A trust is best described as a relationship; an arrangement under which assets are transferred from one person (the settlor) to another person or entity (the trustee) who then holds the assets for the benefit of specified people or entities (the beneficiaries).
There are a range of advantages for having assets held by a trust, which include the protection of assets, succession and tax planning, and confidentiality. The practical advantages of a trust are gained from the distinction that is drawn between the formal or legal owner of property, the trustee, and those people that have the use or benefit of the property, the beneficiaries.
Some settlors are reluctant to set up trusts because they fear relinquishing their control over the assets to be placed into trust. For those who wish to continue to exercise effective control over trust assets, careful planning is required if the trust is to remain valid or useful for its intended purpose. In short, if a settlor retains too much control, there is a risk that the trust will not be effective and the settlor may continue to be regarded as the legal owner. If this happens, the advantages of having the assets held in trust may be lost.
A compromise can be achieved through the use of a Singapore Private Trust Company (PTC), which is a private Singapore company that is formed for the sole purpose of acting as the trustee of a single trust or a group of related trusts. The board of a PTC is typically populated with a mixture of professional advisers and the settlor’s family. This enables the family, with assistance of trusted advisers, to participate in the management of the PTC and therefore in the decisions that need to be taken by the PTC as trustee. This structure also allows members of succeeding generations of the family to become involved in the management of the PTC in a controlled way.
Accordingly, a PTC enables a settlor to retain a degree of influence over the management of that trust company without compromising the validity of the trust. This makes it a PTC a particularly attractive structure for clients wishing to place active and valuable assets, like a family business, into trust. PTCs are often used for wealthy family trusts, or as the basis of a Single Family Office, where commercial decisions can be made in an efficient and effective way.
“In the current climate, we are noticing clients generally moving away from structures and jurisdictions that are more susceptible to changes in regulation due to heightened uncertainty in the global economy” said Max Ezerins, In-house Legal Counsel at Sovereign Management Services in Singapore. “We are certainly seeing increased interest in Singapore Private Trust Companies as a robust way to hold dynamic assets in a secure and well regulated environment.”
The ownership of the PTC company itself is commonly overlooked when setting up a PTC. Whilst there is nothing to preclude the settlor or a family member from owning the PTC company, the most resilient option is for the shares in the PTC to be held by a separate non-charitable purpose trust. This is a type of trust that can be formed to hold assets for a purpose without conferring a benefit on any specific person.
Purpose trusts are often used to hold the shares in a PTC when confidentiality and control issues are important. A purpose trust helps ensure that the assets of the PTC are not beneficially owned by the settlor or a family member, which could expose the assets of the PTC to attack from creditors or revenue authorities. Singapore does not itself have legislation that permits non-charitable purpose trusts, but it is possible for the shares in a Singapore PTC to be held by a trust in another jurisdiction. Guernsey, for example, is one of only a few jurisdictions worldwide that provides for the establishment of non-charitable purpose trusts.
The ownership of Singapore companies, including PTCs, is publicly available on the Singapore company register. However ownership information in relation to trusts is generally not available, such that a Singapore PTC that is owned by a purpose trust in a jurisdiction like Guernsey will assist in keeping the identity of the owners of the PTC and the assets of the trust confidential.
The Singapore PTC that is owned by a purpose trust is therefore an effective and robust way for clients to hold assets in trust, while at the same time retaining a degree of control of the assets, providing for effective succession and tax planning, and maintaining confidentiality.