In today's complex world of international wealth management, the story of a European family's journey towards securing their legacy serves as a compelling case study. This article delves into the insights shared by Dr. Irina Francken and Derrick Kew at the Hubbis Wealth Planning & Structuring Forum - Singapore 2026, where they presented a practical solution involving a New Zealand Foreign Trust for a family with Singapore-resident beneficiaries.
The Challenge of Succession
The core issue at hand is the age-old dilemma of ensuring smooth succession and wealth preservation across generations. Dr. Irina highlighted how investment portfolios, while crucial, are not a panacea for succession planning. Personal ownership can expose families to a myriad of risks, from probate complications to potential disputes and creditor claims.
Governance: The Missing Link
What truly matters, according to Dr. Irina, is governance. The family in question required a structure that went beyond mere investment management. They needed a governance framework capable of safeguarding their wealth and facilitating a seamless transition across generations.
Why New Zealand?
The choice of New Zealand as a jurisdiction was strategic. New Zealand boasts political stability, a robust common law legal system, and an independent judiciary. Its compliance with OECD and CRS standards further enhances its appeal, especially for families with European wealth.
One of the key advantages of New Zealand's trust framework is its flexibility. It empowers trustees with meaningful discretion, allowing them to address various trust-related matters without constant court intervention. This flexibility is a critical component of effective succession planning, as Dr. Irina emphasized.
Tax Neutrality and Structure
The tax position of the New Zealand Foreign Trust was a significant consideration, but it was not the sole reason for its selection. The structure required a non-New Zealand settlor, assets held outside New Zealand, and non-resident beneficiaries. This setup ensured that foreign-sourced trust income remained outside the New Zealand tax base.
For the European family, this meant their Swiss investment portfolio could remain offshore while the trust provided the necessary legal and governance framework for succession. The tax neutrality of the structure aligned perfectly with its primary purpose: preserving wealth for the next generation while minimizing tax leakage.
Singapore's Perspective
Derrick Kew's insights shed light on the Singapore tax position. The analysis began with an understanding of 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 that level.
In this case, the trustee was a New Zealand corporate entity, not a Singapore tax resident, and the trust derived no Singapore-sourced income. Therefore, Singapore had no taxing rights at the trustee level, and distributions made to the Singapore-resident beneficiary could be treated as capital, not income.
Matching Tools to Families
Derrick emphasized that different structures serve different purposes and should not be viewed as competitors. A New Zealand Foreign Trust may be ideal for mobile families with offshore wealth and a strong succession or asset protection objective. On the other hand, a Singapore Family Office might be more suitable for families seeking an onshore investment platform with Singapore substance, albeit with heavier regulatory and administrative requirements.
The key takeaway, as Derrick put it, is that "the purpose dictates the tool." Recent developments in Singapore, such as increasing compliance expectations for family offices, further underscore the importance of matching the structure to the family's specific needs.
Substance and Integrity
The final message from Derrick was a cautionary one. The integrity of the tax position relies on how the structure is managed and administered. If control and management shift back to Singapore, or if the trust is treated as a personal bank account, the entire analysis could be undermined.
Four critical points were highlighted: the trust 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 in New Zealand.
Conclusion
New Zealand Foreign Trusts offer a powerful combination of jurisdictional strength, governance flexibility, and tax efficiency. However, as Derrick cautioned, the structure must match the facts and be operated properly. For advisers, the key is to start with the family's objectives and then select a structure that can support those objectives across jurisdictions, generations, and future tax changes.
This case study serves as a reminder that effective wealth planning involves more than just financial management. It requires a deep understanding of the family's needs, a strategic approach to jurisdiction selection, and a commitment to maintaining the integrity of the chosen structure.
