PRIVATE CLIENT FOUNDATIONS FOR MALAYSIAN HNWIs By Carolyn Oh Carolyn Oh & Co. Advocates & Solicitors Penang, Malaysia
“Estate planning is the process of anticipating icipating and arranging anging , during a person’s life, for the di disp sposa osal l of their eir estate ate. Estate ate planning nning can be be use sed to to elimi iminat nate unce ncertainties inties … and d to to maxi ximiz mize the e va value ue of the e estate ate by y redu ducing cing taxes and other ther exp expense nses. Th The ultimat timate e goal al of estate ate plann nning ing can be be de dete termined rmined by y the e sp speci cific ic goals als of the client ient and may y be be as s si simple ple or plex as the client’s needs dictate.” com omplex ~ Wikipedia
JACK Jack: k: arriv rived, ed, aliv ive e & retired ired @ 5 @ 54
@ 57 (Wang) ang) ji jian: n: arriv ived ed bu but t de dead d @ 5
“ Th The e di difference ence between een su successful cessful peop ople le and nd REA EALL LLY Y su successful cessful peop ople le is is tha hat t REA EALL LLY Y su successful cessful peop ople le sa say y NO! to almost everything.” ~ Warren Buffett
Name person(s) who are to be entrusted [“the Executor(s)”] List the assets concerned, eventually to be the Estate’s asset(s) [“ th the Asset(s) t(s) ”] Express clearly who are to benefit and in what proportions [“ th the Benef nefici iciar aries ies ”] Dictate conditions (if any) to be satisfied by the intended ion(s) (if any]” beneficiaries before they can inherit [“ Co Condit dition(s)
wh who wi will ha handl dle e hi his estate te and asset(s) t(s) ~ person(s) who become administrators may not necessarily be the person(s) whom the decedent would have chosen the assets ts wh whic ich correctly sho hould uld be deem emed ed estate e asse sets ts ~ additionally the challenge of locating & determining the assets in the first place wh who are to to benef efit it ~ intestacy rules where the assets are located, nature of the assets & domicile of the deceased will dictate accordingly
not a “conscious” form of relinquishing; effects of a Will ~ post death executor’s duty ~ distribute not preserve cross border assets ~ 1 Will or more (?) beneficiaries - become “foreign” any Will can be contested [n.b. US case of Ms Huguette Clark ~ pronounced “Ooo - Get” sounds like “Who - Gets” ]
Ce Certain ainty ty of In Inte tention tion (by the Settlor in favour of a named ed Trustee tee) Ce Certain ainty ty of Subject ect Matter tter (“ the the Assets ts ” ~ which are to be transferred to the Trustee to constitute a complete & valid Trust) Ce Certain ainty ty of Objects cts (“ the the Benef eficiaries iciaries ” ~ whom notwithstanding having yet received already have expressed beneficial interest over the assets concerned)
Elem ements ents compa pared ed Onsho hore e (Pen enins nsular r Malaysia sia) Offsh shore (e.g. g. Labuan) n) LEGAL SYSTEM TEM Based on English common law Based on English common law but also drawn from other developed jurisdictions STATUT TUTES S CONCE NCERNE NED Trustee Act, 1949 Labuan Trusts Act, 1996 Trust Companies Act, 1949 Labuan Companies Act, 1990 Trustees (Incorporation) Act, 1952 Labuan Financial Services and Securities Act, 2010 Income Tax, 1967 Labuan Business Activity Tax Act, 1990 Real Property Gains Tax Act, 1976 PROVISION OF “PROTECTOR” No statutory definition Statutorily provided RULES S AGAI AINS NST T PERPE PETU TUIT ITY Applies Unless “limited”, trust can and will continue to exist for an unlimited period REVOCA CABILIT ITY To be expressly stated however common onshore Statutorily provided; Revocation rights can be reserved by the take that once settled, is settled Settlor or empowered to another e.g. Trustee. Moreover there can be retention of certain rights by the Settlor BENEFICIARIES’ Saunders - v - Vautier (1841) 4 Beav. 115. More provisions to curtail Beneficiaries’ rights to demand and to RIGHTS/PO S/POWER If Beneficiaries absolutely entitled and sui juris terminate the trust [n.b. S22(4) LTA 1996] they can collectively terminate the trust CONFI FIDE DENT NTIA IALIT ITY, Fiduciary duty on Trustee Statutory protection expressly provided DISCL CLOSU SURE & SECRECY CY CREATED TED Expressly via an instrument in writing Expressly via an instrument in writing STAMPI PING NG & FILING NG Stamping: Nominal (subject to amendments of Stamping: Need not be stamped REQUIR IREMENT MENTS the Stamp Act, 1949) Registration: Need not be registered Registration: Optional
FOUND NDATI TION ON 1) features of both trusts (i.e. intended for beneficiaries) and companies (i.e. a legal entity on its own) 2) no separation of legal & beneficial ownership 3) (being in its own right a legal entity) can hold and be registered (over the assets) in its own name as well as contract or sue in its own name Foun undati dation on (in the Labuan jurisdiction) is formed under the Labuan Foundations Act, 2010 (I) Found under er – can be … a) Malaysian resident/non-resident b) Individual/body corporate (II) Objec jects/ s/Benefici eneficiari ries es – has no equitable or beneficial entitlement to the Foundation assets but merely a right to receive (III) Coun unci cil l or Super pervis isor ory Perso son(s (s) (optional) (IV) Secr cretary* – a Labuan Trust Company (V) (V) Offic icer(s r(s)* – at least one (1) – can be individual(s) / body corporate(s) * mandatory requirements
Offshor shore e Priv ivate te Family ily Founda ndation tion (Juri risdict sdiction: ion: Labuan) uan) FO FOUNDE DER R (Individua dual/ l/Body Body Corpora rate) te) (Legal & B Benefic icial ial Owner) Charter & Articles per Assets to be endowed Sections 8 & 10 of LFA 2010 * Council Members (“CM”) (optional) a) Letters of Appointment (signed by Founder) b) Acceptance Letters/Letters of Consent (signed by CM) SECRET ETAR ARY – L.T.C. * OFFI FICER ER – (mandatory) (mandatory) 1. Letter of Appointment 1. Letter of Appointment (L)/ LABUAN FO FOUNDATI TION ON (signed by Founder) (signed by Founder) (Revocabl cable/ e/Irr Irrev evocable cable) 2. Acceptance Letter/ Letter 2. Acceptance Letter/ Letter of Consent by of Consent by Secretary Purpose (II) Purpose (I) Officer *NB: B: Founder nder can sit either er as CM * Benefici iciar aries ies or Officer cer and d can be named med as (only Right to to R Receive e – in d due course se) Benef efic icia iary y to too
Should we … TRUST TR T or fin ind d a be better ter FOU OUND NDATION TION ? Primary TRUST FOUNDATION Elements Compared TRUSTED A “true” Trustee ~ scarce Founder can be either a Council CANDIDATE Member or Officer BENEFICIARIES’ Established from the Only when distribution is made to the RIGHTS OR formation of the Trust ~ named beneficiaries per the terms of ENTITLEMENT Beneficial Ownership the Foundation ~ Beneficial Ownership cannot be demanded
Having your Cake & Eating it too! The Founder … gets to Plan & Structure but still retains some level of Control
Wealth Successors (Assets/Businesses) Estate Planning Is Good Living Will/Lasting Estate Duty (?) Power of Attorney (?)
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