Trust have increasingly become a preferred way of structuring assets. ZICO Trust recognises the importance of the legal relationships and obligations involved for those intending to set up trusts.
Trusts originated in England, and therefore English trust law has had a significant influence, particularly among common law legal systems such as the United States and the countries of the commonwealth.
Singapore continues to make itself the choice for wealthy individuals who wish to establish trust arrangements for their families. The country’s reputation as a progressive international financial centre, and its business-friendly environment, has ensured that its wealth management and trust industry will see rapid growth in the coming years.
A trust is a legal arrangement whereby the ownership of a property is divided between two parties, such that one person is entrusted with the legal title to the property (the trustee) whilst another person (the beneficiary) retains the beneficial (or equitable) ownership of the property. The original owner of the property who creates the trust arrangement (the Settlor) would enter into this arrangement in order to allow the trustee the control to manage and administer the property, whilst being assured the economic benefits from the property will accrue to the beneficiary.
It requires the Settlor to give away his assets such as insurance, shares, other liquid assets and properties to the trustee to hold on for the benefit of the beneficiary(ies) upon the Death of the Settlor. This simply means the legal title of the Settlor’s assets has been legally transfer to the trustee but not as the beneficial owner of the assets.
The following 3 certainties are required in order for the Trust to be valid:
A private family trust is usually designed to help a high net-worth individual preserve assets and facilitate the transfer of assets to future generations. Trusts provide continuity in the administration of assets, especially if a company (as opposed to a specific individual) is chosen as the trustee. A properly setup trust ensures protection of assets and can provide continuity of benefits to family members across generations.
A trust can be one of the effective legal ownership tools in order to manage the Settlor wealth more efficiently and to certain extend a good financial and legacy planning.
The Settlor can appoint or nominate anybody to be a beneficiary as he desires which can also include himself but not as a sole beneficial owner.
Any asset that legally belongs to the Settlor except those under joint ownership of which a written consent must be obtained from the joint owner.
The trust can only be revoked or amended if the trust is a Revocable Trust. In the case of an Irrevocable Trust, the Settlor need the consent of the beneficiaries in order to revoke the trust.
A Revocable Trust allows the Settlor to amend and make changes or terminate the trust, whereas an Irrevocable Trust is a trust where Settlor does not have the ability to make any changes or amend. The Settlor can only terminate an Irrevocable Trust by transferring all assets or properties under the trust to the Beneficiaries wholly.
To have the assets protected from potential creditors and in the event that the Settlors are charged by a bankruptcy and insolvency act the trust assets or properties under an Irrevocable Trust are protected and rings fence.
Interest of such deceased Beneficiary can be dealt with accordingly under the terms and conditions of the Trust Deed.
In Singapore, a person is legally capable of holding a property upon attaining the age of 21. The Settlor may also specific a later date which is after the legal age and this should be expressly stated in the Trust Deed the age they should inherit.
In Singapore, Trusts created on or after 15 December 2004 can continue for a maximum period of 100 years. Subject to this new statutory rule against perpetuities, the duration of a trust is otherwise determined:
No, the Trust Settlement is effective once it is executed by the Settlor and the trustee unlike a will. The properties or distribution under a trust are not subject to any order of court as they do not form part of the will.
If the trust is managed by a professional trustee such as a licenced trust company which is govern by the central bank or Monetary Authority of Singapore (MAS), the trustee is bound to observe the Settlor’s Letter of Wishes and has a fiduciary duty to adhere to the terms of the Trust Deed. Unlike if the trustee is an individual, an abuse of power is possible.
A letter of wishes is a non-binding indication by the Settlor of the manner in which he wishes the trustees to exercise their discretion in relation to a discretionary trust.
A letter of wishes provide guidance to the trustee to act to the best interest of the beneficiary(ies) and ensure that the wishes are not against the law and term and condition stated in the Trust Deed.