Setting Up A Singapore Trust – Types, Requirements & Process

  • Post category:Singapore

A Singapore trust is a powerful and versatile legal structure that allows individuals and businesses to protect, manage, and transfer assets for the benefit of designated beneficiaries. In a trust, one party (the trustee) receives the legal title to the property while another (the beneficiary) receives the lawful (or equitable) ownership of the property. 

A trust is a written agreement that distributes property ownership between two people. The settlor, the original owner of the property, enters into this agreement to give the trustee power over managing and administering the property while guaranteeing the beneficiary would receive financial advantages from the property. 

Singapore Trust

The beneficiary and the settlor can both be the same individual. Trusts can be established for real estate, cash, investment portfolios, business shares, jewelry, art collections, and other valuable objects like patents and copyrights. Whether for high-net-worth individuals, families, or businesses, establishing a trust in Singapore provides a secure and efficient means to safeguard and optimize assets, making it a preferred choice for those seeking a reliable and sophisticated trust jurisdiction.

SINGAPORE TRUST LAW

English common law and trust concepts provide a solid foundation for Singaporean trust law. The idea of trusts has changed significantly since it was initially developed to address a societal issue with regard to property ownership during the Crusades. Singapore has substantially improved the trust framework to satisfy global regulatory and compliance standards and adapt to contemporary circumstances. Singapore’s governing trust laws are the Trust Companies Act, Business Trusts Act, Civil Law Act, and Trustees Act. The Trustees Act was revised in 2004 to streamline and encourage wealth management in Singapore.

Here are a few of the main advantages that Singapore’s trust framework offers:

  • There is no requirement for Singapore trusts to be formally registered.
  • strict laws governing confidentiality and banking secrecy
  • Settlors are shielded from illegitimate heir claims.
  • Any or all of a Settlor’s asset management or investment activities may be retained by him, allowing him to continue being actively involved in managing the trust’s investments.
  • Settlors have the option of designating a protector to oversee the trustees’ behavior.
  • No inheritance tax or estate duty
  • zero capital gains tax
  • Income tax reduction for international trusts

TYPES OF TRUSTS AVAILABLE IN SINGAPORE

Charitable Trusts: Charitable trusts are established for the purpose of advancing charitable causes and benefiting the community. They are commonly used to support charitable organizations, fund philanthropic initiatives, and promote social welfare. Singapore provides a favorable legal framework for creating and administering charitable trusts, encouraging philanthropy and community development.

Family Trusts: Family trusts, also known as discretionary trusts, are commonly used for estate planning and wealth management within a family. These trusts allow individuals to transfer assets to a trustee who holds and manages them for the benefit of designated family members or beneficiaries. Family trusts provide flexibility in asset distribution, asset protection, and generational wealth transfer.

Collective Investment Trusts: Collective investment trusts (CITs) are investment vehicles that pool funds from multiple investors to collectively invest in various assets such as stocks, bonds, and real estate. CITs provide an efficient and cost-effective way for individuals and institutions to access diversified investment portfolios managed by professional fund managers. These trusts are regulated by the Monetary Authority of Singapore (MAS) to ensure investor protection.

Statutory Trusts: Statutory trusts are trusts established under specific legislation for specific purposes. For example, in Singapore, the Housing Development Board (HDB) allows for statutory trusts to be created for public housing ownership. These trusts ensure the proper management and allocation of assets related to public housing schemes.

Foreign Trusts: Singapore also recognizes and allows for the administration of foreign trusts. These are trusts established under the laws of other jurisdictions but are recognized and administered in Singapore. Foreign trusts can provide benefits such as asset protection, tax planning, and confidentiality for individuals and businesses with international interests.

REQUIREMENTS TO SET UP A SINGAPORE TRUST

  • Registration – The government does not need trusts to register. As a result, there is no information about trusts in any public records.
  • Perpetuity – According to Singaporean law, a trust may exist for up to 100 years. A trust deed, however, may stipulate a more limited time frame.
  • Trust Deed – The legal document that creates a trust and transfers assets to the trustee is a trust deed. It outlines the complete framework for managing assets, trustee responsibilities, beneficiaries’ rights, distribution of income and assets to beneficiaries, appointment of a protector, reserved powers of the settlor, and termination, much like a corporation’s articles of association.
  • Settlor – A settlor may be a natural person or a legal entity from any nation. Assets must be owned by a person who is at least 18 years old, of sound mind, and can transfer ownership to the trustee.
  • Beneficiaries – Beneficiaries might be living individuals or corporations from any nation that receive trust benefits. A beneficiary may also be a settlor.
  • Trustee – Professional trustee service providers that can be appointed as trustees are licensed and regulated in Singapore. Settlors are, however, free to name an investment bank, another business, or a dependable advisor. Hiring a Private Trust Company (PTC) is another option that is becoming more and more popular.
  • Protector – Settlors have the option of designating a natural person as the trustee’s supervisor, with the authority to override the trustee’s decisions. This is referred to as a “protector” who defends the beneficiaries’ rights. The trust deed can grant the protector a variety of authorities, such as the ability to add or remove trustees, pay trustees, or add beneficiaries.

