Individuals may establish a trust for one or more of the following reasons:
Setup an organisation beneficial to the community for the relief of poverty,
the advancement of education, the advancement of religion, the advancement of citizenship or community development etc
Wealth Protection is a major advantage of private trusts. Since the trustee is the legal owner of the assets, the settlor relinquishes his /her rights. In most cases, this ensures protection against creditors, bankruptcy and other risks such as a matrimonial asset battle in the event of a divorce.
Succession Planning can be managed by setting up trusts, which alleviates concerns of forced inheritance legislations. Trust arrangments empower the settlor to decisively appoint the beneficiaries of their assets. Also, in the event of death, lengthy probate processes can be avoided by setting up trusts during the settlor’s lifetime. In case of bankruptcy of beneficiaries, the trust assets are protected and the beneficiaries are still assured of the income under the trust.
Tax savings are an important consideration for many wealthy individuals to choose to setup trusts in low tax jurisdictions. In the case of Singapore, there is no capital gains tax, estate duty tax or withholding tax imposed on the distributions to beneficiaries. There are also various income tax exemptions available to qualifying foreign or domestic trusts, including, the tax exemption on certain types of trust income of a foreign trust as well as its distributions to beneficiaries.