In short it is a non-profit making entity whose assets are entrusted to a group of people on behalf of the beneficiaries.It is a Legal entity created by a party (the trustor) through which a second party (the trustee) holds the right to manage the trustor’s assets or property for the benefit of a third party (the beneficiary). The four main types of trusts are: (1) Living: trust created by the trustor while he or she is alive. (2) Testamentary: trust established through a will and which comes into effect (is created) when the trustor dies. (3) Revocable: trust that can be modified or terminated by the trustor after its creation. (4) Irrevocable: trust that cannot be modified or terminated by the trustor after its creation.
2. Property interest held by a party (the trustee) for the benefit of another (the beneficiary).
What sort of organisations may be registered as Trusts?
- Charitable Organisations.
- Clubs and Associations.
- Disabled people’s home etc
Each Trust must have the following:
- The Founder
- The Trustees
- The Beneficiaries
- The Objectives
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 settler 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 arrangements empower the settler 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 settler’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.