By Carolyn Oh Carolyn Oh & Co. Advocates & Solicitors - - PowerPoint PPT Presentation

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

• sal

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 com

• mplex

plex as the client’s needs dictate.”

~Wikipedia

Jack: k: arriv rived, ed, aliv ive e & retired ired @ 5 @ 54

JACK

(Wang) ang) ji jian: n: arriv ived ed bu but t de dead d @ 5 @ 57

“Th The e di difference ence between een su successful cessful peop

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le and nd REA EALL LLY Y su successful cessful peop

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le is is tha hat t REA EALL LLY Y su successful cessful peop

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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

beneficiaries before they can inherit [“Co Condit dition(s) ion(s) (if any]”

• 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”]

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Certain ainty ty of In Inte tention tion (by the Settlor in favour of a named ed Trustee tee)

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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)

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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 Trust Companies Act, 1949 Trustees (Incorporation) Act, 1952 Income Tax, 1967 Real Property Gains Tax Act, 1976 Labuan Trusts Act, 1996 Labuan Companies Act, 1990 Labuan Financial Services and Securities Act, 2010 Labuan Business Activity Tax Act, 1990 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 take that once settled, is settled Statutorily provided; Revocation rights can be reserved by the Settlor or empowered to another e.g. Trustee. Moreover there can be retention of certain rights by the Settlor BENEFICIARIES’ RIGHTS/PO S/POWER Saunders - v - Vautier (1841) 4 Beav. 115. If Beneficiaries absolutely entitled and sui juris they can collectively terminate the trust More provisions to curtail Beneficiaries’ rights to demand and to terminate the trust [n.b. S22(4) LTA 1996] CONFI FIDE DENT NTIA IALIT ITY, DISCL CLOSU SURE & SECRECY CY Fiduciary duty on Trustee Statutory protection expressly provided CREATED TED Expressly via an instrument in writing Expressly via an instrument in writing STAMPI PING NG & FILING NG REQUIR IREMENT MENTS Stamping: Nominal (subject to amendments of the Stamp Act, 1949) Registration: Need not be registered Stamping: Need not be stamped 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

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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

• n (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

• ry 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 Sections 8 & 10 of LFA 2010 Assets to be endowed * 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. (mandatory) * OFFI FICER ER – (mandatory) 1. Letter of Appointment (signed by Founder) 2. Acceptance Letter/ Letter of Consent by Officer 1. Letter of Appointment (signed by Founder) 2. Acceptance Letter/ Letter

• f Consent by Secretary

(L)/ LABUAN FO FOUNDATI TION ON (Revocabl cable/ e/Irr Irrev evocable cable) Purpose (I) Purpose (II)

*NB: B: Founder nder can sit either er as CM

• r Officer

cer and d can be named med as Benef efic icia iary y to too

* Benefici iciar aries ies (only Right to to R Receive e – in d due course se)

Primary Elements Compared TRUST FOUNDATION TRUSTED CANDIDATE A “true” Trustee ~ scarce Founder can be either a Council Member or Officer BENEFICIARIES’ RIGHTS OR ENTITLEMENT Established from the formation of the Trust ~ Beneficial Ownership Only when distribution is made to the named beneficiaries per the terms of the Foundation ~ Beneficial Ownership cannot be demanded

Should we … TR TRUST T or fin ind d a be better ter FOU OUND NDATION TION ?

The Founder …

gets to Plan & Structure but still retains some level of Control Having your Cake & Eating it too!

Estate Planning Is Good

Wealth (Assets/Businesses) Successors Estate Duty (?) Living Will/Lasting Power of Attorney (?)