Client Update | Trust, Asset & Wealth Management

August 2016

Private Wealth Planning Why Singapore

New wealth is growing in Asia and that it will continue to be the case for the next few
decades is an understatement. The continued global uncertainties, economic instability
of the developed nations of the West, a volatile global wealth market, increased
frequency of terror threats and attacks and high mobility of wealth and capital spring
no surprise that Asia is growing as a major wealth management market and Singapore
is in a sweet spot to consolidate its position as an international wealth management
centre.
Many factors contribute to the growth of Asias wealth management market. First,
there are an increasing number of high, and ultra high, net worth individuals in Asia,
particularly from China, India and Indonesia, giving rise to a natural need for wealth
protection. Also, as entrepreneurs and patriarchs/matriarchs age, they will look into
wealth succession. It is common knowledge that many from the second and third
generations of such families do not wish, or are not equipped, to take over the wealthy
family businesses. The sophistication of structures and solutions in the wealth planning
industry also bodes well, since the younger generation of entrepreneurs may be
educated in the West or have exposure to western wealth preservation structures,
including trusts and family offices. In addition, the migration of wealth and
professionals from the West to Asia, for one reason or another, has also created a
great platform and impetus for the wealth management industry.
An interesting development is the presence of tax information exchange agreements,
which attract the wealthy to come to Singapore to leverage on the nations robust,
legitimate and forward-looking system and structures to house and protect their
wealth. They are of course happy to pay lower taxes here, but would steer clear of a
blacklisted tax haven. As such, Singapore presents itself as a very attractive and viable
option, as a widely respected international financial centre with genuine and
substantive business activity and a thriving economy.

Key Objectives of Private Clients for Wealth Planning

Private clients have a number of objectives when it comes to wealth planning but we can distil several common
objectives. These are mitigation of taxes and estate duties, protection of wealth, transition of wealth and
authority to the next generation, creation of a legacy, and more importantly, privacy.
It is worth mentioning that there are private clients who have expressed their unreserved love for their
children, but not necessarily entirely endorsing their childrens choice of spouses or partners. Private clients
tend to have a desire to protect their assets from their in-laws. As such, structures and solutions will have to be
put in place to ensure the assets are adequately ring-fenced from not just creditors but also people living under
the same roof. Another key objective seems to be privacy of the family and family wealth. Typically, neither the
giver of the wealth and power, nor the recipients of such, wish to have the public know how much wealth and
power are involved.
The key concerns of private clients would be to have a sustainable structure that provides confidentiality,
flexibility and protection. Even though there are various tools and structures that can be used for wealth
planning including wills, lasting powers of attorney, insurances, offshore companies and foundations we see

the increasing employment of trusts used for such purposes. In recent years, many developed countries have
frowned upon tax havens, complicated structures and multi-jurisdictional offshore companies. Major leaks of
confidential private client data over the years in scandals like the Panama Papers have not just embarrassed
private clients but also the private banks and advisers involved. Offshore has since taken on a more
contentious and, albeit unfairly so, sinister connotation.

Private Trusts, a Viable Solution

A private trust might be new to some Asian private clients who are not familiar with the common law system or
the concept of trust. The very fact that a rich private client is asked to transfer a substantial portion of his
wealth or assets to a stranger (albeit a professional or licensed trust company), to lose control over such wealth
or assets, and to pay an inception fee for setting up, and professional fees for the operation of, the trust does
not make much sense at first. However, once the private client fully appreciates the benefits of a private trust
and how it works for him and the beneficiaries he wishes to bless, the decision is quite easily reached.
A private trust is a legal arrangement, and not a separate legal entity, that requires a trustee to be the legalowner of all trust assets and enter into all contracts on behalf of the trust. The trustee has specific duties under
the Trustees Act, Cap. 337 of Singapore (Trustees Act) and common law. Professional trustees are also
licensed and regulated by the Monetary Authority of Singapore (MAS) under the Trust Companies Act, Cap.
336 of Singapore (Trust Companies Act). The beneficiaries of the trust must be specific or part of an
identifiable class (eg. my child no.1 and child no.2; or my legal children and grandchildren).

The trust can be revocable or irrevocable (eg. the trust can be amended and terminated anytime; or the trust
cannot be amended or terminated at all). The manner in which the trust assets can be dealt with are fairly
flexible, but must be spelt out clearly in the trust deed. Under Singapore's trust law, the settlor (i.e. the one
creating the trust and putting his/her wealth and assets into the trust) of a trust can retain limited powers

Shook Lin & Bok LLP Client Update | Trust, Asset & Wealth Management

(including the powers to direct the trustee on how to invest the trust assets) in the trust.1 Although the
Singapore legislation makes no mention of the office of the protector (akin to an independent guardian of the
trust, with powers over very limited but major issues like changing the trustee or domicile of the trust), a
protector can also be appointed as an additional safeguard. There are also favourable tax incentives available
for certain types of Singapore trust, which we will not cover in this article (but do get in touch with us if you
would like to find out more).

