Common Pitfalls When Setting Up A Trust


Common Pitfalls When Setting Up A Trust

What should you look out for when you decide to establish a trust? We sit down with Aaron Mullins from Asiaciti Trust Singapore to find out more.

Published on 10 October 2016

If you own a lot of assets, setting up a trust is the most obvious thing to do, to ensure they get properly passed on to your successors, and continue to be well-managed. However, just like many of its legal cousins, a trust is rarely a simple thing.

One that is not watertight might create considerable problems for its beneficiaries down the road. It could even result in the breakdown of relationships among family members in your generation.

In addition to applying care and concern, how best should you proceed when establishing a trust? Aaron Mullins, the Managing Director of trust experts Asiaciti Trust Singapore, sheds light on some of the common pitfalls.

Building, Death, House, Eternity, Wealth

Treat death as taboo

Let’s face it. Death is the only certainty in life. This is something you need to try and be open about. Be mindful that you will not live forever, and focus on how you are going to help and guide your family to manage the assets you have amassed. Consider that if you do not, they may all be squandered, and that is something you definitely don’t wish for your family.

Use a templated trust structure

One size really does not fit all in the world of trusts. There might be many websites that might say otherwise, but if your assets are sizable and varied, it is best to work with a trust expert to customise one just for you and your situation. The advisor will usually start you off by offering a template to start from, but you should then consider  adjusting the details and conditions so that it becomes your own tailor-made family trust.

Goldfish, Gold, Fish, Koi, Koi fIsh, pond, Swim, swimming, wealth

Think cheap is good

If you are thinking of setting up a trust, you are most likely at least a high net worth individual. Since you have worked so hard to amass all that wealth, don’t you want to make sure you get the best advice as to how to look after it in the years ahead? Be open to forking out a bit more for trust advisory services to guarantee quality. Try not to sweat the small stuff – it really does not make sense to compromise this after you have come this far.

Not meeting the trustees

If you are going to be putting your families’ future care in the hands of a trustee, it is strongly recommended that at least one face-to-face meeting be arranged. While it takes, on average, several months to establish a trust, it will be good to get to know the trustees to give yourself peace of mind that you’re putting your future in good hands.

Not focusing on asset protection

Don’t lose sight of the fact that one of the basic functions of a trust is to protect your assets from issues such as unnecessary taxation, bankruptcy and divorce. Therefore, the first tenet of any trust you set up has to zero in on how to protect your assets. It should help its beneficiaries on a rainy day rather than handicap them.

Going all in

If it is the first time you are working with a trustee and are a little apprehensive, it is often advisable to set up a smaller revocable trust. This way, it allows you to familiarise yourself with the trustee relationship and build confidence and comfort before adding more substantial assets.

Fear confidentiality

Ongoing media interest in the offshore world has got us all thinking about issues of confidentiality. The highlighted, questionable dealings of others should not drive the decision making in terms of the legitimate and legal wish for confidentiality in relation to your family affairs. A good trustee will be able to advise you on the right balance to strike.