All You Need to Know: Trusts

When it comes to managing and protecting your family’s wealth, trusts can be utilized in a variety of ways to achieve financial security. They can serve as a planning tool for future generations, be used to protect assets, and ensure that your wishes are carried out effectively.

To understand how trusts can be a powerful element of financial planning, it’s important to have a clear overview of the different types of trusts and the strategies associated with them.

What Is a Trust?

When breaking down a trust, there are three main roles to understand:

1. The Settlor or Grantor—The individual who establishes the trust and legally transfers control of the assets to the trustee.
2. The Trustee—The individual responsible for managing and distributing the trust’s assets in accordance with the trust deed.
3. The Beneficiary—The individual or individuals who benefit from the trust and inherit assets upon the settlor’s passing.

A trust is, therefore, a legal arrangement in which the settlor transfers assets to a trustee, who manages them on behalf of the beneficiaries.

As the settlor, you decide the terms of the trust, including who the beneficiaries are and how much control you wish to retain over the assets within the trust. These details are outlined in the trust deed, which is a legal document that specifies the rules, purpose, and responsibilities of the trustee. As the trustee has a fiduciary obligation, they are legally expected to act in the best interests of the beneficiaries.

Why Use a Trust?

Trusts can serve a range of purposes within a well-structured financial plan. It’s important to identify your goals to determine whether a trust is the most appropriate solution for your needs.

Here are some common reasons for establishing a trust:

1. Asset Protection—A trust can protect assets from creditors, divorce settlements, or other legal claims. Rather than giving assets directly to beneficiaries, placing them in a trust ensures they are safeguarded, especially in the event of changing personal circumstances.
2. Estate Planning—Since trusts do not typically go through probate, they allow for the efficient distribution of assets according to your wishes.
3. Tax Planning—When structured correctly, trusts can offer tax advantages for you and your heirs, particularly in terms of inheritance and estate taxes.
4. Family Wealth Transfer—Trusts can facilitate the long-term transfer of wealth across multiple generations, with clear guidelines on who receives what, and when.

Types of Trusts

While there are many types of trusts, most fall under a few broad categories. Understanding these can help you choose the right structure for your goals.

Living vs. Testamentary Trust

A Living Trust (also called an inter vivos trust; Latin for “between the living”) is created during the settlor’s lifetime. The assets are placed into the trust and managed by a trustee for the benefit of the beneficiaries. Upon the settlor’s death, the trustee distributes the assets as directed in the trust deed, avoiding probate. A Living Trust should not be confused with a Living Will, a document that governs end of life decisions.

A Testamentary Trust is created through a will and comes into effect upon the settlor’s death. It is commonly used in broader wealth management strategies, especially when there are young children, dependants with special needs, or beneficiaries who may be unable to manage large inheritances responsibly.

Revocable vs. Irrevocable Trust

A revocable trust can be altered or terminated by the settlor at any time during their lifetime. It offers flexibility but limited asset protection. Revocable trusts are often referred to as the grantor’s alter-ego because most use the grantor’s tax ID.

An irrevocable trust, once established, generally cannot be modified. This type of trust is often used to minimise estate taxes, define how distributions are made to beneficiaries or charities, and provide greater protection from creditors.

Living trusts can be either revocable or irrevocable, depending on your needs. Testamentary trusts are typically irrevocable, though they can be made revocable if specified in the settlor’s will while they are still alive.

Is a Trust Right for You?

For individuals or families with complex assets, young beneficiaries, or international considerations, a trust can be an essential tool in building a secure financial future.

Ask yourself:

• Would you like to control how and when your assets are distributed?
• Do you have young children or vulnerable beneficiaries?
• Are you planning for assets held across multiple jurisdictions?

If you answered "yes" to any of these, it may be worth exploring how a trust could fit into your financial strategy.

Whether you're looking to preserve wealth for the next generation or protect your legacy, understanding how trusts work is key to achieving your financial goals.

To learn more about how a trust could support your long-term plans, or to explore the suitability of incorporating one into your estate strategy, please contact one of our experienced wealth planners.

Sources:

Discretionary Beneficiary: What It Is, How It Works (no date) Investopedia. Available at: https://www.investopedia.com/terms/d/discretionary-beneficiary.asp (Accessed: September 11, 2025).

http://426ad1d9295f41c5a9f2d8a36494d9cd.pages.ubembed.com/d947bf15-da5a-4c89-b54f-de5f031fdbfd/ (no date). Available at: https://426ad1d9295f41c5a9f2d8a36494d9cd.pages.ubembed.com/d947bf15-da5a-4c89-b54f-de5f031fdbfd/c.html?closedAt=0 (Accessed: September 11, 2025).

marketer, S.K.F.B.S. is a content et al. (no date) What Is a Trustee? Definition, Role, and Duties, Investopedia. Available at: https://www.investopedia.com/terms/t/trustee.asp (Accessed: September 11, 2025).

Settlor: Definition and Example (no date) Investopedia. Available at: https://www.investopedia.com/terms/s/settlor.asp (Accessed: September 11, 2025).

What Is a Beneficiary? Role, Types, and Examples (no date) Investopedia. Available at: https://www.investopedia.com/terms/b/beneficiary.asp (Accessed: September 11, 2025).

What Is a Legal Trust? Common Purposes, Types, and Structures (no date) Investopedia. Available at: https://www.investopedia.com/terms/t/trust.asp (Accessed: September 11, 2025).

What Is A Trust? (no date). Available at: https://www.moneysense.gov.sg/what-is-a-trust/ (Accessed: September 11, 2025).

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