Trusts are tools that have very much been associated with the wealthy for estate and legacy planning. For most others, this tool has largely been out of reach due to the high costs of setting up a trust and maintaining it. With standardization and the elimination of complex features, the general public can now access and afford a trust and enjoy the benefits it confers, according to Alex Ng, Deputy CEO of Metis Global (Singapore) Pte. Limited (“Metis SG”), a Singapore licensed trust company. We discussed with Alex why the general public should consider setting up a trust and how Metis SG has made trusts more affordable and accessible to the masses.
Name: Alex Ng
Estate Planning Specialization: Affordable trusts for the masses
Base Country: Singapore
Service style: Simple, accessible and affordable
Anything interesting: Bird enthusiast
Q: Can you tell us about yourself and how did Metis SG come about?
Alex: I have spent 25 years in the financial industry, focusing on insurance and investment products; about first half of that time with banks and next with insurance companies before joining Metis SG in early 2021.
For centuries, trusts have been used by the rich to protect and transfer wealth. However, regular people who do have similar needs but just on different scales have largely been left out. Seeing the mass population being underserved on trust services, Metis SG sets out to change this perspective by making trusts affordable and accessible to regular people.
Q: What are the benefits of using a trust for a normal person? Why should regular people consider the use of a trust?
Alex: High-net-worth individuals (“HNW”) use trusts for various purposes including optimizing taxes, maintaining privacy, protecting their assets from creditors, and planning the distribution of their assets.
Many of these purposes that we have mentioned would also be relevant to the general public in Singapore. Whether you are a HNW or not, we do have concerns over how our assets can be distributed to our loved ones safely and effectively. This is particularly so when it involves vulnerable beneficiaries, blended families, complicated relationships, and beneficiaries who are not financially prudent.
There are many instances where trust can be useful for any of us, and here are some examples.
Lump Sum vs Regular Payouts
In Singapore, the general population accumulate their wealth from savings and investments. Upon their passing, there will be significant payouts from their insurance policies and CPF accounts. Regardless of whether one has a will or not, these monies are typically paid out in lump sums to the beneficiaries. However, this may not be optimal for vulnerable individuals, such as young children, the elderly, individuals with special needs, or those struggling with addiction; not forgetting that many people are not financially savvy with handling large amounts of money.
An example would be beneficiaries of a life insurance policy payout receiving the entire $2 million all at once. Managing such a substantial sum can present challenges for some individuals. An elderly person could potentially fall victim to scams, especially prevalent in today's environment, and lose the inheritance intended to provide financial support through their old age. Inheriting a large sum of money at a young age may not be in the best interest for a minor. Individuals with addictions will most likely squander their inheritance in no time.
By nominating or assigning your insurance policy, as well as, nominating your CPF monies to a trust, you can direct how the money is to be distributed by the trustee (entity appointed to manage your assets in the trust) to your beneficiaries through a document known as a "Letter of Wishes". This document, while not legally binding, will serve as a guide for the trustee. Instead of disbursing the entire sum all at once, payments can be made periodically. Such an arrangement will allow your beneficiaries to receive regular payouts from the trust instead of receiving everything in a lump sum.
Insurance Policy Assignment vs Nomination
When you nominate a trust as the beneficiary of your insurance policy, you retain ownership of that insurance policy during your lifetime. Only after your passing does the death benefit go into the trust and then comes under the trust’s protection. While you are still the owner of the insurance policy, potential creditors can still lay claims on its cash value, if there is any.
On the other hand, the assignment of an insurance policy into a trust involves transferring the ownership of the insurance policy to the trustee. Creditors who have a valid claim against you will not be able to claim against the insurance policy as it no longer belongs to you legally. This will provide protection for both the benefits of the policy and its cash value from potential creditors.
Preserving Inheritance From Unforeseen Bankruptcy
A will is commonly used to deal with one’s estate after death. But what if at the time of receiving the assets from the estate, the beneficiary is an undischarged bankrupt? The executor (person in charge of executing the will) cannot withhold or delay such distribution even if he has knowledge of the beneficiary’s status. In fact, the assets will first go to the Official Assignee for settlement of any debt owed by the undischarged bankrupt beneficiary. Only the balance, if any, will then be given to this beneficiary.
