Setting Up a Trust in Singapore: A Comprehensive Guide

Trust funds play a crucial role in wealth and estate planning. It provides a structured and legally binding way to manage and protect assets for current and future beneficiaries. This arrangement helps preserve wealth across generations, safeguards assets from creditors and legal claims. It also helps minimize estate and inheritance taxes through strategic planning.

However, a trust fund is not like opening a typical savings account. It can be challenging primarily due to stringent regulatory and compliance requirements. These regulations are  designed to align with international standards on transparency, anti-money laundering (AML), and tax compliance. Although Singapore does not require general registration of trusts, the legal documentation and trustee appointment process must be meticulously structured. 

In this article, we will give you a comprehensive overview of how to set up a trust fund in Singapore. We will talk about the legal framework, requirements, and overall cost of starting a trust account in Singapore. 

Understanding Trust Accounts in Singapore

What is a Trust Fund?

A trust is a legal arrangement where a settlor (the person creating the trust) transfers assets to a trustee. The trustee then holds and manages those assets for the benefit of designated beneficiaries. A trust fund, on the other hand, specifically refers to the assets placed within the trust. The key distinction is that the trust is the legal relationship and structure, while the trust fund is the actual property or assets held within that trust.

There are three key parties involved when setting up a trust: 

• Settlor: The individual who creates the trust by transferring assets into it and setting out the terms in the trust deed. The settlor defines how assets should be managed and who the beneficiaries are. 
• Trustee: The person or company appointed to manage the trust assets. Trustees in Singapore must be either a Singapore resident individual or a company incorporated in Singapore. Trustees have fiduciary duties to act in the best interests of the beneficiaries and must comply with the terms of the trust deed and the Trustees Act. 
• Beneficiaries: The persons or entities entitled to benefit from the trust assets, as specified by the settlor in the trust deed. Beneficiaries receive income or capital distributions according to the trust’s terms.

Benefits of Setting Up a Trust Fund

A trust fund is useful for individuals or entities who want to manage their assets effectively. This includes business owners, high-net-worth individuals, professionals exposed to legal risks, and anyone wanting to avoid lengthy probate processes upon death. Trusts are also suitable for those wishing to maintain privacy, shield assets from forced heirship claims, or comply with the country’s tax regulations. Here are reasons why you should set up a trust fund in Singapore: 

• Facilitate smooth and private transfer of wealth, avoiding probate delays and public scrutiny.
• Shield assets from creditors, legal claims, or family disputes, preserving wealth across generations.
• Manage and grow wealth strategically, especially for minors or individuals unable to manage their finances. 
• Potentially reduce tax liabilities by distributing income among beneficiaries in lower tax brackets, though professional tax advice is essential.
• Ensure minors or dependents with special needs are financially supported according to the settlor’s instructions. 
• Maintain family wealth over generations, controlling how and when assets are distributed. 

Types of Trusts Available in Singapore

There are different types of trusts you can open in Singapore. From family wealth preservation to investment management and charity, each type caters to specific needs of the settlor. Here is an overview of different types of trusts you can establish in Singapore: 

Trust Type	Key Features	Typical Uses
Discretionary Trust	Trustee discretion over distribution	Family wealth management, estate planning
Testamentary Trust	Created by will, effective after death	Minor/special needs beneficiaries
Revocable Trust	Can be changed or revoked during lifetime	Estate planning, probate avoidance
Standby Trust	Dormant until triggered	Incapacity planning, post-death asset management
Reserved Powers Trust	Settlor retains some control	Investment control within discretionary trust
Life Interest Trust	Income to life tenant, capital to remaindermen	Lifetime income management
Protective Trust	Protects vulnerable beneficiaries	Protection from creditors or misuse
Bare Trust	Trustee holds assets for beneficiary	Nominee arrangements
Charitable Trust	For charitable purposes	Philanthropy
Purpose Trust	For non-charitable purposes	Holding assets for specific purposes
Private Family Trust	Protects family wealth	Asset protection from creditors, probate

Legal Framework and Regulations For Setting Up Trusts in Singapore

Setting up a trust fund in Singapore is primarily under the Trustees Act (Cap 337). This act provides the foundational legislation for trustees and trust arrangements established under Singapore law. This act sets out the powers and duties of trustees, including investment powers, management of trust property, and general administrative powers such as selling trust assets, raising money, and insuring trust property. 

Complimenting the Trustees Act is the Monetary Authority of Singapore (MAS) to regulate business licensing for companies carrying a trust in Singapore. These strict regulations are in place to ensure compliance with prudential standards, governance, and anti-money laundering requirements. 

How to Set Up a Trust Fund in Singapore

Step 1: Determine the Purpose of the Trust

Decide the primary objectives of the trust. This can be wealth preservation, tax planning, asset protection, succession planning, or charitable purposes. This purpose guides the structure, terms, and type of trust. 

Step 2: Choose a Trustee

Under Singapore law, trustees must act in the best interests of beneficiaries. This includes managing assets prudently, maintaining accurate records, communicating regularly with beneficiaries, and distributing assets according to the trust deed. They must have sufficient time, resources, and willingness to dedicate to managing the trust properly over its duration. They must also be impartial and objective, especially important in discretionary or family trusts. 

When choosing a trustee to set up a trust fund in Singapore, you can choose either an individual or a professional trust company: 

• Individual Trustees: These can be family members, friends, or trusted individuals. They are often more cost-effective and may have a personal understanding of the family’s needs. However, they might lack the expertise or resources to manage complex assets or navigate legal and regulatory requirements effectively.
• Professional Trustees: These include licensed trust companies or financial institutions regulated by MAS under the Trust Companies Act. Professional trustees bring expertise, impartiality, and accountability, which is particularly valuable when managing complex trusts or when family dynamics are sensitive. 

