In the wake of Covid-19, Wendy Yeo, Trust Director at Equiom Singapore, discusses estate planning considerations for Asia residents.
As we began 2020, we closed the chapter on the previous year and looked forward with excitement and anticipation as to what opportunities the year ahead held for us. Never would we have imagined that just a few months into the year, we would be dealing with a global pandemic.
The situation we are in is entirely new and none of us has ever lived through a pandemic as serious as this, bringing the whole world to a grinding halt. While we adapt to the new norm of staying at home and keeping our distance from others, we have also had time to reflect on our lives and futures, and one thing that will have occurred to some are succession plans.
Why is succession planning important?
Even if you already have something in place, this may be a good time to review what you have and update or enhance your plans as situations do change over time.
It is never too early to plan how and when you want your assets to be passed to your beneficiaries. Without a plan, you will have no control of how your assets are distributed when you are no longer around. If you should pass on without having a Will in place, distribution may be based on the laws of the country where assets are located which may result in unplanned beneficiaries, family disputes and delays in the distribution of your estate. This can be easily addressed by drawing up a Will stating your intended beneficiaries of your assets.
Why consider a trust?
Depending on your situation, a Will may suffice but if you find that your family situation may be a bit more complex, a trust may be a suitable complement.
Consolidation of assets, mitigation of estate duty and providing liquidity through avoidance of probate are among the main reasons for creating a trust. Trusts are often set up by people with young children to provide for their well-being should the unfortunate happen and the parents are no longer around to take care of them. One concern about beneficiaries suddenly coming into significant wealth is that they are not prepared for it emotionally or don’t possess sufficient experience in managing it and this may render them unable to manage the wealth within their inheritance. The trustee can help to manage the assets while taking care of the financial needs of the child. These are just some common reasons why people set up trusts.
Confidentiality is another benefit for setting up a trust as it is a legal agreement between the trustee and the settlor hence it can remain private whereas in some jurisdictions a will is considered a public document after probate is granted or applied for.
How does a trust work?
The person setting up the trust, known as the Settlor, will transfer the assets from his/her name to that of the trustee to hold in trust for his/her beneficiaries. The Trustee will then manage the assets until such time that they are distributed to the beneficiaries. Distribution is guided by a Letter of Wishes provided by the Settlor. As trust practitioners, we have worked with families with diverse needs when it comes to forming an estate plan. The purpose of setting up the trust is to ensure that when the parents are no longer around, the children will benefit from the income generated by the trust assets.
For situations where the desire is to have the successive generations involved in the management of assets, a Private Trust Company (’PTC’) could be set up where family members can serve on the Board and take on the role of Trustee to make decisions on the family assets. These assets could include the family business to ensure continuity and to also keep the family working for a common cause.
Singapore PTCs do not need to be licensed but they are required to engage a licensed trust company to carry out trust administrative services in relation to anti-money laundering requirements set out by the Monetary Authority of Singapore. This is where we have assisted our clients set up these structures and provide the required administrative support.
Assets commonly placed in a trust include financial investments, shares in the family business and insurance policies. Many of our clients use insurance policies to enhance their estate as well as to provide for liquidity.
Start planning now
When COVID-19 first started spreading around the globe and countries began closing their borders, many clients put a hold on their succession plans and said they will revisit it at a later date. Now that we are a few months into this global pandemic, many disruptions that we had hoped were only temporary seem to be here to stay, at least for a while. While we have to adapt to the new norm, one thing has not changed and that is the need to plan for your future, and that includes a well thought out succession plan for yourself and family. Beneficiaries still need to be provided for and we have noticed that those clients that initially deferred their plans for setting up a trust have now re-started these conversations and are finalising their structures.
You do not have to wait until the situation with COVID-19 passes to start the ball rolling. If you have any questions and would like to start planning, contact Equiom. We can discuss your situation on email, telephone or video calls. Documents can be sent via electronic means or courier. Agreement and Trust Deed will need to be signed with wet signature and arrangements which can easily be made once the terms of the trust are agreed.
Equiom specialises in estate planning and has in-depth experience across a variety of asset classes. As a regulated independent trust company, we have in-house experienced tax and estate planning experts to assist clients to achieve their objectives.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.