Fraud Blocker Setting Up A Trust in Singapore: Definitive Guide [2024]

Setting Up a Trust in Singapore: A Comprehensive Guide

Here's Why 30,000+ Readers Trust Us Monthly

At Dollar Bureau, we’re committed to providing you with reliable, unbiased financial guidance. Our content is crafted by everyday Singaporeans who are trained in finance and insurance, ensuring relatable and practical guidance. We uphold strict editorial independence, regularly update our reviews, and value your feedback to keep our information accurate and relevant.

Discover more about our editorial guidelines here.

Setting Up a Trust in Singapore A Comprehensive Guide

Ever thought about setting up a trust but found yourself swamped by legal jargon and complex regulations?

It’s a journey worth taking, but you don’t have to do it alone.

In this post, you’ll discover:

  • What a trust is and how it can safeguard your assets
  • The step-by-step process of setting up a trust in Singapore
  • Different types of trusts and which one might be right for you
  • Key benefits of creating a trust for retirement and estate planning

 

Here’s an eye-opener: did you know that setting up the right trust can not only protect your wealth from legal disputes but can also offer significant tax advantages?

That’s just the tip of the iceberg.

So, if you’re looking to manage your assets smartly and ensure they’re handled just as you intend, even when you’re not around, keep reading.

This guide will walk you through everything you need to know about trusts in Singapore.

What is a trust?

Think of a trust as your personal financial container, safeguarded by a trusted mate, and earmarked for someone you care about, or perhaps even for yourself.

In the simplest terms, when you set up a trust in Singapore, you’re placing your assets – that could be cash, property, investments, or even your grandfather’s vintage Rolex – into the hands of a trustee.

This trustee, often a person or a financial institution you can count on, is charged with the duty of managing these assets for the benefit of your chosen ones – the beneficiaries.

Now, you might think, “Is this just for the super-rich?”

Absolutely not.

With a variety of trusts available, there’s something for every situation, whether you’re looking to dodge unnecessary tax hits (legally, of course), plan for your retirement, or ensure your loved ones are sorted if the unexpected happens.

How does a trust work in Singapore?

Imagine setting up a trust in Singapore as setting up a secure vault for your treasure, but you’re handing over the key to someone you trust impeccably – that’s your trustee.

This trustee’s job?

To guard your treasure and eventually, when the time is right, pass it on to the people you’ve listed on your treasure map, your beneficiaries.

But there’s a twist – they must manage it for your beneficiaries, following the rules you’ve laid out.

And these rules, you can tailor them like a bespoke suit to fit exactly what you want – like when and how much of this treasure your beneficiaries can dip into.

In Singapore, this process is buttoned down by some pretty firm laws, ensuring everything’s done by the book.

The Trustees Act (Cap 337) spells out the must-dos for trustees to protect your beneficiaries.

So don’t worry too much about your trust being in the hands of the wrong person – as long as you set it up right, everything will be executed according to plan.

Why create a trust in Singapore?

There are multiple reasons why you should create a trust in Singapore.

Asset Protection

We all want to keep our hard-earned assets safe, don’t we?

In Singapore, setting up a trust is like building a financial fortress around your assets.

It keeps your wealth shielded from life’s legal battles – be it from creditors getting too grabby if things go south, or from familial disputes over inheritance that can pop up after you’re gone.

Even if a financial storm hits and bankruptcy looms, the assets snug inside your trust aren’t part of the fray – they’re protected.

This isn’t a loophole; it’s a legal provision that gives you peace of mind, knowing that what you’ve accumulated over a lifetime is safeguarded.

Financial Management

Managing wealth isn’t just about stashing cash or investing willy-nilly.

A trust in Singapore acts like a savvy finance manager for your assets.

You set the ground rules, and your trustee – think of them as your personal finance director – executes the plan.

They can invest, divide income to beneficiaries, and make sure everything’s done tax-efficiently.

Whether you’re planning for your children’s future, setting up a charitable fund, or securing your retirement, a trust ensures your finances are in good hands, managed to your specifications.

Tax Savings

Who doesn’t like to save on taxes?

In the garden city, trusts can be a tax-savvy move.

Here’s the scoop: trusts in Singapore can potentially offer tax exemptions or reductions, particularly if you’re holding foreign income.

