SINGAPORE Law and Practice Contributed by: Sim Bock Eng, Josephine Choo, Aw Wen Ni and Vincent Ho, WongPartnership LLP
the settlor exercising control over the investment or management of the trust assets. However, issues arise where the control of the sett - lor extends beyond the investment or management of the trust assets and into, for instance, the removal and appointment of trustees and/or the addition and removal of beneficiaries. In Gaye Williams Nee Marks v Cary Donald Williams [1993] SGHC 190, the Singa - pore High Court, in divorce proceedings, decided that the husband (who was the settlor) should be treated as the owner of the trust property for the purposes of determining his financial ability to provide for his wife and children because of extensive powers he had under the trust, including to dispose of the trust prop - erty as he saw fit, to instruct the trustees, to replace the trustees as he saw fit, and to add beneficiaries at his discretion. In Chng Bee Kheng and another v Chng Eng Chye [2013] 2 SLR 715, the Singapore High Court was of the view that the trust may be a sham trust where the settlor and the trustee had the common intention to mislead. In Lau Sheng Jan Alistair v Lau Cheok Joo Richard [2023] SGHC 196, the Singapore High Court held that a trust might not be enforceable if it was illegal or was created for an illegal purpose. A previous common manner of asset protection was the incorporation of SPVs (such as limited liability companies) to hold assets that the family intends to protect. With the various shareholder litigation involv - ing such family companies, it is clear that this is not ideal. The shareholding in these companies tends to be fragmented with each generation of succes - sion, and the supremacy of the rights of sharehold - ers exposes the structure to court litigation for either shareholder oppression or the liquidation of the com - pany. The structure also lacks the confidentiality that families crave. The awareness of these shortcomings of using the corporate structure for asset protection has led to the acceptance and popularity of the trust structure as a method for asset protection – particularly the discre - tionary trust. The trust structure can be used to allow 4. Family Business Planning 4.1 Asset Protection
for the consolidation of wealth and business conti - nuity, and yet allow for the distribution of economic benefits. In Singapore, it is effective planning for suc - cession and can overcome the application of forced heirship rules. It is also robust against challenges in divorce proceedings and creditor claims. 4.2 Succession Planning The prevalent objectives for succession planning in Singapore include asset protection, the seamless transmission of wealth over generations, the con - tinuity of the family business and minimising family conflicts. The structure that is used for succession planning would naturally depend on the objectives and circumstances of the patriarch and/or the family. The discretionary trust is a commonly used structure in this regard. The Trust Structure The trust structure allows for the consolidation of wealth as well as the distribution of economic ben - efits. This provides a balance that is much sought after in Singapore and across Asia. For high net worth fami - lies in Asia who built their wealth in the current gen - eration, a priority is the continuity of the family busi - ness. The trust allows the family business and wealth to be consolidated in order to generate income for current and future generations, and for management to remain with the professional managers or capable members of the family. The trust structure is also modular and can be inte - grated with other structures that may be required by the family or to achieve tax efficiency. Frequently, the trust structure is used with the family’s own private trust company, a family office, an investment entity or a philanthropic arm. The structure can also be made tax efficient by utilising tax incentives such as those under Sections 13N, 13O and 13U of the ITA. Family Offices Singapore provides various incentives for the estab - lishment of family offices in Singapore, including tax incentives under the ITA. Section 13O (also known as the Tax Exemption Scheme for Resident Funds) provides for an exemption of income of a company incorporated and resident in Singapore arising from funds managed by a fund manager in Singapore.
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