{"id":4673,"date":"2023-12-02T07:00:32","date_gmt":"2023-12-02T07:00:32","guid":{"rendered":"https:\/\/mcpg.org.my\/v1\/?p=4673"},"modified":"2023-12-02T07:00:32","modified_gmt":"2023-12-02T07:00:32","slug":"wealth-distribution-what-is-a-private-trust","status":"publish","type":"post","link":"https:\/\/mcpg.org.my\/v1\/2023\/12\/02\/wealth-distribution-what-is-a-private-trust\/","title":{"rendered":"WEALTH DISTRIBUTION – WHAT IS A PRIVATE TRUST?"},"content":{"rendered":"\n

Article by <\/em>Areca Capital Sdn Bhd | 2nd December 2023<\/strong><\/p>\n\n\n\n

A complete and holistic financial\nplanning pyramid encompasses 3 wealth components \u2013 accumulation, protection and\ndistribution. Broken down, it describes the process flow where you start to\naccumulate your savings and investments, then protect your wealth against any\nunexpected events with insurance before deciding on how you will distribute\nyour asset when the time comes.  <\/p>\n\n\n\n

In our opinion, the average\nMalaysian already has in place, a well thought out and decently executed\ninvestment and insurance plan. These covers the wealth accumulation and\nprotection components. Briefly, here\u2019s an example of what they generally\nconsist of: <\/p>\n\n\n\n

  1. Wealth\naccumulation – Investments in properties, shares, Unit Trust Funds and bank\ndeposits <\/li>
  2. Wealth\nprotection – Medical and life insurance. <\/li><\/ol>\n\n\n\n

    However, in many cases, the\napplication of the 3rd<\/sup> component and final piece of the financial\nplanning pyramid puzzle \u2013 wealth distribution, is still found wanting. The Sun\nDaily reported in an article published in September 2023 stating that there are\nover RM78 billion worth of unclaimed inheritance since 2022, lends credence to\nour belief. <\/p>\n\n\n\n

    Whether it\u2019s the thinking that a Will\nis often associated with death which is too taboo of a word or procrastinating\nthe idea of planning the distribution of wealth until a \u2018later\u2019 age, the truth\nis \u2013 one should plan, and preferably, to do it as early as you can. <\/p>\n\n\n\n

    Unexpected events do occur and\nsometimes, at the unlikeliest of times. A Chinese proverb springs to mind \u2013 \u4e0d\u6015\u4e00\u4e07\uff0c\u5c31\u6015\u4e07\u4e00, loosely translated: it is better to be safe\nthan sorry.<\/p>\n\n\n\n

    For example, if the deceased had\nnot made any wealth distribution plans before passing on, a dispute may occur among\nhis\/her beneficiaries or children on who should receive what, that may have\nenormous repercussions. These can potentially tear the family apart, and with\nit, the family wealth and values.  <\/p>\n\n\n\n

    Proper estate planning can go a\nlong way towards preventing any unwanted occurrences.<\/p>\n\n\n\n

    So, write your Will or remember\nto update it if there have been any significant changes e.g.: changes to your\nmarital status, replacement of beneficiaries or if there are notable changes to\nthe size of your estate. <\/p>\n\n\n\n

    However, if either retaining\ncontrol of your wealth even after planning to distribute it away or wanting a\nmore tailored approach towards your estate planning, a Private Trust may be\nmore of what you are looking for.  <\/p>\n\n\n\n

    A Trust is a legal instrument\nwhich is written on a Trust Deed for the Settlor (the person who creates the\nTrust) to provide instructions to the Trustee or Trust Administrator for them\nto hold, manage and distribute the assets to his intended beneficiaries. In\nthis article, we will talk about a Private Trust, which is a living trust.<\/p>\n\n\n\n

    Advantages of a Private Trust from a Will <\/strong><\/p>\n\n\n\n

    • Assets are not frozen <\/strong><\/li><\/ul>\n\n\n\n

      Even after writing a Will, when a\nperson passes away, his\/her assets will still be frozen while waiting to obtain\nthe grant of probate from the Court. The grant of probate is needed to allow\nthe designated executor, who is appointed by the deceased person to administer\nand distribute out his\/her estate. Generally, this may take between 3 to 6\nmonths. Crucially, this may be the time when the deceased\u2019s family members may\nneed the money the most. For example, if the sole breadwinner has passed away,\nhis\/her spouse may be unable to use the frozen money to pay for the children\u2019s\ncollege tuition fees or other important monthly expenses. <\/p>\n\n\n\n

      In the case of a Private Trust\nhowever, for the assets already held by the Trust, they are not frozen and the\nTrust operates as normal and pays out according to the Settlor\u2019s instruction.\nFor the assets which the deceased have nominated to the Trust e.g.: EPF or\ninsurance proceeds, the transfer process can be<\/s> started<\/s>\nimmediately without the grant of probate.  \n<\/p>\n\n\n\n

      *If a person dies intestate or\nwithout a Will, a lengthy and costly process await the family members.\nFurthermore, the deceased\u2019s assets would be distributed according to the\nDistribution Act 1958 instead of what may be his\/her wishes. <\/p>\n\n\n\n

      • Decisive appointment of beneficiaries and conditions <\/strong><\/li><\/ul>\n\n\n\n

        The Settlor can appoint anyone as\nthe beneficiaries, even himself. For Muslims, assets held under the Private\nTrust falls outside of the Settlor\u2019s estate, hence is not subject to the Faraid\ndistribution.<\/p>\n\n\n\n

