Private Trust Set Up in Malaysia
Spending a lifetime growing your wealth and now started to reap the fruits. How are you going to manage your wealth better? One of the ways is through private trust set up. Why would you choose to set up private trust? Well, Trust is created for the benefit of one or more ascertainable beneficiaries. In addition, Trust is for preservation, compared to Will. Once a Trust is setup, your intention will be preserving the capital, at the same time, your beneficiaries can still enjoy the fruits. Besides, comparing to Will, Trust is more likely for long term.
Six terms that you need to know
Before setting up a Trust, there are six terms that you would need to know. Firstly, Settlor. Settlor is the owner of the Trust, the one that set up the Trust. Beneficiaries is referring to the people whom you wanted them to benefit from the assets. For instance, your spouse, your siblings, your children, your parents, etc. Trustee Company, the party who handle and manage the Trust. Protector in your Trust will act as a watchdog and advise the trustee on the needs of the beneficiaries. Apart from that, Protector will be watching over the benefits of the beneficiaries when the owner is no longer around. The assets inside the Trust are called as Trust Asset. Lastly, Trust Period is referring to the Trust duration. In other sayings, how long would you wanted the Trust to last for.
Types of Trust
There are few types of Trust that is available, which includes the Living Trust, Declaration of Trust and Testamentary Trust.
What is Living Trust? The person is still alive and the asset is under the person’s name when setting up Living Trust. During the person’s lifetime, he/she needs to transfer the assets that he/she own to the Trustee name. Setting up Living Trust will provide you with asset protection against negligence claims, creditors and bankruptcy.
How about Testamentary Trust? As for Testamentary Trust, the asset is under the person’s name when he/she is still alive. But when the person is dead and gone, the asset is still under the deceased name. Testamentary Trust will only be started until the probate is granted, debts and income tax are cleared. Testamentary Trust is the cheapest form of Trust. However, Testamentary Trust needs to go through a long probate process before the Trust is setup and there is no creditor protection.
There is a hybrid between Living Trust and Testamentary Trust which is known as the Declaration of Trust. Declaration of Trust is set up when the person is still alive and the asset is under the person’s name.
There are differences between these two types of Trust set up in Malaysia. The asset will be transferred to the Trustee name when setting up the Living Trust. When a person does a Declaration of Trust, the asset will be transferred to the Trustee for the benefits of the beneficiary only when he/she passed away.
Apart from that, there are still a wide varieties of Trust that is available in Malaysia. For instance, Single Parent Trust, Special Child Trust, Golden Age & Healthcare Trust, Insurance Trust, Charitable Trust, Investment Trust, Property Trust, etc.
How to set up private Trust?
- Define your intention of setting up a Trust.
- Appoint a Protector during Your Trust period.
- Determine the trigger event. (When will the Trust start? Death; TPD, coma or mental disability; critical illness)
- Determine Trust Assets and who can revoke or change the Trust.