Trust was traditionally offered to the aristocrats or super wealthy family for legacy planning. However, as time goes by, finance institution found that trust can also be relevant to the commoners as well. To set up a Private Trust Company (PTC), you should know the requirements and responsibilities involved.
Private Trust Companies
PTC is established to act as corporate trustee to a trust, created by the appointed settlor connected to the settlor.
Each beneficiary of the trust is a connected person in relation towards the settlor of such trust. Such a person can be described as:
What are the benefits of using Singapore PTC?
There is a list of benefits the trustee can gain by engaging Singapore PTC:
Confidentiality – Compared to independent professional trustee, PTC is deemed to be more trustworthy and private
Control and influence – Board of PTC consists of settlor, members of the family as well as trusted advisor. Settlor and family members are directly involved with the decision-making process
Continuity – The agent may change but the PTC will remain as trustee providing continuation of asset ownership
Diversified underlying assets – PTC allows better choice to which investments can be made with the trust fund based on current knowledge of the economy and market
Ownership succession – PTC can be owned by settlor or family members appointed.
Will vs Trust
A person’s will be a legal declaration of a person’s wish regarding the succession of the owner assets in a legally bind document after the person’s death.
A private trust is where the beneficiaries are definite and specific individuals which are already mentioned in the legally bind document. It can be owned even when the owner is still alive.
People involved within PTC
Settlor – The person in charge to create the trust by transfer assets into PTC. It can be either an individual or a corporate entity
Professional administrator – Is basically the licensed trust Company in Singapore
Board of Directors – Normally involved the settlor, family members as well as advisors
Trustee – The person who acts as trustee of a private trust
Enforcer of Purpose Trust – This person is appointed to ensure the Professional Trustee acts in accordance with the terms of the trust. This cannot be the same person as Professional Trustee to avoid conflict of interest.
Professional Trustee – The person that holds the shares of PTC to overcome succession issues upon demise of settlor
Key Requirements of Singapore PTC
The purpose of PTC is to provide trust services to the family and is prohibited from soliciting trust business from and provide trust services to the public.
Exempted under Trust Companies Act (TCA) from holding trust business license
Required under regulation 4(2) of Trust Companies (Exemption) Regulations to engage a licensed trust company to carry out trust administration services for the purpose of conducting necessary checks to comply with any written direction issued by Monetary Authority of Singapore (MAS) on the prevention of money laundering or countering the financing of terrorism
May only provide trust services to private trust
Trust for Family members
In recent years, the trusts are becoming more well-known due to its features that can override inheritance tax and gift tax which is otherwise is taxable against the beneficiaries under certain jurisdiction if it is transferred via will.
In lieu of this, aristocrats often choses to pass on their inheritance to their children via trusts instead of will. Even though venturing into trust involves recurring cost such as service fees, however it is still considered cost effective as it provides more benefits such as tax savings and confidentiality.
Those who are considered as high-risk profiles, protecting their accumulated wealth from being attached to any litigation is a normal concern. Hence, placing their wealth in trust will indirectly alienate the assets from such claims as the ownership is transferred to the trust and settlor does not have any legal rights over the assets.
As for family businesses, placing their shares in the form of trust will ensure its continuance despite any potential disputes amongst the family members as well as bankruptcy. Hence, placing the shares in the form of trust will not on benefit the family members as beneficiaries but will also preserve the family business for generations to come.
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