        Besides that, the Settlor can\ndetermine the timing and condition of the particular distribution e.g.:\nInstruct the Private Trust to only distribute out the beneficiary or children\u2019s\nportion upon turning 30 or for the Trust to help with grandchildren\u2019s education\nexpenses. Instructions can be as specific as spelling out that the Trust will\nonly pay as long as the grandchildren is able to maintain a minimum grade of\n3.5 CGPA.<\/p>\n\n\n\n

        • Confidentiality <\/strong><\/li><\/ul>\n\n\n\n

          When a Private Trust is created,\nall the assets are held in the name of the Trust hence the Settlor and\nBeneficiaries remain confidential. <\/p>\n\n\n\n

          Moreover, unlike a Will, when the\nassets are distributed, it is done so to the intended beneficiaries discreetly\nand privately. <\/p>\n\n\n\n

          • Emergency needs <\/strong><\/li><\/ul>\n\n\n\n

            When a Trust is already in place,\nit can provide a safety net to the Settlor or for the family in case of\nunexpected occurrences. If a person falls under mental incapacitation which\nrenders him\/her unable to execute any decisions, all his assets remain under\nhis ownership. In other words, the beneficiaries are unable to utilise the\nmoney and the assets for the family\u2019s needs. \n<\/p>\n\n\n\n

            With a Private Trust, the Trust\nis able to take over and perform the necessary procedures as previously\ninstructed by the Settlor. These may include arranging for medical care,\napplication for EPF withdrawals and providing for the family\u2019s expenses.<\/p>\n\n\n\n

            In the case of other emergencies,\nfor example, if for whatever reason the Settlor is put in lockup and no\nnext-of-kin to post bail, a Private Trust may come in handy.  <\/p>\n\n\n\n

            • Professional Management<\/strong><\/li><\/ul>\n\n\n\n

              The assets in the Trust will be\nprofessionally managed in accordance to the Settlor\u2019s specified mandate; this\nhelps to prevent any mismanagement by beneficiaries who may not be financially\nastute or to prevent any spendthrift family members from mis-using the assets. <\/p>\n\n\n\n

              Depending on the size of the\nTrust, the fund managers can be instructed to invest in local, regional or in\nvarious asset classes. The Trust will be managed to achieve its specified\nobjectives e.g.: generating returns necessary for successive generations and\nmake available liquidity whenever distributions or payments are necessary. <\/p>\n\n\n\n

              • Bankruptcy or Creditor Protection<\/strong><\/li><\/ul>\n\n\n\n

                A Private Trust is able to\nprovide creditor or bankruptcy protection for all the assets held under the\nTrust; provided the Trust structure is made irrevocable and it will take effect\nafter 5 years. <\/p>\n\n\n\n

                • Duration <\/strong><\/li><\/ul>\n\n\n\n

                  A Private Trust can be set up to\nlast for a maximum period of 80 years. Combined with the Settlor\u2019s ability to\nset the timing and condition of the distribution, a Private Trust can be made\nto benefit successive generations of a family – provided the assets are\nsubstantial of course.<\/p>\n\n\n\n

                  Conclusion<\/strong><\/p>\n\n\n\n

                  Contrary to popular and long-held belief, Trusts are not reserved exclusively for the rich. Neither are the fees staggeringly high nor the assets required to be in the mind-boggling tens of millions of ringgit range. In some cases, RM500,000 could be enough to set up a Private Trust. However, it is important to consult a financial adviser or investment professional like Areca Capital in order to specifically tailor the Trust to the Settlor\u2019s needs.\u00a0 <\/p>\n\n\n\n

                  <\/p>\n\n\n\n

                  \"\"<\/figure>\n\n\n\n

                  Areca\nCapital is a niche Malaysian Private Wealth Manager. We are a firm believer in\nthe advisory-based approach towards investing. <\/strong><\/p>\n\n\n\n

                  We help our\nclients, who range from individuals to corporates, family and private trusts,\nfoundations and other institution to achieve consistent risk-adjusted returns\nover the long term. <\/strong><\/p>\n\n\n\n

                  For any enquiries,\nyou may contact us at 03-79563111 or by email: invest@arecacapital.com<\/strong><\/p>\n\n\n\n

                  Disclaimer: The article is produced based on material and information compiled from reliable sources at the time of writing and it is for general information only. The article is not an offer, recommendation or advice to transact in any investment products, including the stocks or funds mentioned within. The contents of this document should not be considered to be legal, tax, investment or other advice, and any investor or prospective investor considering the purchase or disposal of any securities or the Fund should consult with your consultant or advisers as to all legal, tax, regulatory, financial and related matters concerning an investment in or a disposal of such securities or Fund and as to their suitability for such investor or prospective investor. This article does not consider any investor\u2019s particular objectives, financial situation or needs. As such, Areca shall not be liable for any misuse of this document, other than the purposes stated herein.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

                  Article by Areca Capital Sdn Bhd | 2nd December 2023 A complete and holistic financial planning pyramid encompasses 3 wealth components \u2013 accumulation, protection and distribution. Broken down, it describes the process flow where you start to accumulate your savings and investments, then protect your wealth against any unexpected events with insurance before deciding on […]\n","protected":false},"author":1,"featured_media":4675,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4673","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/posts\/4673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/comments?post=4673"}],"version-history":[{"count":1,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/posts\/4673\/revisions"}],"predecessor-version":[{"id":4676,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/posts\/4673\/revisions\/4676"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/media\/4675"}],"wp:attachment":[{"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/media?parent=4673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/categories?post=4673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mcpg.org.my\/v1\/wp-json\/wp\/v2\/tags?post=4673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}