Better Plan Before All Collapse

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I had a case where an elderly client came to me and expressed her worry that one of her children is a spendthrift and will finish his share of inheritance in no time once he is given his share of the properties. In actual fact she is the one who is still giving him money every month for his living expenses. She also has to support her daughter-in-law and 2 grandchildren!

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Well I hope you don’t get the impression that only the super rich can use such instruments like Will and Trust in their estate planning.

The concept of trust may be new to many people in Asian but the Trustee Act had been in place since 1949!

Don’t Just Give the Fruit, Teach Them To Plant

In your estate plan, you should set up a private trust that you can place your assets in the trust and entrusts the appointed trustee to manage and invest your assets, either movable or even immovable and distribute the interest, dividend or even net rental income to your intended beneficiaries in the form of periodical streams of income.

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Remember: Your Beneficiaries CANNOT Simply Sell Your Assets

Since the assets are in the name of the appointed trustee, the beneficiaries cannot simply sell your assets! As you instruct the trustee to pay regular income to them; they will be able to enjoy the fruits of the investments without being able to liquidate the assets.

Properties wrapped in Private Limited

I observe many people like to park their properties such as shop houses and lands in private limited companies. As a company is meant for business purpose, it is not suitable for estate planning purpose.

Though you can pass on the properties to your beneficiaries by bequeathing the shares of the company to them, the drawback is that there is nothing to stop them from selling the company or strip off the properties parked in the company when the time comes!

This is because your beneficiaries will the shareholders of the property- holding company and as long as they agree among themselves, they can do whatever they want!

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Reason for Setting up a Private Trust:

A)    You run a thriving business but want to ensure that at least a part of your wealth you have built up is preserved for your loved ones. After the world economic crisis, you have learnt that huge and unexpected risks can hit your business.

B)    You want to ensure that should you die prematurely, your children / next generation are taken care of. You can put assets into a trust with specific instructions on how you want to provide for your children.

C)    You are unsure if your beneficiaries are able to manage their inheritance prudently.

D)    You have a successful career and your wife is a homemaker with no income of her own. You want to ensure that after you die, she will have income to reply on in case your children do not look after her well into her old age.

E)     You have a child who may be disabled or unlikely to be able to earn a decent living.

Moreover, you can set up a trust in support of your favorite religious or charity organizations. You can specify how much to give each year and for what purpose, it was for education for the poor students, disaster relief or supplies for the old folk’s home.

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What Is The Advantages Of Setting Up Private Trust

The benefits are many. Some of the most important benefits of setting up Trust are as follows:

A)    Assets held on trust are not subject to probate or Letter of Administration and therefore not frozen upon demise. Your assets like your cash or your properties will not be frozen when you set up an inter vivo trust, unlike all your other assets in your Will.

B)    You can specify your own beneficiaries

You will have full discretion in deciding who you want to include as your beneficiaries who will benefit from your Trust. They can even be an organization, for e.g. an orphanage.

C) You can include your own specific instructions

You can “ time release ” your streams of income to your children over a period of time if you are worried that they may not be able to hold on to their inheritance.

Or providing maintenance and education expenses to minor children in the event of common disaster.

D) Protection of your assets from the reach of creditors

You can protect and preserve your hard earned assets from creditors provided it is not meant to deliberately defraud your creditors. However, it is subject to bankruptcy laws in Malaysia.

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Conclusion

While you are busy accumulating your assets, do take time off to plan how you are going to preserve and perpetuate your estate.

Wealth accumulation is rarely an end in itself. Plan your wealth prudently so that your beneficiaries can truly cherish the wisdom of your estate plan.

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