Asia’s great wealth transfer is setting the stage for trust businesses in the region to thrive as wealthy families look to preserve their assets and pass them on to the next generation.

A growing number of families in the region are deciding to set up trusts after years of consideration and Singapore stands out as a choice jurisdiction for many of those from mainland China and Southeast Asian countries.

Christine Wong, Bank of Singapore

“The wealth transition is one of the key elements to a lot of the high net worth clients,” Christine Wong, head of wealth planning for Greater China and North Asia at Bank of Singapore, told Asian Private Banker in an interview. “They are in the stage of passing on their wealth to the next generation, and they’re looking for solutions and tools.”

This view is echoed by Rachel Yao, head of trusts and private wealth practice in Asia at offshore law firm Carey Olsen’s Singapore office, who believes the timing is now right for many families, as family authority figures have now reached the age when they need to seriously consider wealth preservation, including how to pass on the family wealth and business to the next generation.

In China, the economic slowdown has driven the ultra-wealthy to think about what they should do with the money they have already obtained, and adding to this gloomy reality is another layer of rising geopolitical uncertainty.

Yao observed that the trust market in China has become more mature over the years. She sees interest in wealth protection vehicles is also gaining popularity in jurisdictions like Vietnam.

“There’s no perfect plan… start with something simple and flexible and don’t wait too long”

While Asia’s wealth owners choose the trust model due to its instrumental role in preserving wealth, privacy protection and tax planning, they need to have the “right mindset” towards the vehicle. Wong observed that some clients are facing a dilemma in passing control to a separate vehicle, such as a trust, due to the cultural value of being dominant and influential among the first generations in Asian families.

Rachel Yao, Carey Olsen

“What we are doing is giving client education on how they can balance the generational transition by putting in place an effective governance framework without interfering with the legality of a trust,” she told APB.

The tendency to reserve too much power could lead to undesired legal trouble. There have been high-profile cases where trust assets were enforced by a creditor due to improper behaviour of the settlor.

Yao said when some Asian families operate the trust, they tend to be overreaching and sometimes may interrupt the trustee’s job way too much, or directly contact private banks to touch or manage the trust assets, which is very dangerous.

Starting simple

Another issue for families is finding the right trustee, Wong pointed out, given that clients have different types of assets such as bankable assets, real estate as well as private equity.

“There’s no perfect plan, but at least, we would advise clients that they should start with something simple and flexible and don’t wait too long,” she said, adding that some clients have thought about setting up a trust for decades and finally decided to take some concrete steps in recent years.

Wong said a lot of Asian families traditionally set up an umbrella trust to cover everything, but more and more families now consider having multiple trusts for different assets.

“This is a popular conversation we are having with clients nowadays,” she said.

As the family’s demands keep evolving, it is also important to review the trust structure periodically, according to Yao.

Choice of jurisdiction

Multiple jurisdictions with their own edges are contending for trust business.

Yao said that for families requiring a trust to last for a long time, jurisdictions like Jersey, Guernsey and Bermuda where the legal system has perpetuity, are a popular choice. “This is a trend I see in the market at this moment,” she said.

For Singapore, its attractive trust law and robust legal and taxation framework as well as the flexibility provisions, are among the factors that have boosted its popularity over the past decade as a jurisdiction of choice for trust set-up, according to Wong.

“The modernised legislative and regulatory framework for trust, and the regulated regime in Singapore for its trust business have given confidence to families,” she said.

A large portion of new trust clients in Singapore nowadays come from mainland China, with other jurisdictions such as Thailand, Indonesia, and Malaysia making up the rest.

Yao expected that with more Chinese manufacturing entrepreneurs going to Southeast Asia in 2024, they may have a headquarter in Singapore as a common practice and, in the meantime, may have a trust structure in Singapore and offshore jurisdictions, from a private wealth angle as a result.