W hy Estate Planning?

 Estate planning is define as “the process of

managing and administrating the assets of an individual
through the accumulation, conservation and distribution
phase of his life in the most effective and efficient
manner feasible”.

Earning income, savings, asset Inflation, taxes &

building duties
 D efinition of Estate
 Property and property rights that an individual owns,
net of debts
 It covers :
• Land and building, personal (jewelery etc.)
• Tangible (car etc.)
• Intangible assets (copyrights, life insurance etc.)
• Rights (debts owed to him, royalties, rights to damages claimed
in actions etc.) which the decedent held at the time of his
death
 Purpose of estate planning is to ensure when a
person finally dies :
• Assets are sufficient to meet objectives
• Beneficiaries receives assets in the proportion and manner
desired
• Assets depleting expenses like taxes are minimized
• Estate is sufficiently liquid to pay cost of transfer
 TYPES OF PROPERTY OWNERSHIP
Generally classified on the following basis:
I. The owner’s right exercised over the property
II. The duration of the owner’s interest
Both can be in the form of individual or joint ownership

INDIVIDUAL OWNERSHIP JOINT OWNERSHIP

1. Fee Simple or outright Ownership 1. Tenancy in Common
2. Life Interest 2. Joint Tenancy
3. Term Interest
4. Future Interest
 INDIVIDUAL OWNERSHIP
PROPERTY
FEE SIMPLE OR • Individual who holds unlimited interest in the property and
OUTRIGHT OWNERSHIP hence all the right associated with the property. ( Include
present proprietary rights and right-of-transfer to anyone at
any time the property title while alive or death ).

LIFE INTEREST OR • Individual’s right to possess, use and derive income from the
ESTATE property is absolute but limited to the mortality of the life
tenant, when the life tenant dies, the ownership rights end.

TERM INTEREST • Prevailing tenant has the right to possess, use and derive
income form property during a designated term. When the
prescribed term end, the rights of the tenant also end.

FUTURE INTEREST • This is a vested or contingent current right of the individual to

the future right to enjoy a property. If the right is contingent, it
will become vested on the happening of a certain event.
 JOINT OWNERSHIP PROPERTY
TENANCY IN COMMON Property are owned by more than one individual (without
survivorship right – probate assets)
The survivor will not automatically be transferred the portion of
the deceased owner interest in the property when the death
occurs.
Each owner has the right to transfer his interest in the property
to others at death or any other time.
JOINT TENANCY (with
Owners are called joint tenants. (with right of survivorship –
right of survivorship)
non-probate assets)
The death of joint owner automatically transfer his interest in
the property to the surviving joint tenants.
 The 6 Steps of Estate Planning
Process
C onduct periodic review to Establish what the client wants
update plan resulted from for his estate and how to
change of life, new provide for loved ones and
objectives or change in tax other heirs
laws
Periodi Establish
c Objective
Review s Fact finding
process
1. : kind of
W hat
Include execution of property?
legal documents and Plan Info 2. W ho should
transfer of property via Executio Gatherin receive the
use of wills and trusts n g assets?
instruments 3. How should the
transfer to
D evelop Analyz done?
& e 4. W hen should
Present Data the transfer be
done?
Prepare plan and test via Analyze information and decide
a process of simulating whether to employ testamentary
the procedure of trusts or living trusts, to use wills
administration or trusts and the costs attached
to them
 ESTABLISHING
OBJEVTIVE
 The goals must be establish and
prioritised.
 Objectives will circulate around
the desire of the estate owner
with regard to providing for loves
ones and other heirs; the
liquidation or preservation of
business interest and the making
of charitable bequests
INFORMATION
GATHERING
 the planning would revolve
around four key questions of :
• what kind of property does the
estate owner have?
• Who should receive the assets?
• How should the transfer be done?
• When should the transfer be
done?

