What is a Trust?
A trust is a legal arrangement that allows the settlor to place assets so that the trustee can administer and manage them for the beneficiaries. There are typically 3 parties involved in a trust: settlor, trustee and beneficiary. Assets held on trust may take different forms such as cash, stocks, property and beneficiaries may be friends, family members or charitable organisations.
What is the benefits of a trust?
A trust is flexible and can be used for many different purposes. For instance, in Singapore, individuals under 21 years of age cannot hold property (e.g. flat). However, a trust allows you to purchase the property and hold it on trust for the minor. Setting up a trust may also help you reduce tax liability especially if your income places you among the higher tax brackets for income tax. A trust is beneficial if you want to provide for a special needs child or family member or your loved ones. A trust can also be used to invest your money.
What is the Trustees Act 1967?
A trustee has legal ownership of the assets while the beneficiary has equitable interest in the assets. Under the Trustees Act 1967 (“TA”), your trustee has a statutory obligation to act in the best interests of your beneficiaries and has certain duties and responsibilities prescribed by the TA, including maintaining minors, providing for special needs children or family members and advancing the benefit of the beneficiaries.
How to set up a trust in Singapore?
A trust is created through a trust instrument which may take the form of a contract, will or deed. Setting up a trust is complex as there are various considerations to bear in mind including deciding on the type of trust. For example, a fixed trust allows the settlor to determine from the outset how much and under what terms will the beneficiary receive from the trust. A discretionary trust, on the other hand, provides the trustee with full discretion over how much, when and how the distribution shall be made from the trust to the beneficiary.
It is also important to establish, among others, the following elements of a trust which includes:
- Certainty of object
- Certainty of subject
- Certainty of intention
- Constitution
- Formalities