In the realm of international wealth planning, the strategic selection of jurisdictions can be a game-changer for families with global assets and diverse needs. This is particularly evident in the case study presented by Dr. Irina Francken and Derrick Kew at the Hubbis Wealth Planning & Structuring Forum - Singapore 2026, where they explored the use of New Zealand Foreign Trusts for Singapore-resident beneficiaries. Their discussion, centered around a European family's journey, highlights the importance of going beyond investment portfolios to address succession planning and governance.
The Limitations of Investment Portfolios
Dr. Irina Francken, Director at IN Fiduciary Services, emphasizes that investment portfolios alone are insufficient for comprehensive succession planning. She argues that personal ownership of assets can expose families to various risks, including probate, succession disputes, creditor claims, and cross-border complications. These challenges underscore the need for a more robust governance structure that can preserve wealth and support succession across generations.
The Role of New Zealand Foreign Trusts
New Zealand Foreign Trusts emerge as a compelling solution, offering a combination of stability, reputation, and flexibility. Dr. Francken highlights the jurisdiction's political stability, common law legal system, and independent judiciary, making it an attractive choice for international families. The modern trust framework in New Zealand allows trustees meaningful powers and flexibility, enabling them to address trust deed, beneficiary, and administrative matters without routine court involvement.
The tax neutrality of New Zealand Foreign Trusts is another significant advantage. Dr. Francken explains that where the settlor is not a New Zealand tax resident, the trust holds no New Zealand-sourced assets or income, and the beneficiaries are non-residents. This means that foreign-sourced trust income is generally outside the New Zealand tax base, providing a tax-efficient structure for international families.
Singapore Tax Analysis and the Discretionary Nature of Trusts
Derrick Kew, Director, Tax and Advisory at CA Practice PAC, delves into the Singapore tax implications for the family's New Zealand Foreign Trust. He emphasizes that the analysis should begin with the trust mechanics, not a search for exemptions. Under Singapore's Income Tax Act, trust income is generally treated as the statutory income of the trustee and taxed at the trustee level. In this case, the trustee is a New Zealand corporate trustee, not a Singapore tax resident, and the trust derives no Singapore-sourced income.
Derrick highlights the importance of the discretionary nature of the trust. As the beneficiary has no fixed entitlement to trust income, the trustee retains full discretion over distributions. This discretion is crucial in the overall tax analysis, as it influences the character of the distribution and the potential for transparency.
Matching the Tool to the Family's Objectives
Derrick Kew stresses that different structures serve different purposes. New Zealand Foreign Trusts, Singapore Family Offices, and Singapore Trusts are complementary tools, each with its own strengths. The choice should be guided by the family's objectives rather than viewed as interchangeable solutions. For instance, a New Zealand Foreign Trust may be suitable for mobile families with offshore wealth and a strong succession or asset protection objective, while a Singapore Family Office might be more appropriate for families seeking an onshore investment platform with Singapore substance.
Substance and Guardrails
Derrick Kew concludes with a cautionary note, emphasizing the importance of substance in supporting the tax position. He highlights four critical points: the deed must be discretionary in substance, the beneficiary's Singapore tax residency must be genuine, the source of wealth must be clean and traceable, and trustee substance must remain real in New Zealand. Additionally, Section 33 of the Singapore Income Tax Act, which addresses tax avoidance, serves as an important guardrail for structures built for family succession and properly supported.
Conclusion: A Thoughtful Approach to Cross-Border Family Planning
In conclusion, the case study presented by Dr. Irina Francken and Derrick Kew underscores the importance of a thoughtful and tailored approach to cross-border family planning. By going beyond investment portfolios and considering the unique needs and objectives of each family, advisors can create structures that preserve wealth, support governance, and remain tax-efficient across generations and jurisdictions. This requires a deep understanding of the family's circumstances, a nuanced analysis of the available tools, and a commitment to substance and proper management.
Personally, I find this case study particularly fascinating as it highlights the intricate interplay between jurisdiction selection, governance structures, and tax considerations in international wealth planning. It raises a deeper question: how can families navigate the complexities of cross-border assets while ensuring a smooth succession process that aligns with their values and objectives? The answer lies in a thoughtful and tailored approach, where each component of the structure is carefully considered and aligned with the family's unique needs.