This means that if your trust earns income from overseas, that money might just skip the tax line.

Plus, if you’re savvy about it, distributing income to beneficiaries in lower tax brackets could reduce the overall tax bite.

Remember, it’s not about evading taxes; it’s about leveraging legal ways to maximise your wealth.

Retirement Planning

Dreaming of your golden years without financial worry?

In Singapore, using a trust for retirement planning is akin to crafting a tailored retirement plan.

It’s all about ensuring you have a steady stream of income when you decide to take life at a more leisurely pace.

You pour your assets into the trust, which could include savings, investments, or property, and then set terms within the trust deed that dictate how these assets are to be managed and distributed.

So, when you hit those retirement milestones, the trust kicks into action, providing you with the funds you’ve earmarked for this very time.

It’s like having a financial reservoir; you’ve stored the raindrops during your working monsoon, and now you can enjoy the clear days of retirement with ease.

A trust can offer more control and flexibility than some other retirement vehicles.

You can stipulate conditions, like receiving payouts at certain ages, or align it with other retirement plans you’ve got going.

And if you fancy leaving a legacy behind, well, a trust makes sure that’s handled just as you wish.

Succession Planning

Now, let’s talk about the baton pass – succession planning.

In life’s relay race, you want to pass on your legacy smoothly and securely.

Trusts are your go-to for that seamless handover.

By laying out who gets what and when, you’re ensuring your assets bypass the hurdles of probate and go straight to your beneficiaries.

Whether it’s your granddaughter’s university fund or ensuring the family business stays in the family, a trust outlines your wishes clearly, keeping disputes and delays at the starting blocks.

Plus, for the business-savvy folks, it keeps the company running without a hitch while the succession is sorted.

In essence, it’s about your life’s work living on, just as you intended.

The Different Kinds of Trust in Singapore

Testamentary Trusts

Picture a trust that springs to life from the pages of your will.

That’s a testamentary trust for you.

It’s your posthumous voice, ensuring that your assets are handed out and managed according to your wishes after you’ve taken your final bow.

Particularly handy if you’ve got young ones or dependents who might not be ready to handle a windfall, a testamentary trust ensures they are taken care of in the long run.

You can lay out the nitty-gritty, like education funds for the kids or providing for a partner, all to be executed once you’re not around.

Inter Vivos Trusts

Now, for something a bit more immediate, let’s talk about inter vivos trusts, also known as living trusts.

These are set up during your lifetime and can be quite the handy tool for managing your affairs while you’re still here.

Want to make sure grandma’s care is paid for without the hassle?

An inter vivos trust can do that.

Or maybe you’re looking to keep certain assets off the public probate records; again, this type of trust has got your back.

It can be revocable, giving you the flexibility to alter it as life’s circumstances change, or irrevocable, setting it in stone for some serious future planning.

Standby Trusts

The Standby Trust is like having your cake and eating it too.

You set it up now, but it only gets into gear when certain conditions kick in, such as your retirement, incapacitation, or passing away.

It’s there in the background, unobtrusive, waiting on standby.

You can pour in your assets any time you wish, and in the meantime, it’s as quiet as the Marina Bay at dawn.

But when triggered, this trust becomes active, ensuring your assets are managed or distributed according to the blueprint you’ve laid out.

It’s a bit like a financial insurance policy, resting dormant until you need it to spring into action.

Private Family Trusts

A Private Family Trust is a bit like a family heirloom, except instead of jewels or antique vases, you’re handing down financial security and legacy.

Set up to manage your family’s wealth, this trust keeps things within the family circle, offering a tailored approach to managing, growing, and protecting assets across generations.

It could manage anything from the family business to investments, ensuring that your lineage reaps the benefits of your foresight.

Revocable Trusts

Think of a revocable trust as the Swiss Army knife of estate planning — versatile and adaptable.

This type of trust allows you to retain full control over the assets within the trust while you’re alive.

You can tweak, modify, or completely dissolve the trust depending on your changing needs or circumstances.

It’s like having a safety net that you can adjust as you walk the tightrope of life.

This flexibility is particularly appealing if you’re not quite ready to set your plans in stone.

However, it’s important to note that the assets in a revocable trust are still considered part of your estate for tax purposes and could be subject to claims from creditors in the event of bankruptcy or legal judgments.

