15 Nov Peranakan Collections held in Trust
By Glen Chee, Legal Counsel, Head of Legal & Compliance
Futu Trustee (Singapore) Pte Ltd
Collecting antique Peranakan and Chinese porcelain, investment grade stamps, cultural artifacts, artwork, and other investment grade collectibles are common pastime of wealthy individuals. Amassing a large collection of valuable items requires dedication and time as well as a sizeable financial investment. People collect for various reasons ranging from their own general self-pleasure and interests, maintaining cultural heritage. The recent global covid pandemic and other economic uncertainties created market volatility. Furthermore, in times of crisis some public equities and cryptocurrencies have lost their luster overnight, leaving some ultra-high net worth individual with less than 50% of their wealth intact. As such, many wealthy individuals are increasingly investing in alternative assets that are known to maintain or increase in investment value. Taking antique Peranakan porcelain as an example, the realized auction prices for rare Peranakan porcelain and cultural relics during 2019 to 2022 remain constant and, in many cases, increased more than 100%. As such, Peranakan cultural antiques have the potential to be diversified alternative long-term investment for intergenerational wealth preservation. Most collectors may find it tremendously difficult to cash out their collections during their lifetime due to the significant emotional attachment gained from the time spent researching. However, the significant value of these vast collections make it imperative for the owners to plan what happens to these valuable collections on their demise. I have experienced and encountered many unfortunate situations when these patriarchs have passed without proper estate planning for their collections. In many cases their heirs did not share the same passion nor have the necessary knowledge to manage the vast collections, in some extreme circumstances these valuable and beautiful collections were disposed for a minute fraction of its true value. Frequently, family members will dispute over these high value collections, resulting in huge legal fees and causing the hostilities among family’s members. Therefore to avoid such unpleasant situations we should start planning the division of these collections to family members upon demise. Alternatively, if the collection is of ultra-high value and has the potential to generate income for family beneficiaries, it is best to formulate a wealth preservation structure to protect and manage the assets.
Trust structure as a wealth preservation solution
Itemized every piece of the collection by creating a comprehensive inventory list with details such as description, provenance, circa, purchased price and current estimated value is probably the first step. After which appoint a trust company as trustee and create a discretionary trust (or a purpose trust in some jurisdictions) and contribute the valuable collection into the trust as trust assets can be an effective solution. A trust can last for 100 years or more (depending on jurisdiction) and the trust deed can be drafted to impute the Settlor’s (founder of the collection) wishes. The trust deed, and the letter of wishes can be formulated in such a way that ensures the settlor’s wishes in relation to the way these trust assets are to be managed, distributed, to beneficiaries are duly implemented by the trustees. In administering such unique trust assets, the trustee has a fiduciary duty to engage specialist and experts in the relevant field of antiquities or art to assist in the valuation, appraisals, and maintenance of these rare artifacts in accordance with the Settlor’s wishes.
Some frequently encountered options on managing collections held in a trust include the following:
- Private museum collection held in a trust, managing the private museum as a business by collecting entry fees from tourism activities and from public viewing. The income/profits deriving from the museum to be invested in prescribed investment areas, to upkeep and maintain the private museum and distributed to family beneficiaries.
- Distributing the trust assets to the family beneficiaries in an organized manner to prevent disputes.
- Loaning the assets to specific exhibitions or museums.
- Selling the collection to museums or auctions with the proceeds to be divided between the family beneficiaries.
Some practicalities for a collection to be settled into a Trust
There are various legal routes to create such a trust structure. The most common route is to engage a professional trust company to understand and discuss the practicalities and formalities of a trust and allow the trust company to assess the substance and value of the entire collection for a fee quote. Once the trust company has agreed to act as trustee for the said trust in the manner in which one would like the trust and the assets to be managed and distributed a trust deed is drawn up and executed on the basis of the settlor’s intentions.
