3. Trusts

a. Most frequently used trusts

The types of trusts most frequently used in Singapore may be broadly grouped as:

  • private family trusts (both testamentary and inter vivos trusts)
  • statutory trusts (the most common being the irrevocable trust created pursuant to the Conveyancing and Law of Property Act when a policyholder nominates spouse and/or children as the beneficiaries of the life policy)
  • charitable trusts, and
  • collective investment trusts such as unit trusts, which are regulated under the Securities and Futures Act, business trusts that are governed by the Business Trusts Act and real estate investment trusts, regulated by the property fund guidelines.

Singapore does not have legislation specifically authorising non-charitable purpose trusts. Nonetheless, trusts formed in offshore jurisdictions are also frequently used in structures set up for Singapore residents or companies, or by Singapore trust service providers. Chief Justice Chan Sek Keong said in his keynote address ‘Trusts: the legal environment in Singapore’ delivered to the STEP Asia Conference: Wealth Management in Asia Pacific – Building on Our Strengths, on 11 October 2007: ‘Singapore law recognises the validity of and the courts will enforce foreign trusts, subject only to public policy considerations. For this reason, settlors are not affected by any limitations in Singapore trust law. They can establish their trusts under the law of any lawful jurisdiction. The global US and European banks have been here for a long time, discreetly managing the funds of their private clients under trust structures set up under the laws of offshore jurisdictions.’

b. Governing law

Singapore is not a party to and nor has it ratified or acceded to the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985.

Generally, situs and domicile are the two connecting factors most frequently used by the Singapore court in determining trust issues such as whether the court has jurisdiction over the issue, whether the court should determine the substantive rights and obligations according to some system of law other than Singapore law, and whether the court should enforce or recognise the judgment of another court that has determined an issue between parties.

Questions of choice of law as they affect trusts are determined in accordance with conflict of laws principles established in the common law jurisdictions.

If the parties have not specified the law that is intended to govern the trust, the courts will apply the law with which the trust has its closest and most significant connection. This is usually the law of the place of the intended administration of the trust. However, the law of the settlor’s domicile may be applied if other factors are present, for example, where the law of the settlor’s domicile is also the law of the place of residence of the trustees, the law of the place of residence of the beneficiaries, and (in the case of testamentary trusts) where the settlor has used language and terminology unique to the law of the settlor’s domicile.

The courts in Singapore may intervene to enforce a trust with foreign elements. The courts have jurisdiction if any head of jurisdiction under Order 11 of the Rules of Court exists on a good arguable basis. Order 11 states that the courts have jurisdiction if, among others, the cause of action arose in Singapore, or if the trustee, though absent, is domiciled or resident in Singapore, or if the claim is for an account or other relief against the defendant as trustee and the defendant’s liability (as alleged) arises out of any act done in Singapore.

The TA was amended in 2004 to expressly provide that a settlor is deemed to have capacity to create a trust or settle movable property on an existing trust during their lifetime if they have capacity under the laws of Singapore, their domicile, their nationality or the proper law of the transfer.

The courts may decline to exercise their jurisdiction on the principles of forum non conveniens.

c. Creation of a trust

i. Valid constitution

No technical expressions are needed to create an express trust. A trust may be created by will, by deed or by declaration.

A testamentary trust must be created by will in conformity with the prescribed formalities of a will under the Wills Act. (See Section 4.)

A declaration of trust respecting certain types of property must comply with the Civil Law Act if it is to be valid. As is also set out in the Statute of Frauds 1677, a declaration of trust respecting any immovable property or an interest in such property must be manifested and proved by some writing signed by some person who is able to declare such trust, or by will.

To be valid and enforceable, a trust must be properly constituted and possess three certainties: certainty of intention, certainty of subject matter and certainty of objects. The trust must not infringe the various rules relating to perpetuities and inalienability.

The rule against perpetuities is a fixed period of 100 years for trusts created on or after 15 December 2004. A ‘wait and see’ principle applies for all trusts taking effect on or after this date. Trust income may be accumulated for the life of the trust.

Generally, charitable trusts are exempt from complying with the strict rules as to certainty of objects and perpetuity. It is accepted that trusts established for any one of the following purposes are valid: relief of poverty, advancement of education, advancement of religion, or some other purpose beneficial to the community.

Trusts for purposes are generally invalid if they offend the certainty of objects requirement. There are three exceptions to the rule against purpose trusts. Anomalous purpose trusts, trusts of legacies to erect tombs, or to maintain the testator’s animals or to observe Sinchew ceremonies (a type of Chinese ancestral worship), are recognised as valid non-charitable purpose trusts.

There is no restriction on the type of property that may be impressed with a trust so long as the property is in existence, its nature is ascertainable and it is not intrinsically inalienable.

The TA provides that a trust shall not be invalid only by reason of the settlor’s reserving all or any powers of investment or asset management functions under the trust.

ii. Duration and termination

The duration of a trust is determined by the terms of the trust subject to the statutory perpetuity period referred to above. If the trust is one involving the vesting of contingent capital or income at some future time, then, subject to the wait and see principle referred to above, the property must vest, if at all, within the perpetuity period, or the entire gift is void.