Irrevocable Trust

An irrevocable trust, on the other hand, is like a time capsule.

Once you establish it and lock away your assets inside, the terms cannot be changed or revoked without the consent of the trust’s beneficiaries.

This type of trust is a commitment with a capital ‘C’.

By transferring your assets into an irrevocable trust, you relinquish control — the assets no longer belong to you.

This detachment means the assets are generally protected from estate taxes and creditors, making this trust a powerful tool for asset protection and tax planning.

It’s ideal for those who are ready to make definitive arrangements about their estate, ensuring that their assets are managed and distributed precisely as they intend, without interference.

Collective Investment Trust

A Collective Investment Trust (CIT), often found in financial hubs like Singapore, is like a communal pot where investors pool their resources to invest in a diverse portfolio of assets.

It’s managed by professional trustees who are responsible for the trust’s administration and ensuring it operates in line with its investment objectives.

This type of trust is attractive for its cost-efficiency and the way it allows individual investors access to a broader range of investments and professional management that might otherwise be out of reach.

For those looking to diversify their investment portfolio while benefiting from the expertise of professional managers, a CIT offers a compelling option.

It’s particularly popular among institutional investors and can include investments in stocks, bonds, real estate, or other financial instruments, depending on the specific trust’s focus.

Charitable Trust

A Charitable Trust in Singapore serves as a beacon of philanthropy, designed to support charitable activities over an extended period.

This type of trust is set up to manage and allocate funds for charitable purposes, which could range from education and health to poverty alleviation and the arts.

The beauty of a charitable trust lies in its longevity and sustainability, allowing for ongoing support of causes that matter deeply to the settlor.

Unlike direct donations, which are one-off, setting up a charitable trust ensures a lasting legacy of support, driven by the trust’s earnings and capital.

For individuals passionate about making a long-term impact, establishing a charitable trust offers a structured, enduring way to contribute to societal welfare while also enjoying potential tax benefits that come with charitable giving.

This setup not only fulfils philanthropic goals but also embeds the settlor’s values into a lasting framework that benefits future generations.

Discretionary Trust

A Discretionary Trust in Singapore offers the ultimate flexibility in estate planning.

Here, the trustee has the discretion to decide how, when, and to whom the assets within the trust are distributed.

This isn’t about relinquishing control; it’s about empowering a trusted individual or entity to make judgement calls based on the current circumstances of the beneficiaries, which you may not be able to foresee.

For instance, the trustee can allocate more funds to a beneficiary facing financial hardship or medical issues, or conserve funds for future needs.

This type of trust is especially useful if you have a diverse family dynamic or beneficiaries with differing needs.

It allows for responsive and adaptive management of the trust assets, providing tailored support to beneficiaries rather than a one-size-fits-all approach.

Asset Protection Trust

An Asset Protection Trust, often employed in Singapore for its robust legal framework, is designed primarily to shield assets from creditors and legal judgments.

By placing assets into this type of trust, they are legally owned by the trust and thus generally beyond the reach of the settlor’s personal financial troubles.

This makes it an invaluable tool for individuals in high-risk professions or businesses, where the threat of lawsuits and claims might otherwise jeopardise personal wealth.

Moreover, it’s a strategic component of wealth management, ensuring that assets are preserved for future generations or for specific purposes, like funding education or retirement.

Not just a defensive tactic, an Asset Protection Trust can also be part of a sophisticated strategy for managing estate taxes and ensuring that the settlor’s assets are used exactly as intended, without external interference.

Who are the parties in a trust?

In the realm of trusts, several key players form the backbone of any trust arrangement.

At the core is the settlor – you – or the individual who creates the trust.

This is the person who decides to transfer part of their wealth into the trust, setting the terms under which the assets are managed and ultimately distributed.

The settlor is essential because they initiate the trust and define its purpose and scope, effectively shaping the financial legacy to be managed according to their wishes.

Then, we have the trustee, who is responsible for managing the trust’s assets.

The trustee’s role is pivotal; they act as the legal owners of the assets but must manage them for the benefit of the beneficiaries according to the terms set out by the settlor.

This role requires a high degree of trust and integrity, as the trustee must balance impartiality with the duty to act in the best interest of the beneficiaries, often navigating complex financial landscapes to do so.

