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While most may think that trusts are complex and only reserved for the ultra-rich, trusts can in fact be more accessible and easier to set up than you think.
With the rapid growth of Singapore’s mass affluent population, trusts are increasingly becoming more relevant to a larger group of people living in Singapore as a means of protecting their assets and distributing them after they are no longer around.
What Is A Trust?
A trust is a legal arrangement where you (typically referred to as the settlor) transfer assets to an appointed trustee to manage and administer for the benefit of your beneficiaries. This will be done in accordance with the terms of the trust and the governing law of the trust. Even though the process of setting up a trust involves transferring the legal ownership of the assets to the trustee, you (as settlor) will be able to specify how you want your assets to be managed and distributed to your beneficiaries. The trustee also has a fiduciary duty to administer the trust in the interest of the specified beneficiaries.
Source: Metis SG
Why Do People Create A Trust?
A trust presents numerous advantages and benefits depending on your personal and financial circumstances.
#1 Protecting Your Assets
A trust structure establishes a layer of protection for your assets – potentially shielding trust assets against claims from your creditors.
This feature can be useful for people in high-risk businesses or professions (where they may be sued for negligence), such as business owners, c-suite executives, doctors and lawyers, who wish to protect their assets.
Similarly, trust assets can be protected in the event of divorce proceedings. For instance, a trust can be useful if you wish to give assets to your child, while ensuring that these assets will not become a divisible matrimonial asset if your child eventually marries and divorces.
#2 Protecting Your Vulnerable Beneficiaries
Trusts are often used to protect the interests of young or vulnerable beneficiaries who are not capable of handling their own financial affairs. These include children who are minors, beneficiaries who have special needs and even beneficiaries who you worry about not being able to manage lump sum assets well.
In addition, trusts also avoid the legal delays that beneficiaries face in gaining access to assets bequeathed under a will.
Source: Metis SG
#3 Legacy Planning
Trusts can also be used to distribute your assets to future generations according to your own wishes. Apart from being a faster and less costly asset distribution process as compared to wills, trusts allow for greater distribution privacy which can potentially help to avoid family disputes regarding the distribution of assets and inheritance.
Trusts may also be useful for legitimate tax planning purposes such as protecting assets from capital gains or death taxes that may apply in other jurisdictions.
Source: Metis SG
#4 Converting A Lump Sum Payout Into Regular Income Streams For Beneficiaries
If you wish to distribute your assets in stages, as opposed to making a lump sum payout, you can do so by setting up a trust. This is particularly relevant to those who have vulnerable beneficiaries (see point #2 above).
You can also assign typical lump sum payouts, such as insurance payouts and/or CPF monies, into a trust. For example, you may assign your insurance policies and/or nominate your CPF monies into the Metis SG trust and through a Letter of Wishes, request Metis SG to make regular payouts to your beneficiaries from the insurance payouts and CPF monies that are subsequently received into the trust.
Source: Metis SG
What You Should Know Before Setting Up A Trust
First and foremost, and quite obviously, there are costs involved in establishing and maintaining a trust. This typically includes legal, administrative and management costs. The costs vary widely depending on the complexity of the arrangements and the choice of law firms.
Secondly, assets which you choose to inject into a trust would no longer belong to you as the trustee would now hold the legal title of the trust asset. While this feature forms the very basis of any asset protection afforded under a trust, such a structure may not align with your preferences for full ownership.
Finally, creating a trust should be done in good faith, and assets simply placed in a trust to defraud creditors or gain protection can be made void by the courts. In Singapore, to protect the assets from creditors, an irrevocable trust must have been set up for more than three years before a bankruptcy.
Building Wealth Through A Trust
Metis SG is a subsidiary under the Metis Global Group and is part of a larger network of entities (i.e. Metis Global Limited (“Metis HK” and Metis Global (Cook Islands) Limited (“Metis CI”) providing trust services across Asian markets. Metis HK commenced operations in 2013 and to date, the Group has more than 20,000 retail clients in Asia across Metis SG, Metis HK and Metis CI.
Metis SG obtained its trust business license from the Monetary Authority of Singapore in 2021 and launched its products (SapphirePRO and CitrinePRO) in early 2022.
Metis SG’s trust plans are designed to be accessible and affordable to all. SapphirePRO is a regular contribution trust plan that allows settlors to set up a trust with contributions from as little as $500 per month. On the other hand, CitrinePRO is a single contribution trust plan, with a minimum contribution amount of $30,000.
The contributions that you make into the Trust will be entirely used to purchase units in mutual funds of your choice, and any applicable fees will be charged through deductions of units from your investments. This way, instead of sitting idly, your monies will be invested and may achieve returns that outweigh the fees and charges.
Through Metis SG’s trust plans, you can now invest in more than 200 individual funds which are managed by reputable fund managers. You can also invest in a fund even if the fund is not currently listed in Metis SG’s asset listing, provided that they are able to support your trade.
We can look at the following example of Metis SG’s SapphirePRO trust plan to see how it works. As illustrated below, at age 35, Max starts contributing $1,000 per month to his SapphirePRO plan for a Contribution Payment Term (CPT) of 30 years. His beneficiaries are his wife and son.
If he passes on 10 years later, at 45, his trust plan will stop receiving further contributions. By then, he would have contributed $120,000 and his Trust assets could potentially increase in value. The trustee would reference Max’s Letter of Wishes and exercise its discretion to distribute the Trust assets to his beneficiaries, whether via a lump sum payout or a series of regular payouts.
During his lifetime and within the CPT, Max may request for payouts to be made from his Trust plan to his beneficiaries. Assuming any distribution is made during the plan’s CPT, an exit charge may apply. Otherwise, the Trust assets will continue to be fully invested, compounding through the years, until a distribution is made.
Source: Metis SG
If, like Max, you are thinking of building your wealth under the protection of a Trust, you need to be mindful of the fees and charges.
For example, for Metis SG, all fees and charges, with the exception of the Trust Plan fee, are charged through deductions of units from your investments.
As you can see (below), even though you are not forking out a separate payment, you are paying three types of fees when investing in Metis SG’s SapphirePRO trust plan.
First, the Trust Plan Fee, is a monthly $10 fee ($120 annually) that you will be incurred from the plan commencement date up until the end of your CPT. That said, subject to the satisfaction of certain conditions, 100% of this Trust Plan Fee of $3,600 ($10 x 12 months x 30 years) will be refunded into your accumulation account after the trust plan CPT maturity date.
Secondly, you will also bear a Trust Settlement Charge of 0.5% per month (approx. 6% annually) of the Initial Account Value. This applies from the plan commencement date up until the end of your CPT.
Third, an Administration Charge of 0.15% per month (approx. 1.8% annually) of the Accumulation Account Value. But, this only starts after your Initial Contribution Period (ICP). If you’re investing in a 30-year trust plan, your ICP will be 30 months and the Administration Charge will commence on the 31st month of your trust plan. In a general scenario, this charge will drop to 0.1% per month (approx. 1.2% annually) of the Accumulation Account Value after your Contribution Payment Term.
At the end of your Contribution Payment Term, all the units in the initial account will be transferred into the accumulation account.
Metis SG’s trust plans are built to be both accessible and affordable to the man on the street who wants to start a trust. By taking the first step to invest in a trust plan today, you can continue building your wealth while protecting your assets and your beneficiaries.
If you have further questions, you can browse the FAQs listed on their website or get in touch with the Metis SG team.
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