The entire collection will then be transferred to the name of the professional trustees to hold them on trust as per the trust deed. During the settlor’s lifetime the settlor may choose to retain the use and enjoyment of these items (depending on the trust set-up), if the trust is a settlor’s investment reserved power trust, the settlor or the settlor’s appointed delegate (usually an investment specialist) in his lifetime has the power to give directions to the trustee on the management and investing of the trust assets.
The settlor may also appoint a protector for the trust (usually a trusted family member or lawyer), then protector usually is given the following powers:
- power to terminate a non-compliant trustee and appoint an alternative trustee
- trustees to notify the protector before distribution of assets to a beneficiary (in a discretionary trust, the notification does not restrict trustee discretionary powers, trustee can proceed after the notification)
If the trustee is not acting in accordance with the trust deed or in breach of trust, the beneficiaries may compel the trustee to act or sue the trustee.
About the Author
Glen in the first quarter of 2022 joined Futu Trustee (Singapore) as the pioneering batch of professionals and was appointed Legal Counsel, Head of Legal and Compliance where he advises on high-net-worth individuals, wealthy families on the creation and structuring of customized trusts and family offices for succession planing, business preservation, philanthropy, residency, asset protection, legitimate tax planning and family governance relating to the family’s asset and investment holding structures.
He is an avid researcher, curator, and passionate collector of Peranakan antique porcelain. Glen has intimate knowledge on alternative investments such as Pop Art, antique ceramics, in a particular milestone in his career, he assisted on the trust set-up to hold a rare relic of the Mughal Empire made of precious stones valued by Messrs. Sotheby’s auction house and Messrs. De Beers to be more than Usd$15 to 30 million. In another case, he assisted in the administration, valuation of an old Peranakan shop house filled with antiques held in a testamentary trust.
In addition, he joined the Singapore subsidiary (compliance division) of a top tier UK law firm listed under the London Stock Exchange. He advises and specialises in regulatory solutions for the Trust and fiduciaries institutions, payment services institutions and private clients. He read law at the University of London international law programmes and obtained the grade of second upper honors division, LLB (Hons)(Lond) and was top student in his cohort and was awarded by University of Manchester the top anti-money laundering award with distinction for his postgraduate.
He has maintained a link with the legal academia serving as a guest speaker and lecturer for the University of London Law international programs. Glen is the author of articles published in various financial publications and has contributed to the Singapore chapter in “World’s Leading Financial and Trust Centres” (2nd Edition). He frequently gets invited as subject matter expert to speak in various international wealth management conferences, data protection management and anti-money laundering compliance seminars.
Straits Chinese Antique Auction – Series 13/2022
【侨生华人文物拍卖会 – 13/2022系列】
REGISTERATION OPEN 注册开放
SATURDAY | 12 NOVEMBER 2022, 11:00 A.M.
ONLINE BIDDING 线上开拍 :
START TIME : SATURDAY | 12 NOVEMBER 2022, 11:00 A.M.
Special Preview 特别预展 :
SATURDAY | 26 NOVEMBER 2022, 2:30 P.M. to 5:00 P.M.
[by appointment only]
Enjoy an Exclusive Sharing by Specialist Collector, Mr Glen Chee from Singapore on “Straits Chinese Peranakan Porcelain as an Alternative Investment”
Special Preview with a Lucky Draw of a quality Jingdezhen Tea Set worth RM488 for participants. 🎁🥳
Note : Limited seats. Please contact Ms.Jess at 016-440 7740 before it is fully booked. Light refreshments will be served.
LIVE AUCTION 现场拍卖 :
SUNDAY | 27 NOVEMBER 2022, 11:00 A.M.
VENUE 地点 :
mnp artcenter, Quill city mall, Kuala Lumpur
Unit 1-19 & 1-20, Quill City Mall, Jalan Sultan Ismail, 50250 Kuala Lumpur
Tel : (6)04-283 3650, (6)03-2602 2882
Email : firstname.lastname@example.org