Within the spectrum of trustees, we distinguish between private trustees and public trustees.

Private trustees are typically individuals or private companies selected by the settlor because of personal trust or professional expertise.

These might be family members, lawyers, or dedicated trust companies that offer personalised service, understanding the settlor’s individual, family, or business circumstances intimately.

On the other hand, public trustees offer a more institutional approach.

These are usually governmental or community-based entities that provide trust services to the public.

In Singapore, for example, the Public Trustee’s Office offers services such as managing the estates of deceased persons and un-nominated Central Provident Fund (CPF) monies.

They serve a broader community function and are chosen for their impartiality and the robust legal framework that governs their operations, ensuring transparency and accountability in handling trust assets.

Each of these parties plays a distinct and vital role in the functioning of a trust, contributing to its ability to serve as a flexible, secure mechanism for asset management and succession planning.

Who is the beneficiary of trusts?

The beneficiary of a trust is the person or entity who is entitled to benefit from the assets held within the trust, as designated by the settlor.

Essentially, beneficiaries are the reason a trust exists; they are the ones who receive the income or assets managed by the trustee, under the terms laid out in the trust deed.

Beneficiaries can be individuals, such as family members, children, or friends of the settlor, or they can be entities like charities, organisations, or even businesses, depending on the purpose of the trust.

The role of the beneficiary is passive in the sense that they do not manage the trust’s assets; instead, they receive benefits from the trust according to the specific conditions and stipulations defined by the settlor.

These conditions can vary widely.

For example, a settlor might specify that the trust’s income is to be used for the educational expenses of his children, or that the principal is to be preserved until the children reach a certain age, at which point it can be distributed outright or in stages.

In the case of charitable trusts, the beneficiaries are the charitable causes supported by the trust, which could range from educational scholarships to medical research funding.

The selection of beneficiaries is a crucial aspect of trust formation, reflecting the settlor’s intentions and objectives for the trust’s establishment.

This selection also determines the nature of the trust, whether it is meant to serve private interests, such as family estate planning, or broader public purposes, such as philanthropy.

Understanding who the beneficiaries are helps clarify the trust’s goals and guides the trustee’s management and distribution of the trust assets.

How much does it cost to set up a trust in Singapore?

Setting up a trust in Singapore involves several costs that can vary widely depending on the complexity of the trust, the type of assets involved, and the professional services required.

Here’s a breakdown of potential costs:

1. Professional Fees: These are perhaps the most significant part of setting up a trust.

If you engage a lawyer or a specialised trust company to draft the trust deed and manage the setup process, fees can range widely.

For a straightforward trust, legal fees might start from a few thousand Singapore dollars but can escalate significantly for more complex arrangements or high-value asset trusts.

2. Trustee Fees: The trustee, whether a private individual or a professional trust company, will charge for their services.

This fee can be a percentage of the trust’s assets, typically ranging from about 0.5% to 1.5% per annum, or it can be a fixed fee depending on the services provided and the complexity of the trust management required.

3. Registration Fees: While trusts themselves do not need to be registered in Singapore, if the trust involves the transfer of real estate or other registrable assets, there may be registration fees involved.

These fees are payable to the relevant authorities and can vary based on the asset type and value.

4. Maintenance Costs: Trusts require ongoing administration which includes annual tax filing, accounting, and auditing, especially for trusts that are involved in extensive investment activities or have commercial properties.

These maintenance costs are ongoing and necessary to ensure the trust complies with legal and tax requirements.

5. Miscellaneous Costs: Depending on the specific needs of the trust, there might be additional costs involved.

For example, if the trust requires international legal advice or specialised tax planning, these services can add to the overall cost.

Given these variables, the total cost of setting up a trust in Singapore can start from a few thousand dollars for the most basic trusts and can rise substantially for more involved setups.

It’s advisable for potential settlers to consult with a financial advisor or a trust specialist to get a more accurate estimate tailored to their specific circumstances and needs.

This consultation ensures that all potential costs are considered and the trust is set up in the most efficient and effective manner possible.

It is advisable to consult with legal and financial professionals who can provide advice based on your specific circumstances and help you navigate the complexities of trust creation.

How to set up a trust in Singapore?

