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Estate Planning in Malaysia: Will vs Trust vs Family Office

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Ultimate Guide of Estate Planning in Malaysia. 3 Important Types.

estate planning in Malaysia

Important of Estate Planning in Malaysia

In Malaysia, an estimated 80% of Malaysians do not possess valid wills leading to potential family disputes and complications.

Estate planning is particularly important for several reasons:

  • Preventing Family Disputes: The lack of clear estate planning can lead to severe family conflicts, sometimes resulting in legal battles and even violence.
  • Ensuring Financial Stability: Proper estate planning can ensure that your loved ones are financially secure and that your assets are distributed in a way that aligns with your wishes.
  • Protecting Assets from Creditors: Effective estate planning can help safeguard your assets from creditors, ensuring that your wealth is preserved for your heirs.

Real-Life Examples Highlighting the Importance of Estate Planning in Malaysia

Conflicts over inheritance frequently arise due to inadequate estate planning in Malaysia, affecting everyone from small families to ultra-rich households. Notable cases include:

Negative Example:

  • In Sibu, Malaysia, Ngu Ming Wei was jailed and fined for assaulting his sister over an inheritance dispute. The conflict arose from disagreements about the distribution of their family’s land. This case highlights how lack of proper estate planning in malaysia and clear wills can lead to violent family disputes (The Star).
  • Ariff Peter, a former businessman and musician from Malaysia, found himself living in his car for two years to repay a RM1 million debt. His financial troubles began after a failed cryptocurrency investment, where his partners vanished with the funds, leaving him to face the consequences. Despite the hardships, Ariff persevered, working tirelessly to pay back his creditors. His story highlights the uncertainty for business owners. Luckily, Ariff is single; imagine if he had children and a wife. Next time, we’ll discuss ring-fencing for business to protect asset from creditor. (asiaone)
  • Taib Mahmud, former Sarawak governor, passed away, triggering a legal battle over his estate. His second wife, Raghad Kurdi, and his children from his first marriage are entangled in disputes over his substantial assets, including shares in a public-listed company. As an ultra-rich individual, this high-profile case underscores the potential for family conflicts in the absence of clear estate planning and the importance of family office services.( SCMP)
  • The legal battle within Lim Goh Tong’s family over the Genting Group’s inheritance underscores the importance of international knowledge in managing trusts. With assets spread across Malaysia, Singapore, the US, and China, understanding international laws is crucial for effective succession planning and avoiding disputes. This case highlights the complexities and legal challenges of managing a global business empire. ( The True Net )

Positive Examples:

  • Philanthropic and Succession Planning: Tan Sri Lee Shin Cheng’s careful succession planning for his sons to take over his business empire and his legacy donation to UTAR Hospital through Yayasan Tan Sri Lee Shin Cheng illustrate the positive impact of strategic estate planning. Proper estate planning can include philanthropic goals, ensuring that wealth benefits charitable causes and facilitates business continuity and family succession. These stories highlight the benefits of early and comprehensive estate planning. (utar) and (ioigroup)
  • Public Bank Founder’s Legacy: In honor of the late Tan Sri Dr. Teh Hong Piow, his youngest daughter Diona Teh Li Shian donated RM143 million to Tung Shin Hospital and RM200,000 each to several other charities. This act of philanthropy demonstrates the lasting impact of effective estate planning in preserving and extending a legacy of generosity. (edge).

 

Additional Importance and Potential Benefits of Estate Planning

Initiative Calls in Estate Planning There have been calls for more initiatives in estate planning to prevent issues such as the freezing of assets and to ensure that dependents can access their inheritance promptly. This includes educational efforts and legislative changes to simplify the estate planning process. This could include a favourable 15% tax rate for family office investments exceeding RM20 million.(thestar)

The purpose of this blog post is to help you understand the differences and benefits of each estate planning tool by comparing wills, trusts, and family offices, providing clarity on each option’s advantages and disadvantages. As you can see, the absence of proper estate planning can lead to significant conflicts and complications. Therefore, it is essential to consider tools like private trusts and offshore trusts, in addition to wills and family offices, to ensure your assets are protected and your wishes are honored.