Analysis the data
 the clients priority must be
accommodated along with the
analysis of likelihood of
meeting the said objectives.
Preparation and
presentation of the plan
 the main thing at this level is to
come out with a plan that will meet
all the objectives of the estate owner.
 The plan should be tested via a
process of simulating the procedure
of administration so that any defects
in the plan can be detected before it
is implemented
 Plan implementing Periodic plan review
 once the estate plan is fully
 this will involve the execution of
implemented, the owner should be
the necessary legal document and
made aware that a periodic review is
making arrangement for any
required to keep the plan current in
current transfer of ownership.
view of changing circumstances and
 A checklist may be necessary to
laws
ensure that all the planned action
are carried out.
 ESTATE
PERSONALITIES
BENEFICIARIES FIDUCIARIES
• The heirs to the estate known as • This is a position of trust.
beneficiaries • A fiduciary is a person, persons or
• Beneficiaries are the key objects of institution appointed by the estate
the estate plan. owner to hold or manages property
for the benefit of the beneficiaries
• Could be an executor or trustee
appointed by the estate owner or the
court.
• The relationship between the
appointee and the beneficiaries is
known as a fiduciary relationship.
• Trustees, Guardian, Personal
Representative
 Estate
Personalities
Beneficiaries
• Heirs to the estate are known as beneficiaries of the
deceased’s property
• The beneficiaries are the key objects of the estate plan
 Fiduciaries
• An executor, a trustee, a fiduciary is a person, persons or
institution appointed by the estate owner to hold or manages
property for the benefit of the beneficiaries
• The responsibilities of a fiduciary :
🗸 Basic duty is to act in the best interest of the beneficiaries
🗸 He is not to delegate his duty as a fiduciary
🗸 He is to act impartially with the beneficiaries concerning their interest in
the estate where there is a conflict of interest
🗸 He should not deal with matters in the course of his duty to profit himself at
the expense of the beneficiaries
🗸 He should act to preserve the estate property under his charge
🗸 He should keep property in productive states
 THE SPECIFIC DUTIES OF THE VARIOUS
FIDUCIARIES

LEGAL PERSONAL
TRUSTEES REPRESENTATIVES

GUARDIA
NS
D uties of Various
Fiduciaries
 Trustees
• Govern by the Trustee Act, the job of the
trustee is similar to the personal
representative
• N eed for appointment of trustees :
🗸 Where land is vested in trusts for charitable or public
purposes
🗸 Trusts for sale and settlements of land involving a term of
years that is limited by settlements or trusts for raising
money
🗸 Statutory trusts for life insurance (ex S. 166 Life Policy)
🗸 Non-statutory life insurance trusts where the funds are
managed to produce income
🗸 Cases where the beneficiary of a testate or intestate estate is
a minor or suffering from disability
 THE CONCEPT OF A TRUSTEE
1) APPOINTMENT OF TRUSTEES
• Any individual who has the capacity to hold property can be appointed as trustee.
• The Trustee Act of Malaysia limits the number of trustees to be appointed at maximum four.
• This restriction is removed in the case of property vested in the trustees for charitable,
religious and public purposes.

2) IMPLICATIONS OF VARIOUS APPOINTMENTS

• As a general rule, the manner of appointing trustees must fit the objective of the trust so
created.
• For large funds in the estate where special funds management skills are needed, the
appointment of corporate trustee takes precedence over individual trustees.
3) RESPONSIBILITIES OF TRUSTEES
• When a trustee is appointed to a trust fund, he assumes full responsibility for the property
that is placed under his care.
• The responsibility of the trustee to ensure that there is proper recording of the asset
inventory of the trust.

4) SCOPE OF POWERS OF TRUSTEES

• While the statutory powers of a trustee are granted under the Trustee Act, he may obtain
additional powers from the trust deed or the will appointing him.

