Want More Control Over Your Trust? Set Up A Private Trust Company

Planning

Want More Control Over Your Trust? Set Up A Private Trust Company

Trusts can be used to protect your assets, but if you want more control in managing them, setting up a private trust company instead may be the best solution.

Published on 23 August 2017

Setting up a private trust company (PTC) is an incredibly useful way to maintain some control in succession planning or over any asset a client wants to protect. A PTC doesn’t take any longer to set up than the trust itself and can be a pretty cost-effective solution. Karen O’Hanlon – Managing Director of First Names Group, Singapore – talks about how PTCs differ from traditional trusts, as well as their advantages and disadvantages.

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Clients have the option of using a corporate trustee.

What are some differences between a PTC and a traditional trust?

A PTC is a company (corporate vehicle) that acts as trustee of a trust. Essentially, the trust remains the same as in a traditional trust – the only difference being the acting trustee that is in control of the trust.

Clients have the option of using a corporate trustee or the client can set up a corporate vehicle that acts as a trustee for that underlying trust. In the latter option, there are mechanisms that can be added to the constitution documents to allow more control. It is possible to elect a board and the client can choose whom they want to appoint as directors of that corporate vehicle, which typically comprises a combination of their family members or representatives and professionals experienced in trust law and administration.

A corporate trustee like First Names Group can help set up the corporate vehicle such as a Singapore company that will act as trustee; however, the constitution would be slightly different as it will be drafted specifically for a private trust company, as opposed to a standard private limited company.

For clients looking to establish a PTC in Singapore, it is a requirement to use a licensed trust company to carry out the administration of the trust. This is for the purposes of conducting such checks as may be necessary to comply with the directives of the Monetary Authority of Singapore in regard to the prevention of money laundering or countering the financing of terrorism. The licensed trust company would typically assist with the preparation of trustee resolutions, keep the trust documentation in good order, and keep a close eye on the PTC arrangement itself. Representatives from the licensed trust company may also sit on the board of the PTC.

Want More Control Over Your Trust? Set Up A Private Trust Company

Some clients want their existing advisors to play a key role in the decision-making process.

Under what circumstances would it be more suitable to set up a PTC instead of a traditional trust?

A PTC provides clients with a greater degree of control or influence and flexibility over both the assets and administration of the trust. For example, it can facilitate multi-generational family wealth management through gradual introduction of family heirs to the management by appointment of directors/officers of the PTC and without the need to transfer asset ownership to such heirs.

Therefore it depends on the level of control the client would like to have – some clients want their existing advisors to play a key role in the decision-making process, that’s when they may set up a PTC. It also depends on whether it is advisable for them to retain control, taking into consideration their country of residence.

If a client is a resident in a certain country and he or she retains too much control, it could be disadvantageous. Careful legal and taxation advice should be taken to ensure that such control would not create any issues for the client in his/her home country.

Want More Control Over Your Trust? Set Up A Private Trust Company

There are some restrictions to a Singapore PTC arrangement, read more below.

Is it more or less expensive to set up a PTC as compared to a traditional trust?

The establishment costs are comparable. The annual cost depends on how much involvement the license trustee needs to provide, as well as the administration and accounting commitment.

What are the disadvantages and advantages of setting up a PTC in Singapore – as compared to other countries around the region?

There are some restrictions to a Singapore PTC arrangement – mainly in the class of beneficiaries who are entitled in the trust. You have to be related by marriage or blood. Adding a third party to the class of beneficiaries is not allowed under Singapore guidelines. Under the Trust Companies (Exemption) Regulations 2006, a PTC is defined as a corporation with the sole purpose of providing trust business services in respect of a specific trust (or trusts) where each beneficiary of the trust(s) is a connected person to the settlor of the trust(s) and each settlor of such a trust is a connected person in relation to any other settlor of any other trust to which that corporation provides trust business services. (A connected person is defined in the regulations and includes, inter alia, all relationships established by blood, marriage and adoption.)

Singapore boasts the benefits of being a highly regarded and well-regulated jurisdiction – which are very important factors for individuals and families looking to set up a PTC.

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