Step 3: Draft the Trust Deed

The trust deed is the foundational legal instrument governing the trust’s operation and administration. When drafting a trust deed, the document must be carefully prepared to clearly set out the terms, rights, duties, and obligations of all parties involved. Here are key components of a trust deed: 

• Title and Parties: Name the trust clearly, often reflecting its purpose or settlor’s name. Identify the settlor, trustee, and beneficiaries, 
• Recitals (Background): States the background facts, such as the settlor’s ownership of the assets and the intention to create a trust for the beneficiaries.
• Definition of Terms: Defines key terms used in the deed, such as “Trust Fund,” “Beneficiaries,” “Trustee,” and “Income.”
• Declaration of Trust: The settlor declares that the trustee will hold the specified assets on trust for the beneficiaries according to the terms set out.
• Trust Assets: Specifies the assets being transferred into the trust, which may include cash, property, shares, or other valuables.
• Purpose of the Trust: Clearly articulates the trust’s purpose, such as wealth preservation, asset protection, or providing for minors, to guide trustee actions.
• Powers and Duties of the Trustee: Enumerate the trustee’s powers, including managing, investing, selling, or reinvesting trust assets. Outline fiduciary duties such as acting prudently, avoiding conflicts of interest, maintaining proper accounts, and providing reports to beneficiaries. Include powers to appoint agents, borrow money, insure assets, and other administrative powers.
• Beneficiaries and Distribution: Identifies beneficiaries and any classes or contingencies. It also specifies how income and capital are to be distributed, including conditions or milestones (e.g., age, education completion). Furthermore, it includes provisions for discretionary distributions if applicable.
• Duration of the Trust: State the trust’s duration, noting Singapore’s maximum allowable period of up to 100 years.
• Amendment and Revocation: Includes clauses on whether and how the trust deed can be amended or revoked, especially for revocable trusts.
• Governing Law and Jurisdiction: Specifies that the trust is governed by Singapore law, providing clarity and legal certainty.
• Dispute Resolution: Provides mechanisms for resolving disputes, such as mediation, arbitration, or litigation, possibly referencing Singapore’s mediation and arbitration centers.
• Signatures and Execution: The trust deed must be signed by the settlor and trustee(s), often in the presence of witnesses, to be legally binding.

Step 4: Transfer Assets into the Trust

Transferring assets into a trust legally vests the ownership of specified assets with the trustee to hold and manage for the beneficiaries. This transfer must be properly documented to legally vest the assets with the trustee for the beneficiaries’ benefit. The trust is constituted when the assets are transferred or declared as held in trust.

Determine which assets will be placed into the trust. These can include cash, real estate, shares, investments, personal property, or other valuables. Depending on the asset, you need to prepare the necessary documents:  

• For real estate, a formal deed of transfer is required. This must be lodged with the Singapore Land Authority to update ownership records.
• For bank accounts or cash, liaise with the bank to complete their required forms to change ownership or designate the trust as the new owner.
• For investment accounts or shares, coordinate with the relevant financial institutions to effect the transfer. This may involve share transfer forms or account re-registration.
• For other assets, appropriate legal documents must be prepared to transfer ownership to the trustee.

For assets like property or valuable personal items, independent valuations may be advisable to establish market value for legal, tax, and accounting purposes. Transferring all these assets may trigger stamp duty or other taxes. For example, property transfers are subject to stamp duty, and shares transfers may have tax implications.

Step 5: Manage and Administer the Trust

The trustee manages and administers the trust assets according to the trust deed and Singapore law. This includes:

• Investing and protecting trust assets prudently
• Keeping proper accounts and records
• Filing tax returns if applicable
• Distributing income or capital to beneficiaries as per the deed
• Complying with ongoing legal and regulatory obligations. 

Costs of Setting Up a Trust Fund in Singapore

There are many factors that affect the cost of setting up a trust fund in Singapore. Complexity of the trust, the types of assets, and choice of professional and legal services can affect the overall cost. To start a trust, you need to pay for legal fees, trustee fees, and asset valuation costs. 

• Legal Fees: covers drafting the trust deed and providing legal advice. These fees can range from a few hundred to several thousand Singapore dollars, depending on the complexity of the trust and the experience of the law firm engaged. Simple trusts cost less, while complex or bespoke trusts require more extensive legal work. 
• Trustee Fees: If you appoint a professional trustee, expect annual trustee fees typically ranging from 0.5% to 1.5% of the trust’s assets under management. Some trustees may also charge initial setup fees or flat fees for specific services. 
• Asset Valuation Costs: For trusts involving real estate or valuable personal property, independent valuations may be necessary, which incur additional costs depending on asset type and complexity. 
• Registration Fees: While registering a trust is generally not mandatory, certain assets, like real estate, require registration with the Singapore Land Authority. This involves stamp duties and registration fees based on the asset’s value. 

There are also  ongoing costs you will have to account for. This includes annual trustee fees for managing and administering the trust, administrative expenses for accounting, auditing, and tax filing, as well as tax preparation and investment management fees. 

Overall, setting up a trust fund in Singapore can cost from a few thousand SGD for simple trusts to S$20,000 or more for complex arrangements. You also need to keep in mind the  annual fees for professional trustee services and administration. 

Emerhub’s local team can help you set up a trust fund in Singapore. With our extensive knowledge of the country’s regulatory framework, we can assist in preparing and compiling all the necessary documents needed to set up a trust fund in Singapore. Our end-to-end support offers corporate secretarial, tax, and compliance assistance to help you effectively administer and manage the trust once established.

Need help with setting up a trust in Singapore? Fill out the form and get in touch with our local team.