According to the Asia-Pacific Wealth Report 2016, published by Capgemini, a global leader in consulting, technology and outsourcing services, the Asia-Pacific region has the greatest number of High Net Worth Individuals and holds the highest net worth individual wealth. Due to this, there is an ever-rising need for wealth management and asset protection. In addition, trusts are now being favoured also by individuals with relatively modest amount of assets.
For those keen to set up a Singapore trust, here is a quick guide on the trust framework in the Garden City.
What is a trust?
A trust refers to a legal arrangement between various parties to manage the transfer of assets. In this regard, the settlor is the owner of the assets who wants to allow the transfer of the assets legally to a trustee.
The trustee is thus the legal owner of the assets and has management control over the assets. The trustee is typically a licensed trust company.
The assets are being managed on behalf of the beneficiaries, who are the ones benefitting from the trust arrangement.
The settlor can also appoint a protector who will be granted some duties, most notably holding the power to remove and appoint trustees, arrange for their remuneration as well as add discretionary beneficiaries.
Why set up a trust?
Setting up a Singapore trust has many advantages. One of the key benefits is asset protection against various factors, such as potential creditors, bankruptcy or lawsuits.
Gaining tax savings is also a solid reason for initiating a trust set up. This is because a settlor can transfer assets into a trust to beneficiaries who have marginal tax liability. There are also some types of incomes which will not be subject to tax at the trust level.
A trust can also be set up for succession planning. This allows for the assets to be distributed to specific beneficiaries over a given period of time, helping in family wealth management.
Why set up a trust in Singapore?
Singapore has developed robust trust laws and complementary legislation to reinforce its position among international wealth management hubs.
Trusts in Singapore are regulated by the Trustees Act administered by the Ministry of Law. Companies that carry out trust services are governed by the Trust Companies Act administered by the Monetary Authority of Singapore.
There are strict confidentiality and banking secrecy laws and the settlor is always be guaranteed that the details and ownership of trust assets will remain confidential. Singapore also boasts a broad network of comprehensive double taxation treaties, no capital gains tax and no estate duty.
People who are under a forced heirship jurisdiction and are unable to dictate to whom and in what proportion assets will be passed on, might wish to establish an offshore trust. The Singapore Trustees Act indicates that forced heirship regime does not apply to the estates of non-Singapore citizens and non-Singapore domiciles, if the trust is administered under Singapore trust law and the trustees are residents in Singapore.
How to set up a trust?
First, the settlor will need to decide on the type of trust which suits his needs and requirements. The types of trusts available include private family trust, charitable trust, collective investment trust, revocable or irrevocable trust, discretionary trust, asset protection trust and testamentary trust.
Next, the settlor should engage a professional trust firm to help set up the trust. Choosing a third party with relevant expertise gives the settlor a greater peace of mind about the administration of their trust or letter of wishes.
Concretely, a trust is set up when a Deed of Settlement is being executed between the settlor and the trustee with assets being transferred into the trust. The settlor must decide and outline the key terms of the trust. The key details include the initial beneficiaries and the person(s) to be appointed as the protector of the trust. The settlor will also need to determine how much power they would still like to retain in such a trust arrangement.
How long is the trust valid?
Trusts, which have been created on or after 15 December 2004, are valid for up to 100 years in Singapore. The duration of trusts can also be altered, if following the provision of the trust deed, the trust assets have all been distributed to beneficiaries, and the beneficiaries have all agreed to the trust’s termination.
Choosing a trust to meet your requirements can be time-consuming. With our expertise at AM Corporate Services, we can advise and guide you on the trust set up process in Singapore. Contact us today for an appointment.