 

Comparing Type of Estate Planning in Malaysia: Wills, Trusts, and Family Offices

Wills

  • Definition and Purpose: A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children.
  • Advantages:
    • Legal recognition and ease of enforcement.
    • Flexibility in asset distribution.
  • Disadvantages:
    • Probate process and associated costs.
    • Public disclosure of the will’s contents.
  • Suitable For: Straightforward estate situations with clear directives for asset distribution.

 

Trusts

  • Definition and Purpose: A fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of beneficiaries.
  • Types of Trusts: Living trust, testamentary trust, offshore trust.
  • Advantages:
    • Asset protection and privacy.
    • Potential tax benefits.
    • Flexibility in managing and distributing assets.
    • Offshore Trust: Offers enhanced privacy, international asset protection, and potential tax benefits due to being governed by the laws of another country.
  • Disadvantages:
    • Setup and maintenance costs.
    • Complexity in management.
    • Offshore Trust: Additional legal and compliance complexities due to multiple jurisdictions.
  • Suitable For: Complex estates, asset protection, privacy concerns, international asset management, and planning for incapacitation.

 

Family Offices

  • Definition and Purpose: A private wealth management advisory firm that serves ultra-high-net-worth families, providing a range of services including estate planning, tax services, and investment management.
  • Advantages:
    • Comprehensive and personalized estate planning.
    • Professional management of assets.
    • Family governance and legacy planning.
  • Disadvantages:
    • High setup and operational costs.
    • Typically suitable for high-net-worth families.
  • Suitable For: Very wealthy families needing a holistic approach to wealth management and succession planning.

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Which Type of Estate Planning in Malaysia is Right for You? Compare Fees, Net-Worth Requirements, and Expert Support

Now that you understand the advantages and disadvantages of each type of estate planning in Malaysia, we’ve created a comparison to help you choose the right option based on fees, net-worth requirements, and the expert support provided by each service.

ServiceTeam MembersNumber of ProfessionalsTypical Fees (MYR)Who Normally Needs It
Will and Estate Planning FirmWill Drafting Expert, Legal Advisor, Estate Planner, Tax Advisor, Financial Planner4-5RM500 – 50,000 one-time feeIndividuals with straightforward to complex estates; high net worth individuals (RM 1 million and above); those needing detailed asset protection strategies and guardianship appointments
Private TrustTrustee, Trust Administrator, Legal Advisor, Financial Advisor, Tax Advisor5RM10,000 – 50,000 per yearHigh net worth individuals (RM 5 million and above); families wanting to avoid probate; those needing long-term asset management and protection
Offshore TrustTrustee, Trust Administrator, Legal Advisor, Financial Advisor, Tax Advisor, Compliance Officer, Asset Protection Specialist7RM20,000 – 100,000 per yearIndividuals with offshore property or investments; those seeking tax benefits and asset protection in multiple jurisdictions; ultra-high net worth individuals (RM 10 million and above) 
Family OfficeCEO/Director, CFO, Investment Manager, Legal Counsel, Tax Advisor, Philanthropy Advisor, Family Governance Advisor, Administrative Staff, Personal Assistants, Estate Manager10+RM100,000 – 500,000 per yearUltra-high net worth families (RM 50 million and above); those requiring comprehensive wealth management, lifestyle management, and legacy planning

 

Start Estate Planning Now

Taking the first step in estate planning is crucial to ensuring your assets are protected and your wishes are honored. Don’t wait until it’s too late—start planning today to avoid future complications and conflicts.

FIAM, in collaboration with Timeless Family Office, is offering a complimentary 30-minute consultation to help you get started. For further assistance or to schedule your consultation, click the button below or fill out the form below

TIMELESS Family Office Specialist
FIAM SPECIAL: FREE 30-minutes consultation (valued at RM500)

Explore ways to safeguard your family's financial future with a complimentary 30-minute consultation (worth RM500)

Discover strategic wealth planning solutions tailored to your family’s needs with our complimentary consultation on trust structuring. We understand that every family has unique financial goals and challenges, requiring personalized approaches to long-term asset protection.

During your consultation, our experts will explore suitable trust structures aligned with your objectives, ensuring a smooth transition of wealth for future generations.

Schedule your free consultation today to gain insights into effective wealth preservation and legacy planning

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How To Set Up an Offshore Trust in Malaysia

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How To Set Up an Offshore Trust in Malaysia

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In recent times, amid fluctuations in the Malaysian Ringgit (MYR) and shifts in the global financial landscape, offshore trust have emerged as a compelling option for Malaysian investors seeking to diversify their wealth and safeguard assets. The MYR has experienced significant depreciation, potentially causing assets denominated in MYR to drop by as much as 45% in the last 10 years.

