As Trustee holds significant responsibility, it is important that the settlor is satisfied that Trustee is able to fulfill its responsibilities. Some important considerations are:
- Is the Trustee a regulated entity by the Monetary Authority of Singapore or is the Trustee located in some offshore island with unfamiliar laws? Using a locally regulated Trustee is very useful as the settlor and beneficiaries would not want to fly to a remote island to deal with the trustee in the event of conflict.
- Does the Trustee has any conflict interest? For example, if the Trustee is also the investment adviser, there is a conflict of interest as the Trustee also earns commissions and trailers for placing trust assets into financial products.
To safeguard the interest of the beneficiaries, the settlor can consider doing the following:
- Appoint a Protector of the Trust. Also appoint successor Protectors as well. The power of the Protector is to ability to replace the Trustee with another one.
- Mandate that the Trustee seeks the advice of an independent investment adviser with regard to how the assets are to be managed. The investment adviser should not be related to the Trustee and the Trustee should not be receiving any “kickbacks” from the investment adviser.
- Insists that the investment adviser to the Trustee writes an Investment Policy Statement (IPS) so as to avoid any misunderstanding and dispute.
- If there are special consideration such as the trust having a beneficiary who is physically impaired, it is important to ensure that the Trustee has the expert skill to cater for such situation.
- It is important to know what are the Trustee’s restrictions. For example, if the Trustee cannot hold properties, the settlor has to be prepared for all properties to be sold and thus subjecting to market risk.
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