However, if the assets are held in a discretionary trust, they can be shielded from unexpected legal actions or creditors. The trustee has the authority and discretion to decide when and how to distribute these assets. They can choose to withhold the payment or make a judgment based on what they believe is best for the beneficiaries. For example, if only a small sum is needed to clear the beneficiary's bankruptcy, the trustee may decide to make the distribution. But if the debts exceed what the trust assets can cover, the trustee might opt to provide just enough money for the beneficiary's daily expenses or withhold any distribution until the beneficiary is discharged as bankrupt.
Preserving Your Assets For Whom It Is Meant For
Passing on inheritance to children of previous marriage without interference of an ex-spouse and/or the current family members can be challenging at times. The privacy that a trust can provide helps to address such sensitive matters and avoid potential disputes among loved ones.
Inheritance given all at once to a married child can potentially be considered a matrimonial asset. In the event of a divorce, the child’s inheritance may have to be shared with the ex-spouse. By putting your assets in a trust, your children can receive regular payments while most of the wealth stays safe within the trust and remains within the family.
High Degree of Privacy
A point that is commonly overlooked by the general public is the privacy that trusts offer. When you distribute assets through a will, the details of how, who and what will be distributed are known to all beneficiaries. This can potentially lead to family disputes, which aren't necessarily tied to how much money is given to each party. Achieving what is considered a fair distribution can be challenging, as even equal shares may not seem fair to some. Very often, conflicts arise due to personal pride and ego. When family disagreements occur over money, it can permanently strain relationships.
In comparison, trusts offer a much higher degree of privacy, with the trustee handling each beneficiary's affairs separately and each beneficiary may not necessarily know how much other beneficiaries have received under the trust. Conflicts are often avoided when there is no comparison as to who is getting what.
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Q: What is stopping regular people from using traditional trusts?
Alex: The main obstacles are the entry requirements, including high setup fee, large amount of monies to be put into the trust, and other ongoing expenses.
Traditionally, setting up a trust (besides a standby trust) is only worthwhile if you have a substantial amount of money to be placed into the trust, often around $5 million or more. These trusts are primarily designed for HNW individuals with complex financial needs and global assets. In terms of entry requirements, traditional trusts typically require an upfront fee, which can range from SG$6,000 to over SG$20,000 depending on the complexity of the trust structure.
[A standby trust is a legal arrangement that remains inactive until a specific event, such as mental incapacity, disability, or death, takes place. Assets will only be transferred into the trust once it is triggered.]
In addition to the initial setup fee, there are other expenses associated with establishing and managing a trust. Traditional trusts can incur maintenance fees of approximately SG$20,000 to SG$30,000 annually.
Wealthy individuals often utilize trust services to customize their needs such as to administer company shares, overseas assets, and high value immovable assets and these can result in high fees. However, the general public who typically have simpler needs, may not require these services and will find the fees associated with such flexibility unnecessary.
It's like comparing buying a ready-made shirt to getting a custom-tailored one. If you don't require any customization, you can simply pick a shirt off the shelf without the need for additional costs.
Q: How do Metis SG Trust Plans differ from traditional trust?
Alex: Metis Trust Plans are more accessible and affordable than traditional trust.
No Additional Setup Fee
Unlike traditional trusts which require a separate amount (few thousands of dollars) to be paid upfront as set up fees, Metis trusts have no such requirements. All contributions made by you will be placed into the trust and be invested into mutual funds of your choice. Fee and charges will then be charged through deduction of units from the investment assets over a stipulated period.
Metis offers two Trust Plans:
A single contribution plan (CitrinePRO), where you inject a lump sum of money (min. S$30,000) into the trust.
A regular contribution plan (SapphirePRO), where you contribute some money regularly and build up your assets in the trust over time for your beneficiaries. The regular contribution starts from as low as SG$500 per month and you can choose a contribution period ranging from 5 to 30 years.
