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Succession Planning Considerations for Singapore Family Offices

May 2, 2022

By Wendy Sim, Managing Director, ZEDRA Singapore

Singapore was one of the first jurisdictions to implement stringent social distancing measures in 2020. Since then, some strong trends have emerged, indicating how the Coronavirus has shaped client priorities and concerns.

One of the things we have seen is a significant uptake in requests and inquiries for succession and estate planning solutions.

How the Coronavirus Pushed Families to Consider Succession Planning

The Coronavirus is one of the drivers of the change – but by no means the only one.

Our discussions with clients and intermediaries are telling us that the Coronavirus and the global geopolitical environment has made ultra high net worth individuals (UHNWIs) reassess their priorities, and succession planning is certainly more important than before. That said, global volatility in the markets, a family’s preparedness for unexpected events of any kind and looking to protect wealth have also been considerations that have merited re-evaluation of the current structures a family has in place.

The global measures to curb the spread of the Coronavirus as well as the resulting market instability travel restrictions still in place as well as the current global environment have also allowed younger generations to speak more freely with family members. Interestingly, we have seen that the reduced travel and slowing in operations have had a positive effect in the sense that the measures opened the floor for more open and informal conversations between older and younger generations of the same family as they share common concerns. Some families are moving to formalise the plans discussed earlier this year, and we expect others to follow.

Why Trusts Continue to Be Popular for Asian UHNWIs

Trusts continue to be popular structures for estate planning, given they allow for considerable flexibility. For Asian families making their first foray into formal succession planning, trusts can feel like a very comfortable compromise: Distributions and beneficiaries can be drawn up according to wishes, but equally, a settlor does not have to totally relinquish control.

In the past, for some Asians, formalizing succession could come with some initial trepidation: A settlor doesn’t want to feel like they are losing control before they are ready to hand over the reins. For that reason, a reserved powers trust, for example, is particularly popular here in Singapore and can be set up for succession planning purposes, while effectively allowing the settlor to reserve some powers. At the same time, some of the worries of the next generation are addressed, knowing that a structure has been put in place to facilitate succession. We might well see clients start out with this type of solution, and then add structures or other types of assets including business assets, art pieces or real estate or for other needs as required. Trusts of course are flexible, and their legal form can be adapted later with the aim of optimising the estate for other purposes.

Our Current Issue: Q2 2022

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