SINGAPORE TRUST VS. CORPORATION

As trust is not a distinct legal entity, there are no requirements to go through a formal business registration process. Compared to employing a holding company for wealth management, this makes it much simpler to set up. Trusts are not required to come up with any article of incorporation because there is no registration process. 

When it comes time to divide the estate’s assets, this will provide more legal certainty. Since trusts are not registered entities, they can also provide far higher levels of asset protection and stronger privacy policies.

Additionally, compliance is much simpler because trusts are given exemptions from certain financial reporting requirements if it is determined that they are not engaging in activities that generate profits. In comparison to a firm, they also have fewer tax and compliance obligations.

Refer to Singapore company incorporation to know more.

SINGAPORE TRUST VS. FOUNDATION

When compared to a foundation, trusts have the same advantages and disadvantages as corporations do. Trusts do, however, have one further benefit over foundations. Trusts have a longer history than foundations as a legal entity. As a result, trusts are treated more predictably under the law and in terms of taxes than foundations. This makes using a trust to manage wealth and arrange for succession simpler.

WHAT IS THE PROCESS OF SETTING UP A TRUST IN SINGAPORE?

Determine the Purpose and Structure: Clarify the objectives and purpose of the trust. Decide on the type of trust (e.g., family trust, charitable trust) and the structure that aligns with your goals and requirements.

Engage Professional Advisors: Seek guidance from experienced professionals, such as Relin Consultants, who are well-versed in Singapore’s trust laws and regulations. They will help you navigate the legal and administrative aspects of setting up the trust.

Select Trustees: Choose one or more suitable trustees to manage the trust and its assets. Trustees can be individuals, corporations, or a combination of both. Consider their expertise, trustworthiness, and ability to fulfill their fiduciary duties.

Draft Trust Deed: Prepare a trust deed, which is the legal document that establishes the trust’s terms and conditions. The trust deed outlines the purpose, beneficiaries, powers of the trustees, and other essential provisions. Seek legal assistance to ensure compliance with Singapore’s trust laws.

Fund the Trust: Transfer assets into the trust as per the terms specified in the trust deed. These assets can include cash, real estate, investments, or other forms of property. The transfer should be properly documented to reflect the ownership transfer to the trust.

Register the Trust: While not mandatory, registration with the Accounting and Corporate Regulatory Authority (ACRA) or the Inland Revenue Authority of Singapore (IRAS) may be required for certain types of trusts or for tax purposes. Consult with professional advisors to determine if registration is necessary.


WHY SET UP A SINGAPORE TRUST?

ADVANTAGES OF SETTING UP A TRUST IN SINGAPORE

Setting up a Singapore trust offers several compelling reasons and advantages. Here are some key reasons why individuals and businesses choose to establish a trust in Singapore:

  • Asset Protection: A Singapore trust provides a high level of asset protection. By transferring assets to a trust, they are held separately from personal or business assets, reducing the risk of creditors or legal claims against them. This can help safeguard assets for future generations and provide a secure structure for wealth preservation.
  • Estate Planning: Trusts are powerful tools for effective estate planning. They allow individuals to plan for the orderly distribution of assets, minimize probate complexities, and potentially reduce estate taxes. Through a trust, assets can be managed and distributed according to the settlor’s wishes, ensuring smooth wealth transfer to beneficiaries.
  • Wealth Management: Singapore trusts offer flexibility and control over wealth management. Settlors can appoint professional trustees or family members to manage the trust’s assets, ensuring professional expertise and continuity in wealth management. Trusts can be structured to provide regular income, protect against spendthrift behaviors, and support long-term financial goals.
  • Tax Efficiency: Singapore has a favorable tax regime for trusts, making it an attractive jurisdiction for tax planning. Certain types of trusts, such as foreign trusts, may benefit from tax exemptions or reduced tax rates on income generated outside of Singapore. Properly structured trusts can help optimize tax efficiency for settlers and beneficiaries.
  • Confidentiality: Singapore trusts provide a high level of privacy and confidentiality. Unlike corporations, trusts are not publicly registered, and beneficiary information is not typically disclosed. This confidentiality can be advantageous for individuals who prefer to keep their financial affairs private.
  • Charitable Giving: Singapore trusts support philanthropic endeavors through charitable trusts. Settlors can establish trusts dedicated to charitable causes, contributing to community development and social welfare. Singapore’s robust legal framework for charitable trusts encourages philanthropy and provides tax incentives for charitable donations.
  • Well-Regulated Environment: Singapore boasts a stable and well-regulated financial and legal system. Trust laws are well-developed, providing clarity and certainty for trust structures and operations. The Monetary Authority of Singapore (MAS) oversees trust-related activities, ensuring a transparent and reliable environment for trust administration.
  • International Recognition: Singapore is internationally recognized as a reputable and well-regulated trust jurisdiction. Establishing a trust in Singapore can enhance credibility and trustworthiness, particularly for cross-border transactions and dealings with international parties.

