Total Return Investment and Classification and Apportionment for Capital and Income Trustees

Always revitalising and evolving


About the project

The Singapore Academy of Law’s Law Reform Committee (‘LRC’) considered the merits of reforming the legal rules dealing with the classification and apportionment of trust capital and income, in particular to better reflect today’s investment market and to address gaps and inconsistencies in current laws stemming from the introduction in 2004 of the “prudent investor norm”.

Report Recommendations

The report recommends:

  • Leaving it to the settlor of a capital and income trust to decide whether to adopt a policy of total return investment in respect of all or part of the trust property. The LRC considered this preferable to two alternative options of giving trustees either:
    1. a general statutory power to invest on a total return basis and to determine capital and income for the purposes of distribution; or
    2. the ability to convert to a unitrust or percentage trust, and thus to decide in advance what percentage of the total return of an investment will be distributed to income and capital respectively;
  • disapplying, with retroactive effect, various common law rules governing trustees’ powers to adjust between income and capital. 

The LRC considered that – with the exception of the rule in Re Atkinson –  the basis for these rules had been eliminated by the creation in 2004 of the ‘prudent investor norm’;

  • replacing the rule in Bouch v Sproule (under which dividends paid out of a company’s profits are considered income and those paid out of its capital are considered capital) with a simpler rule: all distributions from a company to a trustee shareholder are considered income if they are cash receipts and capital if they are non-cash. Such trustee should also be given a limited statutory power to adjust between capital and income;
  • clarifying the law to provide that, where a trust is governed by foreign law that mandates total return investment and the trustee is amenable to the Singapore courts’ jurisdiction, the exercise by him or her of capital and income adjustment powers in line with that foreign law is deemed valid; and
  • that separate special study and investigation be undertaken into whether permanently endowed charitable trusts should be empowered to adopt total return investment. 

Project status: Completed

  • The report was published in February 2020.
  • Click here to view the full report.

Areas of law

 Trust law


Click on the image above to view the paper

Last updated 28 February 2020


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