What is a Trust in Singapore?

What is a Trust?

In Singapore, you are able to set up a legal arrangement called a trust. A trustor or settlor initiates this arrangement, by entrusting a trustee to look after his or her properties, assets or any other possessions. The trustee is the person or entity that the settlor appoints to hold the legal title of the trust property and perform the duties required of him or her. The trustee can be the settlor himself or herself – in which case, the settlor declares himself or herself to be holding trust property on trust for the beneficiary.

Who is the Trustee?

The Trustees Act in Singapore provides a wide regulatory framework overseeing the operation of trusts and trustees. The trustee derives his power from the terms of the trust instrument. For instance, a trust deed may specify the trustee to invest the trust fund in low-risk unit trusts or investment-linked policies. The Trustees Act specifically confers certain powers on the trustee; However, these powers only apply if they are not contrary to the terms of the trust instrument. They include (non-exhaustively) the power to invest, insure, maintain minors, and advance the benefits of beneficiaries. Sometimes, you can also appoint a trust protector to ensure the trustee exercises his powers in accordance with the terms of the trust.

Together, the Act and common law stipulate a minimum standard trustee must adhere to. This includes the statutory duty to exercise reasonable care and skill in the discharge of his powers. It also includes exercising his discretion properly, and to abide by the directions of the trust instrument. In relation to the investment of trust property, the trustee has a wide range of duties to undertake. They include the duty to
1. Invest only in authorised investments.
2. Consider the standard investment criteria, such as the suitability of the investment and diversification.
3. Seek advice where it would be prudent to do so.
4. Take proper care and skill reasonably.

What does a trust encompass?

The trust details how the associated benefits of these possessions are passed to the eventual beneficiaries. Sometimes, the trustor and beneficiary can be the same person.
The assets that are commonly included in a trust are properties, bank accounts, investments, shares, patents, jewellery, or any items of tangible and intangible value. In contrast, trust does not include insurance policies, retirement account balances, health savings and motor vehicles.

You can create trusts by contract, will, or deed, collectively known as trust instruments. Deeds are usually used when no consideration is given for an agreement. Due to their complexity, it is advisable to engage the services of a lawyer. Your lawyer can offer specific legal advice in trust law, estate planning, and intergenerational wealth transfer.
Generally, certain requirements must be complied with in order to create a trust. They include:

1. Certainty of intention – The settlor must possess the requisite intention to create the trust obligation.
2. Certainty of subject matter – Trusts must be created over specific property.
3. Certainty of object – A trust usually may only be created in favour of legal persons (except purpose trusts).
4. Constitution – A trust is created when trust property is transferred, or via a declaration of trust whereby the settlor himself is the trustee holding property for the beneficiary.
5. Formalities – Statutory provisions regulating the creation of a trust or a will must be complied with.
6. Capacity – Settlor must have legal and mental capacity to create the trust.

Why do people set up a trust in Singapore?

Here are several benefits:
•There is no need for any formal registration with any government body.
•There are laws in place to maintain strict banking secrecy and personal data protection.
•A trust provides protection from forced heirship claims.
•The trustor can reserve part or all of the powers to him or herself.
•The trustor can appoint a protector to supervise the conduct of the trustees.
•There is no estate duty or inheritance tax.
•There is no capital gains tax.

Here are four common types of trusts in Singapore:

1. Private family trusts – usually for high net-worth individuals who planned to protect their assets, and properly distribute their wealth to their intended next of kin
2. Statutory trusts – mainly for statutory compliance purposes, such that they are structured for insurance policyholders and their beneficiaries.
3. Charitable trust – set up with the purpose to benefit a certain cause or group of people as a form of charity.
4. Collective investment trusts – trust that deals with business trusts, unit trusts, and real estate investment trusts (REITs).

What is a breach of trust?

1. A breach of trust may be deliberate or inadvertent.
2. It may consist of an actual misappropriation or misapplication of the trust property, an investment or other dealing which is outside the trustees’ powers.
3. It may consist of a failure to carry out a positive obligation of the trustees.
4. It may be injurious to the interests of the beneficiaries or be contrary to their benefit.

How much to set up a trust in Singapore?

Depending on the type of trust and assets involved, it can cost you around S$3,000 to S$10,000 to set up a trust.  Reasons for setting up a trust usually revolve around wealth control within the family, efficient distribution to the rightful beneficiaries, and protecting assets from creditors and lawsuits. If you like to find out more about setting up a trust here in Singapore, talk to us today.

Download the Telegram app and follow us for the latest updates: https://t.me/sgcompanyservices