Common Usage of Trust in Malaysia Estate Planning Landscape

The most significant difference between a Will and Trust is all wills must go through a legal process called probate, where an authorized court administrator examines them. This process can be lengthy and potentially contentious if family members contest the will. Whereas a Trusts are not required to go through probate when the settlor dies, and they cannot be contested if is done properly.

For this article, we will examine on the 4 common usage Trust in Malaysia:

1. Distributing Wealth To Avoid Grant Of Probate ( Asset Frozen Issue )

Trust of this nature is essential when you have:

• Family with minor children

• Spouse who is not the main bread winner.

• Single with aged parents

• A second family to provide for

• Special children requiring funds for medical, education and living expenses.

2. Protecting your estate ( and your beneficiaries s estate) by having full controlled

For example, suppose that you want to leave RM1,000,000 to your only son, but you are concerned that before you can say, "sail around the world", he probably will have spent the entire million . You can use a trust to disburse out the money to your son as you see fit. The trust can give him a little bit each year for some duration, and then a final lump sum at the age when you think he will be mature enough to protect the money as if had actually earned it himself.

Or you can add conditions to how the money in the trust is disburse, such as you son receives a little bit of money until a certain age, and then he gets the rest only if he graduates university or meets some other criteria you determine when you set up a trust

3. Protecting Wealth Against Settlor and your beneficiaries’ Creditors

This type of trust can keep your estate safe from creditors. When a person becomes a bankrupt, usually an investigation by the authorities is done to recover assets transferred up to 5 years prior to bankruptcy.

4. Unlock the Spell of the 3 Generation Wealth Inheritance

Trust can be a very good Multi-generational Wealth Management tools

The Rockefellers are perhaps one of the most famous and wealthy families to use trusts to pass on their wealth. John D. Rockefeller made his fortune in the early days of the oil business, setting up Standard Oil Company of Ohio - the predecessor of today’s Exxon Mobil.

The first Rockefeller trusts passed the bulk of his wealth to his heirs when he set them up in 1934. Now entering its seventh generation of beneficiaries, with more than 170 heirs, the Rockefeller family was estimated to have still enjoyed an $11 billion fortune in 2016 - so many years after the founding Rockefeller established the initial corpus from his vast holdings and wealth.

As illustrated above, one of the reasons to set up a trust is to protect wealth on a multi-generational basis. Instead of giving money or wealth directly to the next generation of the family, founders create trusts and give some or a substantial portion of their wealth to a trust instead.

Please seek advice from your trusted financial planner to give you a complete solution to your estate planning today.