Testamentary & Living Trust

Trust is a distinct legal concept in the common law system adopted by Singapore. It enables dual ownership of an asset, providing benefits in asset protection and estate planning.

TRUST IN ACTION

The diagram below illustrates how a settlor (client) transfers an asset (property) to a trustee. The trustee is legally bound by the trust deed and trust laws to manage the asset for the beneficiaries' benefit.

PRINCIPAL CONSIDERATIONS FOR TRUST STRUCTURING AND PLANNING

Planning comes with costs, so a trust structure should only be pursued if it can achieve specific outcomes that other structures cannot. These outcomes include:

• Liquidity upon the settlor’s death or mental incapacity
• Asset protection for the settlor and beneficiaries
• Staggered distribution of a beneficiary’s inheritance
• Directing assets to specific beneficiaries
• Holding assets for minors or mentally incapacitated individuals
• Preserving family assets for future generations
• Maintaining confidentiality of assets

KEY CONSIDERATIONS FOR TRUST STRUCTURING

A. Family Structure Analysis
Understanding your family structure is crucial, as your assets should reflect your duty or affection towards family members. Consider family members who might be unintentionally excluded from your estate due to intestacy laws or outdated wills, especially in these scenarios:

• Single individuals
• Blended families
• Non-traditional relationships
• Single parents (divorced or widowed)
• Stepfamilies
• Extramarital relationships
• Challenging family relationships

Reflect on whether there are any family members you wish to set aside or allocate funds for specifically.

B. Financial Analysis
This involves assessing your assets, liabilities, income, and expenses. It’s more than just numbers; it’s about understanding the emotions tied to your financial situation. Consider:

• Market values and ownership structures of assets
• Institutions holding the assets
• Outstanding liabilities and responsible parties
• Income and expense patterns and their stability

Ask yourself:

• Are there assets you want to allocate for a specific purpose or person?
• Do you need to protect any assets from liabilities?
• Are you holding or intending to hold assets in trust for someone?
• Do you have any liquid assets you wish to keep separate from probate?

C. Giving Intention Analysis
After evaluating your family and financial situations, consider your intentions for giving and how they can positively impact others and provide personal satisfaction. These intentions will guide the purpose statement of your trust deed.