You may have heard that a trust can protect your assets, preserve your privacy, and plan for generations.
But what if the trust you created… isn’t a real trust in the eyes of the law?

That’s what we call a sham trust—a structure that appears valid on paper, but fails in practice because of how it was created or used. And if challenged in court, it can be struck down completely, leaving your estate exposed.

Let’s explore how this happens—and how you can avoid it.

What Is a Sham Trust?

A sham trust is one that is set up to give a false impression of asset separation or protection. In legal terms, it’s a trust that doesn’t reflect the true intention or behavior of the settlor (the person who created it).

Even if the trust document looks formal, if the court finds that:
- You still treat the assets as your own
- The trustee is merely acting on your personal instructions
- You never relinquished real control
...then the trust can be declared void.

Real-World Examples of Sham Trusts

- Mr. Tan sets up a trust but continues to manage all the investments and personally withdraws funds—without trustee oversight.
- A parent sets up a trust for a child but uses it primarily for personal tax avoidance, with no clear beneficiary purpose.
- A trustee is appointed in name only—never actively involved or unaware of their duties.

In each case, the “trust” was a smokescreen, not a legitimate fiduciary structure.

How to Ensure Your Trust Is Valid

To avoid creating a sham trust, ensure these 3 Certainties are met:

1. Certainty of Intention
    You must clearly demonstrate that you intend to create a trust—not just move assets around or hold them informally.

2. Certainty of Subject Matter
    The assets being placed in the trust must be clearly identified and described.

3. Certainty of Objects (Beneficiaries)
    The beneficiaries must be identifiable—either by name or class (e.g., “my children”).

Additionally, make sure:
- Your trustee is truly independent and understands their role
- You don’t continue using trust assets as if they’re still yours
- The trust has clear documentation, records, and administration

Use a Corporate Trustee for Added Credibility

If your trust is ever challenged, having a licensed trust company as trustee can strengthen your case. Courts tend to respect well-managed trusts run by professionals—especially when proper reporting, decision-making, and asset handling are in place.

Final Thought

A trust should be more than a legal document.
It should reflect real intention, structure, and accountability.

If you cut corners, or treat the trust as a personal account in disguise, you risk everything it was designed to protect.

Coming up next:
“Why Corporate Trustees Might Be the Safer Bet”
Explore how licensed professionals can protect your assets with objectivity, structure, and accountability.