Year Exchange Rate (Average: 1 USD to MYR) Percentage Change
2014 3.27 MYR –
Present 4.72 MYR 44.35%

Notable personalities in Malaysia have also embraced offshore trusts for their potential benefits. This comprehensive guide explores the process of establishing an offshore trust in Malaysia, considering the MYR currency drop, and highlights how influential individuals in Malaysia have utilized offshore trusts to optimize tax efficiency and asset protection.

NamePosition/AssociationInvolvement in Pandora Papers
Daim ZainuddinFormer Finance MinisterLinked to multiple companies and trusts in the BVI, jointly holding assets worth at least £25 million (RM141 million). Sons, daughter, third wife, and business associates named as owners of offshore companies.
Zafrul AzizFinance MinisterNamed director of Capital Investment Bank (Labuan) Limited, a boutique bank incorporated in Labuan, although claims to have relinquished position eleven years ago. Seeks legal counsel regarding allegations, asserting the ability of individuals to open accounts with licensed banks.
Ahmad Zahid HamidiUMNO PresidentNamed director of BVI firm Breedon Limited in 1996, with company subsequently dormant for several years. Denies tax evasion attempts, citing investments in a “prominent country.”
Yamani Hafez MusaDeputy Finance MinisterFormer director of Great Ocean Consultants in the BVI alongside siblings. Father, former Sabah chief minister, took over as sole director in 2015. Company sold in 2016.
G GnanalingamCargo Company OwnerOwns BVI firm Paisley Marketing Limited, dissolved after being gifted to daughter. Ranked No. 13 on Forbes “Malaysia’s 50 Richest 2021” list with a net worth of US$1.8 billion.
William LeongFormer Party TreasurerAdministrator of Collister Holdings Ltd in Jersey, managing income during tenure as executive vice president of Philippine National Steel Mill. Linked to BVI firm Maxcorp (Asia) Overseas Ltd.
Mahmud Abu BekirSon of Sarawak GovernorNamed in Pandora Papers through directorship of family business, BVI company Rondinmass Incorporated, holding commercial properties in Seattle and Washington worth US$35 million.
Tiong Hiew KingTimber Company FounderListed as owner of IB Holdings Limited, a Cook Islands company involved in investment and timber products trading.
Larry Low Hock PingParent of Jho LowLinked to BVI companies Coswell Corporation and Strategic Equities Limited, with combined shares worth US$7 million.
Lim Kok ThayGenting Group ChairmanLinked to BVI company Azure Supreme Limited, though the nature of its business remains undisclosed.

Source: Coconuts (2021-10-06)

Step 1: Understanding Offshore Trusts

Before delving into the process, it’s essential to grasp the fundamentals of offshore trusts. An offshore trust is a legal entity established in a jurisdiction outside of Malaysia, typically in jurisdictions renowned for their favorable regulatory frameworks and tax benefits. Such trusts serve various purposes, including wealth preservation, succession planning, and confidentiality.

Step 2: Choosing the Right Offshore Jurisdiction

Selecting the appropriate jurisdiction for your offshore trust is paramount. Factors to consider include the jurisdiction’s legal system, political stability, regulatory environment, and tax laws.

Leading offshore trust destination in the world 2022

Major offshore destination in the world in 2022.
Source: Statista 

In 2022, Switzerland emerged as the leading offshore destination for private wealth globally, with Hong Kong and Singapore following closely behind. During that period, offshore assets in Switzerland reached approximately 2.4 trillion U.S. dollars. Timeless International Family Office maintains offices or professionals in all major leading offshore destinations including Switzerland, Singapore, Hong Kong, Shenzhen, Taipei, Kuala Lumpur, Dubai, London, Vienna, Geneva, the British Virgin Islands, the Cayman Islands, and the Marshall Islands.

Step 3: Engaging Offshore Trust Professional Services in Malaysia

Given the complexity of establishing an offshore trust, engaging professional services is highly advisable. Seek assistance from reputable law firms, trust companies, or financial advisors specializing in offshore structuring. These professionals can provide expert guidance on trust formation, compliance requirements, and ongoing administration. It’s important to note that there are limited offshore trust service providers in Malaysia. 

