’s requirement on anti-money laundering or prevention of financing of terrorism.

 

Do you need help?

3E Accounting associated partner provides Trust services according to your needs. Feel free to contact us should you need any assistance in Private Trust services!