How do Trusts managed by non-professional trustees (e.g. individuals such as friends / family members) work?
A Trust appoints trustee(s) to hold and manage assets for the benefit of the Trust’s beneficiaries. The trustee(s) will become the legal owner of your assets and has a fiduciary duty to act in good faith, to manage and use those assets for the best interest of the Trust’s beneficiaries. The terms of the Trust can be found in the instrument that created it such as a contract, Will or deed.
A Trust is set up when your appointed Trustee takes ownership of your assets and manages them in the best interest of your beneficiaries. There is no central registry in Singapore that all Trusts must be registered to when it is set up.
In the case of a Testamentary Trust, the terms of the Trust is usually found within the Will. The Trust is only set up after the testator (who is also the settlor) passes on when his/her estate is distributed by the executor into the Trust. The executor may also be the trustee of the Trust.
"Non-professional" trustees are trustees who are individuals such as your friends or family members instead of a Licensed Trust Company (i.e. the Trust is manage by anyone other than a Licensed Trust Company).
Generally, "non-professional" trustees will try to separate the Trust funds/assets (from his/her own personal assets) and keep records of which assets belongs to the Trust and the distribution to the beneficiaries.
For example, if S$2 million is given into a Trust meant to pay out a monthly amount to a beneficiary, the trustee may open a separate bank account to deposit the money before distributing. Depending on the powers given to the trustee (as spelt out in the Trust instrument), the trustee may hire for professional help and/or even to invest the funds accordingly for the benefit of the beneficiary. Even when discretionary powers were granted to the trustee to allow for flexibility in managing the Trust, the trustee will still follow closely to the terms of the Trust acting for the benefit of the beneficiary.
There is no central body which will regularly check these “non-professional” Trusts / trustees or to report to. Like the name suggests, it’s based on TRUST! Trustees when they take on the role, are legally required to manage the Trust in the best interest of the beneficiaries. If there’s a dispute, it’s usually best discussed with the parties involved first to see if an amicable solution can be reached. In the worst-case scenario, the parties may have to go to Court for litigation.