Category: Trust

How do I choose a name for my Trust? Should it carry my name? Should it follow my child’s name? Or should I name it to a unique memory or places my family had been to?

When you establish a Trust, you are required to provide a formal name to identify the Trust to its trustees, the beneficiaries and the relevant legal authorities. Besides appearing on all Trust documents, the selected Trust name will also appear on bank accounts which hold your Trust assets, the CPF and insurance nomination forms which you nominate your Trust as the beneficiary. Very often, the names of the Settlors are most commonly used to name the Trusts.

If a Trust name is too long, for example ‘The Robert V. and Patricia S. Hernandez Family Trust’, it is not possible to fit into the limited space for the bank account name to hold the Trust assets or name of the CPF/ insurance nominee when filling in the nomination forms.

On the other hand, if it is too short, where the Settlor’s surname is commonly used, for example ‘Tan Family Trust’, it might be too common and does not differentiate from other similar trust name like ‘Tan Sui Family Trust’, that may create confusion in sorting out legal documents. Although using the Settlor’s surname carries the Settlor’s family identity, it may give rise to concern over privacy issues.

Things to keep in mind when naming a Trust:

1. Consider the Settlors and Beneficiaries

The most obvious choice is to create the Trust in the name of the Settlor, the person setting up the Trust. For example, if Jenny Chang is the Settlor, the Trust can be named ‘Jenny Chang Family Trust’. Otherwise, consider the beneficiaries who will benefit from the Trust, such as the minor children. For example, ‘Joseph and Mona  Chang Trust’. If the beneficiary is an organization or a charity, the trust name which can facilitate the ease for registration with The Commissioner of Charities should be considered.

2. Keep the Name Short

Before you finalize on a Trust name, consider the practical aspects of your choice. Because it is necessary to re-title any property in the name of the Trust, choose a Trust name that can conveniently appear on checks, titled deeds and bank accounts. For example, “Hernandez Trust” is less cumbersome than “The Robert V. and Patricia S. Hernandez Living Trust Fund.”

In Precepts, the rule of thumb in choosing a Trust name is

(i) The name of the Trust should not be too abbreviated.

(ii) To keep the Trust name within total characters not exceeding 30 spaces for the ease of opening and operating bank accounts and CPF/ Insurance nomination.

(iii) The name of the Trust should not carry an apostrophe [‘s] or any special symbol [+, -, @, #, $,*, %, !] to avoid any ambiguity and potential typographical errors. The symbol [&] which denotes ‘and’ is acceptable though not encouraged.

If the Settlor would like to keep his/ her Trust confidential, the name of the Trust can be any name not related to his/ her actual name subject to the above rules when choosing a Trust name.

Jenny Tan

AEPP®

Trust Manager Precepts Trustee Ltd

When the word “trust” is mentioned, it is likely that this term will go over the heads of majority of Singaporeans. That’s because of the common perception that it is a subject reserved for discussion among only the ultra-high net worth community. In this piece, we will attempt to provide a clearer understanding of what a trust is, and debunk the misconceptions that are stopping individuals from setting up a trust in Singapore and taking full advantage of its benefits as an estate planning instrument. Depending on the objectives of an individual, some trusts have a more complex structure, but the bulk of most are used in very direct and practical ways.

WHAT IS A TRUST?

Imagine you’re holding on to a bowl of candy. Before leaving the house for a weeklong work trip, you hand this bowl over to your spouse together with a set of instructions on how you want your candy to be distributed to your children. If you are concerned that your children aren’t disciplined enough to ration the candy on their own (and worry they may gobble up everything at once), your instructions to your spouse could include giving them one candy each after mealtime for the entire week.

Similarly, the archetypal trust is a legal arrangement by which you, the owner (“settlor”) of the assets, create the trust and appoint another party whom you trust (“trustee”) to manage your assets according to your instructions (“trust deed”) for the benefit of the loved ones (“beneficiaries”) you have listed down in the trust deed.

So figuratively, the bowl of candy is like a trust.

THE 6 MISCONCEPTIONS

Before you decide to bury the idea of trusts as a potential solution for your estate planning, here is a list of common misconceptions that many people have about trusts which may encourage you to reconsider setting one up for yourself. You’re not alone if you find yourself falling into one or more of these categories.

Misconception #1: Trusts are Only for the Wealthy

This is perhaps the most common assumption about trusts. While it is true that many wealthy people set up trusts, many in the middle-income group make full use of the benefits of a trust for a variety of purposes in their estate planning. In general, a trust is set up to ensure the estate does not become misappropriated.