Meeting the Clients Needs

In a private trust, assets of the settlor are legally transferred to the trustee and thus ring-fenced against
creditors and third parties. This will give the private client peace of mind.
The professional institutional trustees in Singapore must be licensed under the Trust Companies Act2 and are
subject to stringent licensing requirements and ongoing supervision by the MAS. They are also subject to
stringent duties and obligations under the Trustees Act3 and common law. The assets in the trust set up by the
private client are also required by law to be segregated from the trustees own assets and the assets in other
trusts operated by the trustee. These provides additional comfort and protection for the private client and the
beneficiaries.
As a private trust allows the flexibility of adding or removing beneficiaries from the trust, the private client can
grant the trustee discretion within certain parameters to include deserving beneficiaries and exclude
undeserving beneficiaries that should be excluded. The private client can also keep things fluid by identifying
only a certain class of beneficiaries and leaving it to the trustee to determine later which persons should be
included or excluded from the distributions. The quantum of distributions can also be flexible and left to the
discretion of the trustee to determine, based on the circumstances at the relevant time. The private client can
also specify conditions for the beneficiaries to receive payments under the trust, for example when the
beneficiary attains his/her first university degree, gets legally married or reaches a certain age.
Since the settlor can retain limited powers in the trust, there is legitimacy for private clients to have some
measure of control over matters without the trust being deemed a sham, provided the powers retained are not
so extensive and wide-ranging that the settlor is deemed to be in de facto control of the entire trust.
In addition, Singapore offers other solutions for private clients.
A Singapore foreign trust, for purposes of the nations income tax law, is a foreign trust created in writing with
no Singapore settlor and beneficiary4. This means that neither the settlor nor any of the beneficiaries can be a
citizen or resident of Singapore. In the case of companies, they must be foreign companies5 whose beneficial
owners are all non-Singapore citizens and non-residents of Singapore. Such a trust can enjoy favourable tax
treatment under our tax regime including tax exemption for specified income from designated investments6.
Another key condition is that the trustee must be licensed under the Trust Companies Act7.

Section 90 (5) of the Trustees Act states that no trust or settlement of any property on trust shall be invalid by reason only of the person
creating the trust or making the settlement reserving to himself any or all powers of investment or asset management functions under the
trust or settlement.
2
Section 3 of the Trust Companies Act.
3
Such the statutory duty of care provided for in Section 3A of the Trustees Act.
4
Regulation 2A of the Income Tax (Exemption of Income of Foreign Trusts) Regulations ("Income Tax Regulations").
5
As defined in Regulation 2 of the Income Tax Regulations.
6
Regulation 3 of the Income Tax Regulations.
7
Ibid.
1

Shook Lin & Bok LLP Client Update | Trust, Asset & Wealth Management

Singapore also allows the use of private trust companies, private unit trusts, single investor funds or private
label funds (where a private fund is set up exclusively for the family), family offices and family-owned
investment companies. These are different structures that are available but require proper and detailed
planning to extract the benefits of the structure for the private clients needs.

Conclusion
In short, with regard to wealth management, Asia is the place to be for now and the foreseeable future. The
wealthy will find that they will increasingly require more sophisticated advice and solutions for their diverse
needs. With the current trust law and structures in place to address such needs and concerns, the wealth
management industry in Singapore is well placed to meet the increasing challenging demands of private clients.

For more information, please contact:

Tan Woon Hum
Partner
T: +65 6439 4898
E: woonhum.tan@shooklin.com
Shook Lin & Bok LLP
1 Robinson Road #18-00 AIA Tower Singapore 048542 T +65 6535 1944 F +65 6535 8577 E slb@shooklin.com W www.shooklin.com
Shook Lin & Bok LLP (Unique Entity No. T07LL0924K) is registered in Singapore under the Limited Liability Partnerships Act (Chapter
163A) with limited liability.
This information is provided for general information and does not constitute legal or other professional advice. Specific advice should
always be sought in relation to any legal issue. Shook Lin & Bok LLP does not accept any responsibility for any loss which may arise from
reliance on the above information.

Shook Lin & Bok LLP Client Update | Trust, Asset & Wealth Management