Testamentary Trust vs Living Trust in Singapore: Cost & Scenario
Summary
Testamentary trusts cost little while you are alive: A testamentary trust is created by your Will and only takes effect on your death, so you avoid the setup and annual maintenance costs a living trust incurs while you are alive. You will still pay additional drafting and planning fees to build trust provisions into your Will.
Living trusts cost far more to set up: Setup is often cited from a few thousand dollars up to S$20,000 or more, with S$10,000-plus a commonly cited realistic figure. For many families, a gap that size determines which kind of trust makes the most sense.
Probate still applies: A testamentary trust does not avoid probate, because the Will it sits within still has to be proven through the probate process before the trust can take effect.
In Singapore, many families assume a trust is expensive and only reserved for the wealthy. This is true for a living trust, but the same cannot be said about a testamentary trust. Mixing up the two leads plenty of families to rule out a structure that would have suited them well.
With a living trust, you pay to set up and maintain a structure for years, sometimes decades, while you're alive. With a testamentary trust, conversely, it generally does not incur administration costs, with the bulk of its “costs” coming from drafting the Will it sits in.
In general, testamentary trusts only take effect after you pass. Should you appoint a professional or corporate trustee, administrative costs may still apply.
In this article, we compare testamentary trust vs living trust in Singapore, examining how much each type of trust costs, why the difference exists, and when each type suits your goals.
Testamentary Trust vs Living Trust in Singapore
A testamentary trust, also known as a Will trust, is a set of instructions that you outline in your Will, stating which assets should be held in trust when you pass away. Until then, there is no separate structure to establish, fund or administer.
What this means is that you don’t have to pay a trust setup fee or an annual trustee fee while you’re alive. The costs of running a trust only begin once it takes effect when you pass.
By contrast, a living trust, also known as an Inter Vivos trust, is created and funded during your lifetime. Setup costs, trustee fees, and administrative expenses start from Day One.
In Singapore, living trusts start from S$3,000 to S$5,000, going up to S$20,000 or more for complex arrangements. Figures above S$8,000 are often quoted as a realistic mid-range expectation.
On top of setup, annual professional trustee fees typically run from 0.5% to 1.5% of the assets under management (AUM). For an active trust, the practical minimum is often around S$3,000 a year.
Depending on its purpose and structure, a living trust may serve useful functions during your lifetime, such as managing assets, providing for beneficiaries or ensuring continuity of administration.
Unlike a testamentary trust, a living trust takes effect throughout your lifetime, not only on your death. Say you set up a living trust and transfer S$1 million into it for your children. While you are alive, the trustee may already be managing and investing those assets, making distributions where appropriate and administering the trust according to its terms.
If you later lose mental capacity or pass away, the trust can continue operating without drawing up a new arrangement. The trade-off is that its administrative fees run from the start, adding up to a significant sum over the years.
Below is a tabulated, side-by-side comparison of the two trusts:
Testamentary Trust | Living Trust | |
When it's created | On your death, via your Will | During your lifetime |
Setup cost | Additional drafting and planning fees within your Will; no separate trust setup fee | S$3000 to S$20,000 or more |
Annual fees while you're alive | None | Typically 0.5% to 1.5% of assets, or ~S$3,000+ minimum |
Flexibility while you're alive | Can be changed any time you amend your Will | Depends on trust structure; may be revocable or irrevocable |
Avoids probate? | No | Yes, for properly retitled assets |
Privacy | Part of the public probate process | Generally more private |
Choosing Between Testamentary Trust vs Living Trust
Start by deciding what you want your trust to do for your estate.
When Should You Choose a Testamentary Trust?
If your main concern is how your assets are distributed after your death, a testamentary trust generally does the job at a fraction of a living trust's lifetime cost. You might be providing for a minor or a vulnerable beneficiary, or you might want family members to receive their inheritance in stages rather than all at once.
Do note that a testamentary trust does not avoid probate. As it is created within your Will, this means it is also subject to the full probate process. The court will first verify your Will and grant probate before giving your appointed executor the authority to act. The testamentary trust will then be funded and take effect.
When Should You Choose a Living Trust?
Conversely, a living trust makes more sense if you want to manage your assets actively during your lifetime, avoid probate for the assets you transfer into the trust, or keep your affairs more private. If so, a living trust's extra cost may be justified by what it gives you.
Bear in mind that only assets properly transferred into and held under the living trust fall outside your probate estate. Probate assets you personally own outside the trust may still require probate.
Trusts are Just One Part of Your Estate Plan
Choosing between a testamentary trust and a living trust works best as part of a wider conversation about your overall estate plan.
How your property is held, your Central Provident Fund (CPF) nomination, and your executor's ability to fund the trust correctly through probate all interact with the trust structure of your choice.
Property held in joint tenancy, for example, passes to the surviving co-owner and bypasses your Will and any trust it creates, unless the ownership structure is changed first.
Entrust Your Trust and Estate Planning Needs to Mezzanine Legacy
Once you can see what each trust structure costs over its whole life, you’ll be better able to make a choice. Ultimately, the right trust is the one that best fits your family’s needs at a cost you’re comfortable with.
If you need further guidance on which trust structure to pick, our team of qualified and experienced estate planning experts at Mezzanine Legacy will help you weigh the two structures against your family's goals and your budget.
Once we’ve identified the best fit, we build your trust into a Will that works with the rest of your estate plan, including how your property is held.
Book a free consultation with us now to find out more.
Frequently Asked Questions
Is a testamentary trust cheaper than a living trust?
Yes, a testamentary trust is generally much cheaper than a living trust. It has no separate setup fee and no annual maintenance cost while you're alive, because it only comes into existence on your death, although including it in your Will adds drafting and planning fees. Once it's running, it carries tax on any trust income and trustee fees if you appoint a professional or corporate trustee, so plan for these accordingly.
How much does a living trust cost in Singapore?
A living trust in Singapore commonly costs from S$3,000 to S$20,000 or more to set up, with figures above S$8,000 often cited as realistic. Annual trustee fees typically run from 0.5% to 1.5% of assets, or a minimum of roughly S$3,000 a year. You pay these fees from the day the trust is set up, while you're still alive.
Does a testamentary trust avoid probate?
No, a testamentary trust does not avoid probate as it's created within your Will. Your Will has to go through the full probate process before the trust can be funded and take effect. A living trust avoids probate, but only for assets properly retitled into it.
Why would anyone choose a living trust if it costs more?
People choose a living trust because it avoids probate for retitled assets, offers more privacy, and lets them manage their assets actively during their lifetime. For some families, these benefits outweigh the extra cost.
Which structure is right for protecting my children's inheritance?
For protecting your children's inheritance after your death, a testamentary trust can be a suitable and cost-efficient option where your objective is to control or protect their inheritance. It holds their share on the terms set out in your Will, and it typically costs a fraction of a living trust.
Conversely, while a living trust generally costs more, it may suit you better depending on what you want to protect against and what you want the inheritance to achieve.