Misconception #2: A Trust is Expensive

While there are set-up fees payable, a trust need not be actively administered or managed by the trustee. For example, with a standby trust, one only needs to pay a one-time set-up fee upon creation. Thereafter, there are no on-going trust administration fees until the standby trust is activated, usually upon the occurrence of a triggering event, e.g. death or mental incapacity of the settlor, when assets are transferred into the trust.

Misconception #3: Trusts are Complicated

Usually, setting up a trust in Singapore is not as confusing as it seems. Depending on your estate planning goals, you can set up a trust that is as simple or as complicated as you want it to be. All you need is to list down your objectives – whether it is for protection of assets, provision of funds or anything else – and exactly how you would want the trust to work for you.

Have a chat with your estate planner so that he/she may take you through the process for easier understanding. The last thing you would want to have is a trust that doesn’t serve its purpose.

Misconception #4: A Trust “Locks Up” Your Assets

Again, it depends on what your requirements are for setting up a trust. As stated above, with a standby trust, you need not settle any assets into the trust until a triggering event (such as death) has occurred. Meaning during your lifetime, you retain control over your assets.

If you wish to set up a trust in Singapore and immediately settle assets into the trust, you may retain the power to revoke the trust (revocable trust) which allows you to withdraw your assets if you change your mind.

Misconception #5: A Will is Enough. There’s No Need for a Trust.

A will is required to undergo the process of probate, which grants the executor authority to deal with the deceased’s estate. Without the probate, the executor cannot execute what is written in the will. Also, wills can be challenged and may cause unnecessary delays in the execution of your wishes. In addition, your will will become a public document once it has gone through the probate process.

A living trust does not need to go through the process of probate, so the release of the trust assets to the beneficiaries will be made within a shorter period, in exactly the way you want it to. arguments over assets can be avoided as well because whatever has been instructed by the settlor will be done. Furthermore, should one set up a trust, there is strict confidentiality among the beneficiaries.

Misconception #6: Family or Friend Makes for a Better Trustee

Understandably, people would choose to appoint a close family member or friend as their trustee. After all, who else would make a better choice, right? Unfortunately, many fail to understand the huge amount of work and responsibility they will take on should they agree to act as a trustee. In addition to creating potential tensions within the family, there are also legal implications if the trustee’s role is not fulfilled properly.

A suitable alternative would be to appoint a trust company. This solution shifts the workload entirely to a neutral party who has the expertise and capability to manage the settlor’s estate. Any disagreements regarding the distribution of assets will then be significantly reduced.

WHAT WE SAY

It is important to evaluate your list of assets, decide what your goals are and how you want them to be managed after passing on. After which, a chat with an estate planner would be in order, to help you understand the processes and provide you with the right support before setting up a trust for yourself.

Disclaimer: Any information in this feature is intended to provide only a general understanding of trusts. It should not be misconstrued as material to be used for advice of any kind especially with regards to financial, legal, or tax-related practices. Should you need further advice relating to your estate planning, do approach our consultants to discuss how to structure your trusts according to your requirements.

This article is first published on our newsletter, The Custodian Issue 12 on September, 2019. Click here to subscribe to our latest newsletter.

The use of trust for legacy and succession planning has its significant merits but there are some limitations. The use of trusts for legacy and succession planning has significant merits but there are some limitations where it concerns the person of the trustees. This is where we introduce the concept of a PTC (private trust company). It is suitable for families with substantial family business assets and other family properties. These families face unique challenges as their family generations expand over time.

In the typical TV dramas and many real-life cases, such family businesses lose their direction and control over time and the family and the assets inevitably split up. The development of an estate plan and use of a succession tool like PTC can overcome such challenges. Such a structure has been utilized across modern jurisdictions with much success to help preserve the family wealth.

PTCs are established with the sole purpose of acting as a corporate trustee to a family trust or a number of family trusts, where the settlor and beneficiaries are connected persons.

PTCs are commonly used by high net worth (HNW) families in their wealth structuring. When it comes to family companies, the PTC offers aspects that may be absent in the traditional trust. Whereas the traditional trust structure requires the settlor to give up ownership over certain assets to someone else, in the PTC, the settlor will be more comfortable shifting his assets into a special purpose vehicle which provides for his family members.