A trust terminates when the instrument of trust so stipulates or when all the beneficiaries of the trust who are sui juris consent to the termination, or when there cease to be any settled trust assets.

iii. Beneficiaries

The basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law. The rights of a potential beneficiary under a discretionary trust are similar to those of the objects of a mere power given to trustees in their fiduciary capacity. In such circumstances, the beneficiary has merely a hope but not entitlement that the power will be exercised in the beneficiary’s favour.

A trustee may retain so much of a beneficiary’s entitlement as payment for money owed to the trustee by the beneficiary and similarly, as against persons claiming through the beneficiary. The beneficiary’s entitlement, whether of a capital or income nature, may be retained.

A beneficiary of a trust may now rely on the Contracts (Rights of Third Parties) Act to compel a trustee to sue on behalf of the beneficiary if the trustee, as a party to a covenant, refuses to do so. Under the TA, a trust that is expressly governed by Singapore law and whose trustees are resident in Singapore, which is created by a settlor who was not a citizen or national of Singapore at the time of creating the trust or transferring the property, may exclude the operation of forced heirship rules if the person creating the trust or transferring property to be held on trust had the capacity to do so under the law of Singapore, that person’s domicile or nationality, or the proper law of the transfer.

iv. Trustees

A named trustee who is unwilling or unprepared to accept the trust is free to disclaim it and become divested of the trust property ab initio. A disclaimer may be made in writing or orally, or implied in conduct that is inconsistent with the acceptance of the trust. The disclaimer is irreversible and cannot be withdrawn. By the same token, once a trust is accepted, the named trustee cannot afterwards withdraw acceptance.

The power to retire is exercisable in accordance with the retirement provisions or replacement provisions set out in the trust instrument. The TA also provides for the retirement of trustees. It sets out the circumstances under which a trustee who is desirous of being discharged from the trust may retire from it. Under this provision, a trustee desirous of being discharged may retire with the consent of the co-trustees, provided that after discharge, there will be either a trust corporation or at least two individuals remaining or continuing as trustees.

The TA provides for the power of appointment of new trustees. Under this Act, new trustees may be appointed so as to replace, among others, a trustee or trustees who have died, who is or are absent from Singapore for more than 12 months, who is or are desirous of being discharged from all or any of the trustee duties, or who is or are unfit to act. This statutory power of appointment is conferred on, among others, the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust.

A trustee that is a trust corporation or is acting in a professional capacity is entitled to reimbursement for all reasonable expenses properly incurred in the discharge of duties under the trust. This right of reimbursement is a right under general law and is also accorded under the TA.

Generally speaking, a trustee that is a trust corporation is entitled to remuneration for the performance of the duties of office unless the trust instrument, either expressly or impliedly, prohibits such payment. Where the trust deed is silent on trustee’s remuneration, a trustee that is a trust corporation is entitled to receive reasonable remuneration out of the trust funds for any services provided to or on behalf of the trust and a trustee acting in a professional capacity. A trustee that is not a trust corporation is entitled to reasonable remuneration for services provided to or on behalf of the trust if the other trustee has agreed in writing to the remuneration.

Generally, trustees have duties accorded to them by equity, by the trust instrument and by the TA.

When performing the trust, a trustee must comply strictly with the terms of the trust. It is a paramount duty of trustees to exercise their powers in the best interests of the present and future beneficiaries of the trust.

As between beneficiaries with conflicting interests, a trustee must act impartially.

Trustees must exercise such care and skill as is reasonable in the circumstances having regard to any special knowledge or experience that they have or hold themselves out as having and, if they are professional trustees, to any special knowledge or experience that may reasonably be expected of them.

v. Protectors

If the settlor wishes to reserve some control over the trustees, it is common practice to appoint a ‘protector’ for the trust. The protector may be called by some other name such as advisor or management committee, and may be given a wide variety of powers, including the power to remove and appoint trustees and settle their remuneration or add to a class of discretionary beneficiaries, or to terminate a trust by triggering a final vesting provision.

Although there is no specific mention of the role of a protector in the TA, the provision in the Act setting out the statutory power of appointment of new or additional trustees does contemplate a situation where the power of appointing new trustees may be conferred on a party other than the trustees. The conferment of powers, in connection with the trust, on the protector under the trust instrument should, as a matter of trust law, be accepted as valid.

vi. Role of public trustee

The public trustee is a statutory office created by the Public Trustee Act. The public trustee is appointed by the Minister of Law and holds office on such terms and remuneration as the Minister determines.

d. Trust administration

i. General management

A trustee has a general duty to invest trust assets. Under the TA, trustees may make any kind of investment that they could make if they were absolutely entitled to the assets of the trust, having regard to standard investment criteria.

ii. Distributions from trust

The trustee must distribute trust property to the person beneficially and indefeasibly entitled to it at the time of distribution specified by the trust instrument or when the beneficiary’s share is immediately payable.

iii. Variation of a trust

The general rule is that where a trust is completely constituted, the settlor will not be able to vary the terms of the trust. The trust instrument may give specified persons, including the trustees for the time being of the trust, the power to vary the terms of the trust, for example, an express power to appoint trust property upon new trusts. An application may be made to court to vary the terms of a trust. In practice, the inherent discretionary power of the court to vary a trust is exercised only under very limited circumstances.


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