Setting up a trust in Singapore involves a series of thoughtful steps, each important to ensure the trust operates effectively and meets your specific needs.

Here’s a straightforward guide to help you through the process:

1. Define Your Objectives: Before anything else, pinpoint exactly why you want to create a trust.

Whether it’s for estate planning, asset protection, providing for your family, or supporting charitable causes, your goals will dictate the type of trust and the terms you need to set.

2. Choose the Right Type of Trust: Depending on your objectives, decide on the type of trust that best suits your needs — whether it’s a revocable, irrevocable, living (inter vivos), testamentary, or a special purpose trust like a charitable or asset protection trust.

3. Select the Trustee: Choose a trustee who will manage the trust assets.

This can be an individual, such as a family member or a trusted advisor, or a corporate trustee like a bank or a trust company.

The trustee must be someone you trust implicitly to manage and distribute the trust assets according to the trust’s terms.

4. Identify the Beneficiaries: Clearly define who will benefit from the trust.

Beneficiaries can be family members, friends, or organisations such as charities. Detailing who benefits, and under what conditions, is crucial.

5. Draft the Trust Deed: This legal document outlines all the specifics of the trust, including the settlor’s intentions, the powers and duties of the trustee, the rights of the beneficiaries, and the terms for managing and distributing the assets.

Engage a qualified lawyer experienced in trust law to draft this to ensure it’s legally sound and reflects your wishes accurately.

6. Fund the Trust: Transfer the assets you wish to include in the trust to the trustee to hold on behalf of the beneficiaries.

These can include money, stocks, real estate, or other valuable assets.

7. Register the Trust, if Necessary: While not all trusts in Singapore need to be registered, those involving certain types of assets (like real estate) may require registration or notification to relevant authorities.

8. Manage the Trust: Once established, the trustee manages the trust assets according to the terms laid out in the trust deed.

This involves investing assets wisely, making distributions to beneficiaries, and handling any tax implications.

9. Ongoing Administration: Trusts require ongoing administration to ensure compliance with legal, tax, and regulatory requirements.

This may include preparing annual accounts, tax filings, and periodic reviews of the trust’s terms and its effectiveness in meeting your goals.

10. Review and Modify as Needed: If you’ve set up a revocable trust, you can modify it as your circumstances or intentions change.

Regular reviews are recommended to adapt to legal changes or shifts in your personal life.

Each step in setting up a trust in Singapore requires careful consideration and, often, the assistance of professionals such as lawyers, financial advisors, and tax consultants.

Their expertise ensures that the trust is set up correctly and operates efficiently, fulfilling your objectives while staying compliant with Singaporean law.

Conclusion

So, there you have it – a quick dive into the world of trusts in Singapore.

From understanding what a trust is, the ins and outs of setting one up, to getting your head around the different types of trusts like testamentary and revocable trusts.

We’ve also touched on why setting up a trust could be a game-changer for managing your assets, protecting your wealth, and planning for the future – be it for retirement, your family’s well-being, or your philanthropic legacies.

Navigating the nuances of Singapore’s trust law might seem daunting with all its legal jargon and intricacies.

But remember, you’re not alone in this.

If you’re feeling a bit tangled up in all this information or just need a little more clarity on how a trust could work for you, why not chat with one of our financial advisor partners?

They’re here to help, and the best part – it’s absolutely free.

No strings attached, just good, solid advice to help you make the best decisions for your financial future.

So, don’t hesitate to reach out and get the guidance you need.

Picture of Firdaus Syazwani
Firdaus Syazwani
Twenty years ago, Firdaus's mother bought an endowment plan from an insurance agent to gift him $20,000. However, after 20 years of paying premiums, Firdaus discovered that the policy was actually a whole life plan with a sum assured of $20,000, and they didn't receive any money back. This experience inspired Firdaus to create dollarbureau.com, so that others won't face the same problem of being misled or not understanding what they are purchasing – which he sees as a is a huge problem in the industry.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Dollar Bureau and its affiliated parties is not meant to be construed as financial advice. Dollar Bureau shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

Most Popular Posts

Recent Posts

FREE beginner Investment course!

Start Investing without fear of losing your money

Get the free investment course for beginners that has helped hundreds of Singaporeans start their journey towards financial freedom.