4 Reasons to Set up a Trust Fund in Singapore

4 Reasons to Set up a Trust Fund in Singapore

Singapore has a lot of rich people because it is a good place to do business. In 2022, about 2,800 HNW people moved to Singapore. Many of the wealthy elite set up family offices and Southeast Asian centers to take advantage of the country’s low tax rates. These HNW individuals would typically set up a trust fund for their loved ones here in Singapore since the tax laws here favors that.

A trust is a formal arrangement in which the person who sets up the trust gives their property to a trustee who will take care of it for the benefit of the beneficiaries. Real land, funds, stocks, bonds, etc. are all types of assets.

The formal owner of the assets may be the trustee, but the beneficiary has just as much right to them. In Singapore, when you set up a trust fund, the beneficiary may not have formal ownership of the assets, but they still have a stake in them and other rights. The Trustees Act sets the rules for all of these.

The Benefit of Getting a Trust Fund

Movie gif. Christopher Lloyd as Doc Brown from Back to the Future gets in Marty's face, eyes wide and wild says, "Why?"

Trust is flexible and can be used in many different ways. For example, a trustee can buy land for a minor until they are 21 years old. This is because Singapore law says that people under 18 can’t own property.

Other people may choose a trust to protect the property of a person who is unable to do so on their own (because they are a child with special needs or because they are physically unable to do so). This investing method has been around for quite some time and its one of the best wealth preservation that wealthy individuals used to pass down assets to their loved ones.

1) Understanding legal and fair interest

This is different from having a legal right to the property, which means that a certain person legally owns it. Most of the time, having legal interest also means that the proof of ownership or property registration is in their name.

2) Trustees’ Duties And Powers

Along with other rules for setting up a trust, the Singapore Trustees Act spells out the roles and responsibilities of trustees. The terms of the trust instrument give the trustee the power to handle and spend the trust fund however they want.

For example, you could say in the trust deed that the manager is well within the law if they put the trust fund into low-risk investments or similar policies.

The Trustees Act gives the trustee certain rights. But these rights only work if they don’t go against what is written in the trust document. In these words, you have the right to:

  • Invest
  • Maintain children
  • Help children or family members with special needs.
  • Bring the benefits of the recipients forward
  • The trust’s creator, or settlor, can also name a trusted guardian to make sure the trustee does their job right.

The trustee must then carry out their duties with care and skill and follow the rules of the trust.

Aside from investing in the trust property, the trustee has a number of other (but not all) duties:

Diversify the assets, but only in ways that are allowed.
Should carefully think about each business criterion
When you need to, talk to a lawyer.

3) How to Create a Trust

A trust can be made with a contract, a will, or a deed. These are all called “trust instruments.”

Setting up a trust isn’t easy, so if you’re having trouble, it’s best to talk to a lawyer.

When setting up a trust, the following things must be in place:

  • Certainty of intention: The person who sets up the trust must say clearly why they want to do it.
  • Certainty about the subject: The person who sets up the trust must know exactly which assets to include and say so.
  • Certainty of purpose: The person who sets up the trust can only do so for the benefit of a legal person. (Purpose trusts are an exception).
  • Constitution: A trust is made by the settlor when property is given to the trust. Or, the settlor writes a statement of trust in which he or she names himself or herself as the trustee. (In this case, there is no need for a move).
  • Formalities: The person who sets up the trust must follow the laws and rules that govern how a trust or will is made.
  • Capacity: Finally, the person who sets up the trust must be of sound mind and be able to do so.

4) Why you might want to set up a trust in Singapore

As we’ve talked about, a trust serves different purposes and is helpful in different scenarios. Contrary to what most people think, making a trust is not just a way for wealthy people to handle their money. It could also help people who make an average income.

Creating a trust can be a good idea for a few reasons:

  • You want to help a child or family member who has special needs.
  • You want to take care of your family.
  • You want to pay less tax.
  • You want to keep giving money to good causes even after you’re gone.
  • You want to keep your assets safe from those who owe you money.
  • During a divorce, you want to protect your possessions.
  • You want to put your money to good use.

You want to help a child or family member with special needs

You can put your money in the care of the Special Needs Trust Company (SNTC) if you are taking care of a child or loved one with special needs. They are a non-profit group where you can put your money and property in the hands of your beneficiaries.

Since it is also a listed charity, the Commissioner of Charities keeps an eye on the SNTC. The Ministry of Social and Family Development also gives them money to help them run.

You want to take care of the people you love.
Even if you don’t have kids, you might still want to set up a trust for family members who aren’t very good with money. It can be hard to deal with a lot of money. But a trust lets you give money to your family without spending too much.

For example, you could set up a trust to pay for a family member’s college. You can tell the money to only be used for a certain thing by giving it specific directions.

But there may also be times when trust is broken. For example, the trust is no longer binding if the beneficiary (who is not a child and has legal ability) tells the trustee to give the trust to someone else.