The PTC offers a structure where the founder could make the transfer and consolidate the ownership of his diversified family businesses, investments and real estate into one vehicle which also is the trustee. The assets as a result do not get diluted by family growth or marital complications. The structure reduces the chance that these assets become a source of envy, greed and infighting.

With proper structuring, the PTC can be a suitable trustee for a family trust to address concerns such as:

• Succession of wealth for the family
• Asset protection and avoiding adverse claims e.g. business creditors, divorce and family feuds.
• Wealth preservation and investment

FEATURES OF A PRIVATE TRUST COMPANY STRUCTURE:

Other than the family trust instrument, there is usually a family constitution. The family constitution provides

• the governance framework,
• the rules governing the relationships and roles of the family members in the family council,
• the appointment of various committees to carry out certain roles,
• the policies for distribution of the family wealth through the family trusts,
• the human resource policies and compensation of family members employed by the family companies etc.

The family constitution typically stipulates the establishment of a family council and its functions as the supervisory body of the board of directors of the PTC. The family council also provides the communication channel and forum for all the family members to participate in the affairs of the family.

As significant wealth continues to grow in the family, the family PTC could also in time eventually be structured as part of a family office.

Notably, under the Trust Companies (Exemptions) Regulations 2005, the PTC is specifically defined and mentioned as an exempt entity; i.e. it is not required to seek a Trust Business License under the Licensing regime for Trust Companies. At Precepts Trustee Ltd, we assist families to set up their PTCs, and subsequently provide the support to maintain the PTC to comply with regulatory obligations and requirements as well as to provide advice for legacy planning.

Make an appointment with us to explore how the PTC structure can enable you to achieve your legacy plans.

Most of us have probably come across the term “Guardian” or “Guardianship”, but have you ever stopped to think about whether this is something you need to put in place?

What is the Role of a Guardian?

A Guardian will effectively have overall responsibility for  the child including:-

As a parent, it may be something you think you may never have to consider but the safest option is to make provisions for your children now so you know when you are no longer in this life, they will still be loved and well cared for by someone you trust.

A guardian is someone who has the legal authority to take care of a child (21 years old for Singapore) in the event of the death of both their parents or carer.

We understand that determining who will be the guardian of your children is one of the most important decisions as a parent that you will have to make and can be quite an overwhelming task so we have put together some guidance for you below when determining who your guardian(s) should be.

Things to Consider when Appointing a Guardian

Choosing a legal guardian can be, in some cases, a fairly difficult decision to make. Here are some factors for you to consider ensuring you make the best choice:-

Can I appoint more than one guardian?

Yes, you can appoint more than one guardian but make sure the people you choose will be able to agree on what is best for your children.

If you decide you want the guardians to act jointly (instead of jointly and severally), this effectively means all guardians would be required to agree on every single point relating to the children’s upbringing, which school they go to etc. This is likely to cause issues and potential conflict between the guardians.

In some cases, where only one guardian has been appointed, it would be advisable to appoint an alternative guardian in the event the appointed guardian(s) are unable to fulfil their role for any reason.

Guardians Appointed in Different Countries

We have recently seen a high number of queries relating to appointing guardians in different countries to each other and that of the children. Looking at this objectively, realistically this is likely to cause a lot of unrest for the children. Where would the children be expected to reside? Will an agreement even be reached as to who the children will stay with?

Aside from the above, there could also be difficulties faced (along with the associated expense) of obtaining visas for the children and removing them from the UK to live abroad. Will this even be permitted and what if the visas are refused?

Can I Leave Money for my Appointed Guardian(s) in my Will?

The simple answer is yes.

One option is to include this as a money gift in the will which will enable you to specify that the gift is conditional on them acting as a guardian. However, there is no guarantee that the guardians will use it towards the children’s maintenance.

The other alternative is that if assets are being left to the children, the trustees can use the trust income and capital towards the children’s maintenance and benefit. The trustees could do this either by using trust assets directly for the children’s benefit, by transferring income or capital to the child’s parent or guardian whilst they are a minor or to the child directly once they are no longer a minor.

Consequences of not Appointing a Guardian

So what will happen to your children if you don’t appoint a guardian in your will?

Quite simply, the Courts may appoint a guardian for your children. There may well be a feud between the family as to who looks after your children or worse still, your children may be placed into foster care.

I’m sure many people will agree that their children are their most treasured possession. Losing parents can be extremely distressing for children so make provisions in your will now which will make the transition less painful for your children later in life but equally give you the assurance that your children will be well looked after and loved by someone you trust after should anything happen in the future.