Estate Planning in Malaysia

Financial Planning involves a few component that are very crucial.

The components are:

• Cash Flow Management
• Investment Planning
• Insurance Protection
• Tax Planning
• Retirement Planning
• Estate Planning

In this article, we will touch on Estate Planning.

Most people presume that their assets will automatically go to their loved ones when they passed on.

However, there is a legal process to follow before any assets can be transferred.

What is Estate Planning

Estate planning is the process of managing and administering the assets of an individual through the accumulation, conservation, and distribution phases of life in an effective and efficient manner according to the wishes of the owner. This is very important to ensure the continuity of your assets to your family members and intended beneficiaries.

Situation Upon Demise

Upon a person’s demise

Testate:

• Died with a valid Will/Wasiat

• Estate Distributed according to Will/Wasiat

• Grant of Probate

Intestate:

• Died without a Will/Wasiat

• Estate Distributed according to Distribution Act

• Estate Distributed according to Faraid Law (Muslims)

• Letters of Administration

Partial Intestate:

• Dies with a valid Will/Wasiat but incomplete asset

disposition

• Will & Distribution Act

• Letters of Administration with Will Annexed

LETTERS OF ADMINSTRATION

JURISDICTION TO ISSUE: LETTERS OF ADMINISTRATION IN MALAYSIA

DISTRIBUTION OF ESTATE

WEST MALAYSIA:

Non-Muslims – Distribution Act 1958 (Distribution Amended Act 1997)

Muslims – Faraid Law

SARAWAK:

Non-Muslims – Distribution Act 1958 (Distribution Amended Act 1997)

Muslims – Faraid Law

SABAH:

Non-Muslims – Intestate Succession Ordinance 1960

Muslims – Faraid Law

LIMITATION:

a) Distributions is strictly regulated

b) Does not recognize illegitimate /step/adopted children (Muslim Only)

DISTRIBUTION OF ASSETS (NON-MUSLIM AND MUSLIMS)

Who is a Beneficiary?

A beneficiary is an individual or a corporation who will benefit after your demise

by inheriting the predetermined amount or assets specified by you.

However, do you know who are your beneficiaries?

NON-MUSLIM DISTRIBUTION

MAIN BENEFICIARIES

Parent(s) - Natural parents or the lawful parents of a child under the Adoption Act 1952.

Spouse - Legally married OR customary marriage before 1 March 1982.

Issue - Legitimate children and descendants of the deceased children.

DISTRIBUTION ACT 1958 (AMENDED 1997)

(PENINSULAR MALAYSIA & SARAWAK ONLY)

INTESTATE SUCCESSION ORDINANCE 1960

(SABAH ONLY)

The following person(s) are entitled to the estate in accordance to priority when he or she dies without leaving a surviving spouse, child or parent:-

• Brothers & Sisters
• Grandparents
• Uncle & Aunts
• Great Grandparents
• Great Uncle & Aunts
• Government

AT THE END OF THE DAY THE HOUSE IS SPLIT INTO 11 NAMES!!!!

Estate Planning Tools

1. Lifetime Transfer
2. Nomination
3. Will / Wasiat
4. Private Trust

Lifetime Transfer

NOMINATION (INSURANCE/EPF)

Will / Wasiat

A Will/Wasiat is a declaration in prescribed form (written) of the intention of the person making it of the matters which he or she wishes to take effect upon his or her death, until which time it is revocable.

“A Will/Wasiat ensures efficient distribution of assets and one may include specific instructions to specific persons and cater for special circumstances.

With a will entire estate can be distributed to your loved ones”

A WILL IS IMPORTANT

A WASIAT IS IMPORTANT

WHY WRITING A WILL/WASIAT IS IMPORTANT?

1. Faster & Smoother Distribution
2. Choice of Executor(s) & Trustee(s)
3. Choice of Beneficiary(ies)
4. Benefit non-immediate family member
5. Own manner of distribution
6. Choice of Guardian
7. Prevent hassles and disputes
8. Prevent splitting of assets

Private Trust

Private trust is a trust created during an individual's lifetime where the trust creator (“settlor”) entrust and transfer the legal ownership of the Settlor’s assets to a trustee via a trust deed.

The trustee is given the responsibility to administer the assets and act according to the terms of the trust deed for the benefit of the beneficiaries.

One of the key advantage of private trust is to provide immediate liquidity to the beneficiaries while pending the long and complex legal process of probate.

PARTIES INVOLVED IN A TRUST

• SETTLOR
• PROTECTOR(S)
• BENEFICIARY(IES)
• TRUSTEE

OBEJCTIVES TO MEET WHEN SETTING UP A TRUST

Intention - Settlor must be clear on the intentions and objective of creating the trust

Subject Matter - Settlor must also clearly identify the asset(s) and to be legally transferred into the trust

Object - Settlor must be clear who are the beneficiaries nominated to be entitled from the trust

Private Trust

TYPES OF TRUST

Discretionary Trust

• Beneficiaries do not have a fixed entitlement or interest.

• Trustee has the discretion to determine beneficiaries’ entitlement.

• Trustee can only distribute to beneficiaries within a nominated class as set out in the terms of the trust deed.

Non-discretionary Trust

• Beneficiaries have a fixed entitlement or interest.

• Trustee do not have the discretion to determine beneficiaries’ entitlement.

• Trustee is directed to invest in named investments and to diversify the investments among specific types of investments.

• The trustee has no discretion or personal decision making power in the matter.

PRIVATE TRUST VS TESTAMENTARY TRUST

REVOCABLE VS

IRREVOCABLE TRUST

STRUCTURES OF TRUST

Trust for Children

Wealth Preservation / Protection Trust for Children

Family Maintenance Insurance Trust

Family Dynasty Trust

Have you done your Estate Planning?

Have you written a will?

Happy Investing! 😉