About Trusts

Final - Allshores Website-p6

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.

 

Historical basis for Trusts & worldwide recognition

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.

Why Singapore Trust is a preferred jurisdiction?

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.

What is a Trust?

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.

How does a Trust work?

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 relationship

TRUST_Chart

How can a Trust be valid?

The following 3 certainties are required in order for the Trust to be valid:

  1. Certainty of intention to create a trust.There must be a clear intention to create a trust. The person creating the trust, be it the Settlor (in the case of a living trust) or the testator (in the case of a testamentary trust) must clearly express in the trust deed or his Will (as the case may be) that it is his intention to create a trust.

 

  1. Certainty of subject matter (Asset or Property of the Trust). It is a requirement that the subject matter be certain — that the property intended to be vested in the trust be separated from other property.

 

  1. Certainty of the objects of the Trust (Refer to Beneficiaries). l trusts must have beneficiaries. A trust is not valid, if it has no beneficiaries, or if the identity of the beneficiaries is uncertain and cannot be determined. Beneficiaries can be anyone of the Settlor’s choice and need not be related to the Settlor.

What is a Private Family Trust?

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.

What does the Trust do and why set up a Trust?

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.

  • Wealth protection is a major advantage of private trusts. Since the trustee is the legal owner of the assets, the Settlor relinquishes his rights. In most cases, this ensures protection against creditors, bankruptcy, exchange controls, hostile governmental authorities and other risks such as a matrimonial asset battle in the event of a divorce.
  • Confidentiality, trusts can be established offshore (outside of the Settlor’s home country) and privately, thereby ensuring confidentiality of the Settlor. Furthermore, when the Settlor passes away, the trust assets would not be dealt with under any probate proceedings.
  • Succession Planning can be managed by setting up trusts, which alleviates concerns of forced inheritance legislations, such as those imposed by Shariah Law. Trust arrangements empower the Settlor to decisively appoint the beneficiaries of their assets. Also, in the event of death, lengthy probate processes can be avoided by setting up trusts during the Settlor’s lifetime. In case of bankruptcy of beneficiaries, the trust assets are protected and the beneficiaries are still assured of the income under the trust.
  • Tax savings are an important consideration for many wealthy individuals to choose to setup trusts in low tax jurisdictions. In the case of Singapore, there is no capital gains tax, estate duty tax or withholding tax imposed on the distributions to beneficiaries. There are also various income tax exemptions available to qualifying foreign or domestic trusts, including, the tax exemption on certain types of trust income of a foreign trust as well as its distributions to beneficiaries.

Can the settlor be a beneficiary?

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.

What type of assets can be transferred to the Trust?

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.

Can the trust be revoke or amend?

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.

What happened if one of the beneficiary passed on?

Interest of such deceased Beneficiary can be dealt with accordingly under the terms and conditions of the Trust Deed.

What is the legal age to inherit the Trust property or asset?

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.

How long can a Trust last In Singapore?

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:

  1. According to the provisions in the trust deed
  2. When all the trust assets have been distributed to the beneficiaries
  3. When all the beneficiaries unanimously consent to the termination

Does grant of probate or letters of administration needed?

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.

Will trustee abuse its power?

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.

What is letter of wishes?

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.

error: Content is protected !!