Timeless International Family Office is one of the recent entrants, having opened their office in Kuala Lumpur on March 23, 2024. Due to the complexity involved, meeting face to face with professionals is often preferred for a thorough discussion and understanding of your needs

Local trusts, such as those offered by Rockwill and UBB Amanah, may differ from offshore trusts in certain aspects. Offshore trusts, in particular, may offer added benefits compared to local trusts. We will delve deeper into this topic in future discussions. Join our newsletter for more update.

Option 1: Setting Up with Agency Assistance


Step 4: Engage the Offshore Trust Agency in Malaysia

Simply fill out the necessary forms and provide the offshore trust agency with the required information. They will then prepare all the necessary documents based on your input. Once everything is set up, you’ll open your offshore trust account system, ensuring all details are accurate. After confirming payment, a quick follow-up call ensures smooth processing. Legal experts from the agency will assist you in drafting the trust deed, detailing terms, objectives, and beneficiaries. As a bonus, you can also apply for a credit card linked to your offshore trust account. Once all paperwork is signed and submitted, your offshore trust account will be activated effortlessly.

You are done!

 

 

Option 2: Setting Up Independently

Step 4: Drafting the Trust Deed

Drafting the trust deed independently requires close collaboration with legal experts. You’ll need to invest time and effort in ensuring that the document is comprehensive and tailored to your needs, addressing key considerations such as asset protection provisions and succession planning arrangements.

Step 5: Selecting Trustee(s) and Settlor(s)

The selection of trustee(s) and settlor(s) is a critical aspect of trust formation. Trustees play a fiduciary role in managing trust assets and executing the trust’s terms, while settlor(s) establish the trust and may contribute assets. Choose trustees with a solid reputation for professionalism, integrity, and expertise in trust administration.

Step 6: Funding the Offshore Trust

Once the trust is established, it must be funded with assets. This typically involves transferring assets such as cash, securities, real estate, or other investments into the trust’s name. Take care to comply with all legal and regulatory requirements governing asset transfers, including documentation and reporting obligations.

Step 7: Compliance and Reporting

Maintaining compliance with relevant laws and regulations is essential for the ongoing operation of an offshore trust. Be aware of reporting requirements, tax obligations, and other compliance matters applicable to both the trust and its beneficiaries. Regularly review the trust’s structure and operations to ensure continued compliance with evolving regulatory standards.

Step 8: Monitoring and Review

Effective management of an offshore trust requires ongoing monitoring and review. Stay abreast of changes in regulatory environments, tax laws, and economic conditions that may impact the trust’s operations or objectives. Periodically assess the trust’s performance, structure, and asset allocation to ensure alignment with your financial goals.

Is Establishing an Offshore Trust from Malaysia the Right Move for You?

Setting up an offshore trust in Malaysia offers numerous benefits, including asset protection, tax optimization, and enhanced privacy, embodying the principles of Dark Forest Logic. By following these steps and leveraging professional expertise, Malaysian investors can establish a robust offshore trust structure to safeguard their wealth and achieve their financial objectives.

Explore ways to safeguard your family's financial future with a complimentary 30-minute consultation (worth RM500)

Discover strategic wealth planning solutions tailored to your family’s needs with our complimentary consultation on trust structuring. We understand that every family has unique financial goals and challenges, requiring personalized approaches to long-term asset protection.

During your consultation, our experts will explore suitable trust structures aligned with your objectives, ensuring a smooth transition of wealth for future generations.

Schedule your free consultation today to gain insights into effective wealth preservation and legacy planning

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Applying Offshore Trusts and Dark Forest Logic in Malaysia

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Malaysian Investors Can Learn From Dark Forest Logic And Apply It To Offshore Trusts

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In Malaysia, Netflix’s “The Three-Body Problem” is one of the most popular TV shows currently. The Dark Forest Theory portrayed in it demonstrates a cautious attitude when facing unknown threats, sharing astonishing similarities with concepts like offshore trusts and global wealth management with tax optimization. This article will delve into the connections between these theories and their importance in wealth management and tax optimization, highlighting the role of offshore trusts and Dark Forest logic

The Offshore Trusts and Dark Forest Logic 

In “The Three-Body Problem,” the Dark Forest Theory describes the cautious behavior of civilizations in the universe, choosing to hide their existence to avoid potential threats from unknown civilizations. Similarly, in real life, individuals and entities in Malaysia may also choose to hide their assets in offshore trusts to protect their privacy and wealth.