CHALLENGES OF SETTING UP A TRUST IN SINGAPORE

  • Selection of Trustees: Choosing the right trustees is essential for the successful administration of a trust. Identifying trustees who possess the necessary expertise, integrity, and commitment to fulfilling their fiduciary duties can be a challenge. The selection process may involve evaluating multiple candidates and considering factors such as their qualifications, experience, and availability.
  • Cost Considerations: Setting up and maintaining a trust in Singapore may involve certain costs. These can include legal fees, professional advisory fees, trustee fees, registration fees (if applicable), and ongoing administrative expenses. It is important to consider the financial implications and ensure that the benefits of establishing a trust outweigh the associated costs.
  • Compliance and Reporting Obligations: Singapore trusts are subject to various compliance and reporting obligations. Trustees must ensure proper record-keeping, financial reporting, and tax compliance. Staying abreast of regulatory changes, fulfilling reporting requirements, and adhering to deadlines can be challenging, especially for individuals or trustees who are unfamiliar with Singapore’s regulatory landscape.
  • Privacy and Confidentiality: While Singapore offers a high level of privacy and confidentiality for trusts, there may be instances where information needs to be disclosed. For example, certain information may need to be disclosed to regulatory authorities or tax authorities. Maintaining confidentiality and managing potential disclosure requirements can be challenging while ensuring compliance with legal obligations.

Reach out to us at Relin Consultants for further assistance with setting up your trust.

FAQs

What is a Singapore trust?

A Singapore trust is a legal arrangement where assets are held and managed by a trustee for the benefit of designated beneficiaries. It provides a secure structure for asset protection, estate planning, wealth management, and charitable giving.

What are the advantages of setting up a trust in Singapore?

Setting up a trust in Singapore offers several advantages, including asset protection, efficient estate planning, tax optimization, confidentiality, flexibility in managing wealth, and access to Singapore’s reputable and well-regulated financial and legal system.

Who are the key parties involved in a Singapore trust?

The key parties involved in a Singapore trust are the settlor (the person who establishes the trust and transfers assets), the trustee (who holds and manages the assets), and the beneficiaries (those who are entitled to benefit from the trust).

Can a Singapore trust hold assets located outside of Singapore?

Yes, a Singapore trust can hold assets located both within and outside of Singapore. This flexibility allows for international diversification and efficient management of global assets.

Is it necessary to register a trust in Singapore?

Registration of a trust in Singapore is generally not mandatory, except in specific cases such as public trusts or certain charitable trusts. However, some trusts may choose to voluntarily register with the Accounting and Corporate Regulatory Authority (ACRA) or the Inland Revenue Authority of Singapore (IRAS) for certain benefits or tax purposes.

Can a Singapore trust be revoked or amended?

In most cases, a Singapore trust can be amended or revoked if provided for in the trust deed. However, the specific provisions regarding amendment or revocation will depend on the terms outlined in the trust deed and Singapore’s trust laws. It is advisable to seek legal advice when considering any changes to the trust structure.

What is the taxation treatment for Singapore trusts?

The taxation treatment for Singapore trusts depends on various factors, including the type of trust and the nature of the income generated. Singapore provides favorable tax incentives for certain types of trusts, such as foreign trusts, which may enjoy tax exemptions or reduced tax rates on income generated outside of Singapore. It is recommended to consult with tax professionals to understand the tax implications specific to your trust structure.

Can non-residents establish a trust in Singapore?

Yes, non-residents can establish a trust in Singapore. Singapore’s trust laws do not impose residency restrictions on the settlor, trustee, or beneficiaries of a trust. However, non-resident settlors should consider their own tax and legal obligations in their home jurisdiction.