You want to pay less tax.
In Singapore, there is neither a tax on stock gains nor a tax on wealth. But if you make a lot of money and are in the high-income tax group, you could set up a trust to lower the amount of taxes you have to pay.

You can pay less in taxes if you make yourself a trustee for an object that brings in money. Then you should make the receiver someone who lives in Singapore and is in a lower tax bracket. The beneficiary’s income rate will be used to calculate and tax the income, not yours.

You should know, though, that any money you make from your business or trade will still be taxed at the rate in effect. If you want to know more about this situation, you can talk to one of our family lawyers.

You want to keep giving money to charities even after you’re gone.
A charitable trust is a way to give money to a charity instead of to a person or group. In theory, a charitable trust can last for as long as people want it to. Even after you die, the trust can still give money away.

Before you can set up a nonprofit trust, you need a trust deed and a board of trustees, which is made up of at least three people who will run your trust.

You can also start a Guarantee Company or a club. It’s a type of business where owners don’t make money. Instead, the wealth goes to other things, like charities, non-profits, or social enterprises.

You want to keep your property safe from your debtors.
When you file for bankruptcy, most of your assets will be divided among your creditors to settle claims against you. If you want to keep them from getting to your assets, you could set up an irreversible trust in favor of someone else.

A trust that can’t be changed is called an irrevocable trust. Its assets can’t be taken either. This trust won’t be included in the things you own. By this meaning, if you file for bankruptcy, your creditors cannot take the assets from the irrevocable trust and give them back to you.

This kind of trust has some limitations. There are some situations in which the Court could rule it invalid:

The Court could decide that the trust is a deal that was not worth what it was worth. When this happens, the Court will say that the trust is not legal, especially if it was set up less than five years before the bankruptcy was filed.
If the Court finds that you set up your trust to cheat your creditors, it could be thrown out.
For any reason, the Court could say that the trust is fake, which would mean that it can’t be used in court.
Remember that there are different rules for immovable trust property if you set up an irreversible trust. A piece of land or a private home are two examples.

Without help from a professional, it can be hard to set up a fixed trust in Singapore. The best thing to do is to talk to our law company.

During a divorce, you want to protect your assets.
Part of the divorce process in Singapore is figuring out how to split up the couple’s assets in a fair way. The family car, shares, savings, furniture, Central Provident Fund savings, etc., can all be considered marital assets.

Unless the couple has a prenuptial agreement or has talked about who gets what after a divorce, it is usually the Court’s job to decide how to split the assets they have together.

But before dividing the assets, the pair must give a list of everything they own. This list is called the Schedule of Assets.

But what if you don’t want some of your assets to go into the marriage pool? One way around this is to set up a trust in Singapore.

With a permanent trust, the assets in the trust are probably not going to be counted as part of the marital assets. But keep in mind that the Court can find a reason to cancel the trust.

For example, if the Court has reason to think that you set up the trust on purpose to keep your ex-spouse from getting the assets, they can invalidate the trust up to three years after it was made.

Also, if you set up a trust and named yourself as one of the heirs, the Court may include the trust assets in the matrimonial pool.

You want to put your money to work.
Investors may also find a trust useful. But in this plan, they will join a trust that is already set up instead of making their own.

Let’s say you want to buy a Real Estate Investment Trust (REIT) share. You will always be one of the people who get money from that trust. The trust property comes from real estate, like a shopping center or retail store. The income from the property will be shared among the owners in proportion to how much each of them put into it.

A Business Trust, which covers other assets, is another choice. BTs are businesses that are not the same as companies.

Putting together a trust fund in Singapore:
It can be hard for the normal person in Singapore to set up a trust fund. But making one has a lot of useful uses, not just for protecting your wealth.

People who want to help family members who are having trouble with money can set up a trust fund. They could also set up a trust to keep their belongings safe from creditors. No matter what the reason is, Singapore law has little details that can make the process harder.

If you want to set up a trust, the best way to avoid conflicts or legal problems is to talk to an attorney. Tembusu Law is a modern law company in Singapore that can help you with legal issues. Call us now to set up a free 30-minute appointment. We will be glad to help you with your case.

Trusts in Singapore: Frequently Asked Questions Who Can Be A Beneficiary?
A beneficiary can be a third-party person or organization (like a company, charity, or another trust) that will gain from the trust. They have a fair share of the trust property, which is managed by a manager.

What is a crime that involves breaking trust?
A criminal breach of trust happens when a trustee intentionally takes money from a trust fund for their own use. A violation of trust can also happen when the trustee does something that hurts the interests of the recipients.

How much does it cost in Singapore to set up a trust?
Expect to spend anywhere from $4,000 to $10,000 to set up a trust.

Does Singapore require trusts to be registered?
No. Trusts do not have to be registered with the government in Singapore.

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