Many professionals and entrepreneurs take significant risks in their field of work. Professionals such as doctors, accountants, dentist, pilot etc could face significant financial hardship should there be professional negligent and breach of contract. Lawsuits brought about either by their clients or by the authorities could result in severe financial hardship and bankruptcy. Take for an example of a recent case in which a doctor was investigated because his patient died after going through liposuction at his clinic. This case is a reminder of the potential risk that all professionals face. If there was a plan for assets protection from creditors, such financial hardship can be avoided.
Families of entrepreneurs such as business owners could also face financial hardship. For example, it is quite common for business owners to become guarantors for loans borrowed by their companies. Should their companies be unable to pay the loan, these guarantors become personally liable. If there was a plan for assets protection from creditors, such financial hardship can be avoided.
For others who are neither professionals and entrepreneurs, they could also face financial hardship and bankruptcy due to the duties imposed upon them. For example, individuals servicing as Board of Directors have the fiduciary duties to ensure shareholders interest are looked after. Thus, Board of Directors could face lawsuit from shareholders as well.
We offer a service which make it is a possibility to plan for assets protection from creditors. There are various techniques and setting up an irrevocable trust for the benefit of their family members is one of a well-known technique. The following is an illustration (but not necessary a recommendation) on how this can be done:
- The settlor (the persons who is setting up a trust) transfers the assets that he wants to be protected to the trust. The trust is an irrevocable discretionary trust. “Irrevocable” means that the transfer is irreversible. He is also not able to benefit directly from the trust’s asset anymore. The beneficiaries to the trust could be his spouse, children and parents (for example) but cannot be himself. The trust is “discretionary” because the trustee has the final decision as to how the assets in the trust can be distributed.
- As an option, the settlor can still have the power to make investment decisions although he cannot direct the assets to his own benefit.
- The settlor can indicate how the assets are to be managed and distributed to beneficiaries through Letter of Wishes.
- Should the settlor becomes a bankrupt, assets that have been transferred into the trust more than 5 years ago would generally be protected from creditors. In this way, beneficiaries such as his own family members need not suffer financial hardship as a result of the settlor’s financial distress.
- Should the settlor dies or becomes mentally incapacitated, the trustee will take over from the settlor to make investment decisions and distribute the assets according to the Letter of Wishes.
Assets in such a trust will not be subjected to Probate if the settlor dies. Also it is possible for the settlor’s Will to “pour over” his estate into the trust. However, these assets in his estate are not protected from creditors.
In the past, setting up an irrevocable trust described above requires million of dollars for it to be economical. Moreover, such a trust used to be marketed by private banks and placed in offshore justifications. Now, it is possible to set up such a trust in Singapore with trust companies regulated by Monetary Authority of Singapore (MAS).
If you are interested in this service, feel free to contact us at this link HERE.
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