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Estate planning and establishing a trust in Singapore

Estate planning and considering a trust: an expert’s advice

Wendy Yeo from Equiom Trust services shares what you need to know as you consider your estate planning strategy in a COVID-19 era. Coronavirus has changed the world significantly and swiftly, and the impact has been felt on every level. While we adapt to the new norm of staying at home and keeping our distance from others, we have also had time to reflect on our lives and futures — and one thing that will have occurred to some are succession plans.

Why wills matter

You may already have a succession plan in place, but as situations do change over time this may be a good opportunity to review what you have and update or enhance your plans as appropriate.

It is never too early to plan how and when you want your assets to be passed to your beneficiaries: a succession plan can give you the confidence your vision will be carried out. If you should pass on without having a will in place, distribution may be based on the laws of the country where assets are located, which may result in unplanned beneficiaries, family disputes and delays in the distribution of your estate. This can be easily addressed by drawing up a will stating your intended beneficiaries of your assets.

Why you should consider a trust

Depending on your situation, a will may suffice but if you find that your family needs may be a bit more complex, a trust may be a suitable complement.

Consolidation of assets, mitigation of estate duty, providing liquidity through avoidance of probate (the legal process of handling final affairs) are among the main reasons for establishing a trust. Trusts are often set up by people with young children to provide for their well-being should the unfortunate happen and the parents are not around to take care of them. One concern about beneficiaries suddenly coming into significant wealth is that they are not prepared for it emotionally, or possess sufficient experience to manage the wealth within their inheritance. Children with special needs may require prolonged care, so a trustee — a person or firm appointed to administer the assets — can help to manage the assets while taking care of the financial needs of the child. These are just some common reasons why people set up trusts.

How trusts work

Confidentiality is another key reason for setting up a trust as there is no public register for trusts, unlike wills. How a trust works is that the person setting up the trust, known as the settlor, will transfer the assets from their name to that of the trustee to hold in trust for their beneficiaries. The trustee will then manage the assets until such time that they are distributed to the beneficiaries. Distribution is guided by a letter of wishes provided by the settlor — this is a non-legal document but it clarifies the settlor’s intentions. As trust practitioners, the team at Equiom has worked with families with diverse needs when it comes to forming an estate plan. For example, you may have a young child with special needs, and want to ensure that they are financially taken care of. By having a trust in place, you may gain confidence, knowing they will benefit from the income generated by the trust assets even when you are not around to care for them.

When family has a say

For situations where the desire is to have the successive generations involved in the management of assets, a Private Trust Company (PTC) could be set up where family members can serve on the board and take on the role of trustee to make decisions on the family assets. These assets could include the family business to ensure continuity and to also keep the family working for a common cause.

Singapore PTCs do not need to be licensed but they are required to engage a licensed trust company to carry out trust administrative services in relation to anti-money laundering requirements set out by the Monetary Authority of Singapore. This is where we have assisted our clients set up these structures and provide the required administrative support.

Assets commonly placed in a trust include financial investments, shares in the family business and insurance policies. Many of our clients use insurance policies to enhance their estate as well as to provide for liquidity.

Practical planning in the time of COVID-19

When COVID-19 first started spreading around the globe and countries began closing their borders, many clients put a hold on their succession plans and said they will revisit it at a later date. Now that we are a few months in, many disruptions that we had hoped were only temporary seem to be here to stay, at least for a while.

While we have to adapt to the new norm, one thing has not changed and that is the need to plan for your future, and that includes a well thought out succession plan for yourself and family. Beneficiaries still need to be provided for and we have noticed that those clients that initially deferred their plans for setting up a trust have now re-started these conversations and are finalising their structures. Out of this challenging situation, there is an opportunity to use this time to put a succession plan in place.

You do not have to wait until the situation with COVID-19 passes and social distancing measures are lifted to start the ball rolling. If you have any questions and would like to start planning, contact your Advisor. We can discuss your situation over email, telephone or video calls. Documents can be sent via electronic means or courier. Agreements and trust deeds will need to be physically signed, and arrangements can easily be made once the terms of the trust are agreed.

Ultimately, this unique situation should not stop you from achieving your objectives.

Note: This article been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it. See here for information on the regulatory status of our companies.

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