June 2, 2023

Categories: Planning

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Trusts are a popular estate planning tool that you can harness manage your assets and ensure they are distributed according to your wishes even when you are no longer around.

A trust is a legal arrangement between you (the settlor) and the trustee. When you set up a trust, your appointed trustee takes ownership of your assets and manages them in the best interest of your beneficiaries. In Singapore, trusts are governed by the Trustees Act, which sets out the rules for creating and managing trusts.

One of the main benefits of trusts is that they can help you to avoid probate, which is the legal process that takes place after someone dies in order to transfer their assets to their beneficiaries. As assets placed in a trust are not part of a deceased’s estate, probate is not required; hence reducing the probability of time-consuming and costly disputes over the assets.

Trusts can also provide greater flexibility and control over how assets are distributed. For example, your trust can specify how and when your beneficiaries receive their inheritance, which can be particularly useful if you have concerns about the financial responsibility of your beneficiaries.

The most common types of trusts used in Estate Planning are:

  • Testamentary trust: Set up under a Will and only comes into effect upon the death of the settlor. It is irrevocable and often used to provide for young children, dependents with special needs, or beneficiaries who are unable to manage financial matters.
  • Living trust: Created during the lifetime of the settlor. The settlor transfers assets to the trustee, who manages them on behalf of the beneficiaries. The settlor can revoke or terminate the trust at any time.
  • Charitable trust: Established for charitable purposes. The assets are managed by a trustee and the income is used to support the chosen charitable cause.

Individuals should consider their unique circumstances and goals before deciding whether to establish a trust. You will also need to determine which type of trust best suits your needs. Let’s speak on this to see how I can help you incorporate this aspect into your overarching financial strategy.

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