Investors in Malaysia can leverage the advantages of offshore trusts to protect and grow their wealth. By establishing offshore trusts, Malaysian investors can enjoy tax benefits and asset protection in other jurisdictions, thereby maximizing financial planning and asset management goals.

Tax Optimization

In the Dark Forest, civilizations must carefully choose to hide their existence to minimize potential threats. Similarly, in the globalized economic environment, individuals and businesses can also achieve tax optimization goals through structures like offshore trusts, minimizing tax burdens to the fullest extent.

Investors in Malaysia can use offshore trusts in other jurisdictions to achieve tax optimization goals, similar to civilizations in the Dark Forest choosing to hide their existence to evade potential threats. This strategy not only helps protect wealth but also provides greater flexibility and opportunities in the ever-changing economic and tax environments.

Global Wealth Management

Apart from the Dark Forest Theory, we can also learn important lessons about civilization survival and development from “The Three-Body Problem.” Civilizations must carefully manage resources and develop strategies to address potential threats for survival and prosperity, mirroring the concept of global wealth management.

Global wealth management is not just a comprehensive strategy for managing personal and family wealth but also a strategy for survival and prosperity in an unknown universe. Offshore trusts play a crucial role in this strategy, offering advantages such as asset protection, financial planning, and tax optimization, helping individuals and families protect and grow wealth in the dark forest of the universe, coping with changing environments and threats.

Global Payment Solutions

Global payment solutions provide beneficiaries with the opportunity to use trust account assets globally, facilitating consumption through configuring beneficiary credit cards. Similar to scenarios depicted in “The Three-Body Problem” series where advanced technology obstructs scientific progress on Earth, challenges posed by foreign exchange controls also highlight this issue. Just as the Trisolarans use technological barriers to impede human scientific progress, foreign exchange controls are used by governments to restrict cross-border currency flows, limiting economic growth and innovation. Both scenarios demonstrate how technological or regulatory barriers hinder progress and development.

Conclusion

When facing uncertain tax environments and financial risks, individuals and entities in Malaysia can still adopt similar strategies by using offshore trusts and global wealth management to protect and grow wealth. Malaysian investors can achieve tax optimization and wealth management goals by utilizing offshore trusts in other jurisdictions.

By deeply understanding the connections between the Dark Forest logic and offshore trust, global wealth management, and tax optimization, individuals and entities in Malaysia can better formulate financial strategies to cope with changing economic and tax environments, achieving financial freedom and long-term prosperity.

Global wealth management, global payment solutions, asset privacy, and tax optimization are just some of the many advantages of offshore trusts. To learn about the top 10 benefits of offshore trust accounts at Timeless International Family Office, please visit this link: https://fiam.my/10-benefits-of-offshore-trust-account/.

Timeless International Family Office

With an international professional team spread across locations like Singapore, Hong Kong, Shenzhen, Taipei, Kuala Lumpur, Dubai, London, Vienna, Geneva, British Virgin Islands, Cayman Islands, and Marshall Islands, we deeply understand the importance of family legacy and are committed to assisting you in creating seamless generational wealth succession.

Through strategic partnerships with industry leaders, Timeless International Family Office has accumulated rich experience and strength, embarking you on an outstanding journey of family legacy, ensuring wealth continuity and achieving generational prosperity.

**This article is for informational purposes only and does not constitute legal or tax advice. Readers considering using offshore trust structures for financial planning or tax optimization should consult professional legal and tax advisors to ensure that actions taken comply with all applicable laws and regulations. The author and this website are not responsible for any actions or decisions made by readers based on the content of this article.

Explore ways to safeguard your family's financial future with a complimentary 30-minute consultation (worth RM500)

Discover strategic wealth planning solutions tailored to your family’s needs with our complimentary consultation on trust structuring. We understand that every family has unique financial goals and challenges, requiring personalized approaches to long-term asset protection.

During your consultation, our experts will explore suitable trust structures aligned with your objectives, ensuring a smooth transition of wealth for future generations.

Schedule your free consultation today to gain insights into effective wealth preservation and legacy planning

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