Ability to Invest Money in Trust for Potential Investment Returns
With Metis SG’s trust plans, monies contributed into the trust will be invested in mutual funds of your choice so that your assets in the trust have the potential to grow with time. Metis SG’s trust plan enables individuals to start their financial journey early and build their wealth under the protection of a trust.
Simple & Affordable – The ‘Plan’ Part in Trust Plan
Traditional trusts are bespoke in nature and are meant to cater to complex estate planning needs. Metis SG’s trust plans are standardized and packaged into “plans” to serve individuals with simpler needs. As such, the fees and charges are more budget friendly.
In addition, you can also do the following for protection and future distribution by:
Assigning your insurance policies into your Metis SG trust (no charges for first 3 policies);
Nominating the death benefit of your insurance policies to your Metis SG trust (no charges);
Nominating your CPF monies to your Metis SG trust (no charges).
You (the settlor, the person who sets up the trust) have the power to add or remove beneficiaries anytime without incurring any charges. When it comes to the selection of beneficiaries, Metis SG’s Trust Plans offer 3 options:
Up to 5 natural persons; or
A trust company licensed by the Monetary Authority of Singapore (MAS); or
A charitable organization registered with the Commissioner of Charities of Singapore.
A Letter of Wishes outlines how the settlor wants the assets to be distributed. This document serves as a guideline, and trustees are not legally bound to follow its terms. Metis SG offers two distribution options and settlors can indicate their preference for either a lump sum payment or regular payments.
In essence, Metis Trust Plans are designed to be simple, accessible, and affordable for individuals with a need for a simple trust solution.
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Q: What about people with more complicated needs?
Alex: It really depends on the level of complexity, but the Metis SG trust plan can potentially be a part of your estate plan; be it to complement other estate planning tools or as a form of risk diversification.
Q: What happens if one wants to end the Metis SG Trust Plan or if Metis SG goes bankrupt? What happens to the trusts in that case?
Alex: Metis SG’s trusts are irrevocable, meaning the settlor cannot revoke the trust once the trust has been set up. However, the settlor may request the trustee to distribute the trust assets to the beneficiaries. The settlor himself can be one of the beneficiaries. The trust 'ends' once there are no longer any assets left in it.
In the case of Metis SG, the trust assets are held in custody of DBS Singapore. Metis SG, as the trustee, is responsible for administering the assets in accordance with the terms of the trust for the interest of the beneficiaries. The assets in the trusts do not form part of the assets under Metis SG’s balance sheet. Should the unfortunate happen, the trust assets in custody will then be administered by an appointed trustee.
Q: Anything interesting about you?
Alex: I have five pet parrots; four love-birds and a hahn’s macaw. While some people walk their dogs, I fly my birds on weekends.
I adore flying because of the sense of freedom it brings. In my younger days, I even applied to join the Singapore Air Force. Obviously, I did not make it then but my passion for flying led me to become a drone pilot. One day, while I was flying my drone, I stumbled upon a group of people who were enthusiastic about flying parrots. This was how I got myself into the birds flying community.
Operating a drone, I have complete control but not the case with flying a parrot. The bond and the trust between my parrots and I are key in ensuring that they return safe. Seeing them chirping and happily soaring through the air is incredibly gratifying for me. Born with a pair wings, they should be given the freedom of flight.
This interview has been edited for length.
FAQs
What are the benefits of a trust?
Whether you are a high-net-worth individual or not, you can use a trust for various purposes, including optimizing taxes, maintaining privacy, protecting your assets from creditors, and safely and effectively distributing your assets to loved ones. This is particularly crucial in situations involving vulnerable beneficiaries, blended families, complicated relationships, and beneficiaries who may not be financially prudent.
How much does it cost to set up a trust?
To get started with a traditional trust, it requires an initial set up fee ranging from SG$6,000 to over SG$20,000 (depending on the complexity of the trust structure) and placing around $5 million or more into the trust. These trusts are mainly for high-net-worth individuals with intricate financial situations and global assets.
However, there are alternative trust options in Singapore that offers accessible and affordable trust plans for normal people. Learn more about Metis SG's trust plans here.
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