5) GENERAL LIABILITIES OF TRUSTEES

• The trustee appointed to manage the trust property must exercise care in handling those
property.
• Any neglect to carry out his duties or not acting in accordance with the provisions of the
trust instrument would constitute a breach of trust – legally actionable by the
beneficiaries.
6) LEGAL PROVISIONS AFFECTING TRUSTEES
• Where a will appoints a trustee, who could also be the executor, his role begins as soon
as all administration formalities have been complete.
• In case of intestacies - the personal representative, in the position of an administrator,
automatically assumes the role of a trustee on his appointment by the court.
• The process of administration is considered complete when the personal representative
has compiled the estate and paid or made provision for the payment of the expenses,
debts, liabilities of the deceased estate owner including whatever inheritance taxes is
to be paid.
7) PERSONAL LIABILITIES OF TRUSTEES IN CONTRACT
• a trustee must ensure that contracts legally entered into by the deceased estate owner is
honoured by the estate.
• Exception - the contracts of a personal nature entered into by the deceased, which are
brought to an end on his death.
• If the trustee is required to advance moneys to the estate from his personal funds to
settle contractual damages or compensation, he is entitled to receive a refund.
8) POWER TO REQUEST DISCHARGE FROM DUTIES
• Once a trustee has completed his trusteeship in dealing with the trust property handled
by him, he can have his accounts examined, settled and be given a formal discharge.
• To free from further obligations – a trustee must obtain a proper discharge from the
beneficiaries and the creditors of the estate.
D uties of Various
Fiduciaries
 Guardian
s• Someone appointed by the court to take care of someone
who is either a minor or incapable of looking after oneself
• Duration of guardianship will only last for the period of
minority or incompetency but are lifetime in case of
incompetent due to disability
 Legal personal representatives
• The executor/executrix (named in will) or
administrator (appointed by court) of an estate
while the due process is in process; normally close
relatives or spouse of the deceased
• General duties – to identify and gather all the assets, to settle all
debts and financial obligations and to distribute the residual estate
to the beneficiaries.
 POWERS OF PERSONAL REPRESENTATIVES
• It is possible that an appointee of a will or the court is both a trustee and a personal
representative.

• The role of the personal representative ends when he has completed administration,
settled all the estate’s liabilities and ascertained the residue estate for distribution.
Thereafter, the trustee roles begin.

• Whether testacy or intestacy – before the estate is full administered – the personal
representative holds the estate vested in him for the purpose of carrying out the
functions and duties as an administrator.

• A personal representative must derive powers from the Malaysian Trustee Act. – to
organise the assets, convert hem into cash and distribute them to the beneficiaries.

• The rules impose a personal accountability on the trustee who disburses the assets
recklessly.

• They also must manage the affairs of the estate by taking precautions as an ordinary
prudent man of business would have taken in managing his own affairs.
Estate Planning Instruments
 Wills
• A written instrument by which an
individual signifies his wishes as to the
distribution of his estate after his
demise.
 Trust
• A trust is a legal arrangement or
relationship whereby an individual transfer
assets to a third party called a trustee
 Trust property
• Held by Trustees for the benefit of
another person
 WILLS
• A written instrument by which an individual signifies his wishes as to
distribution, of his estate after his demise.

• Takes effect only after death ; can be revocable and modified at any time
before the will-maker dies.

The Malaysian Wills Act 1959: Definition of a will

A written declaration of the will-maker's intention on the disposition of his

property or any matters that becomes legally effective after his death.

A document or set of documents that includes any of his written testaments,

codicils and appointment or any writing in the nature of a will in exercise of a
power ; and
A document that effect a disposition by will or testament of the guardianship,
custody and tuition of any child
 TRUST

• Legal arrangement or relationship whereby an individual

transfers assets to a third party called trustee who are
bound to follow a set of directives, rules and regulations for
benefits of others knows as the beneficiary or distributee.

• A trustee may be an individual, a professional advisor or a

corporation.
Components of Trust
 The Grantor or Settlor
• C reator of the trust
 The Property or Trust C orpus
• Anything of value that can be owned and
title transferred to the trust
 The Trustee
• Acts as a fiduciary looking after the trust
property for the benefit of the beneficiary
 The Beneficiary
• O wns the beneficial interest of the property
 The Trust D eed
• Document that sets out the terms
Power of Attorney
 A tool to arrange for someone to make financial decisions for an
individual should the person become incapacitated (unable to
do so himself) due to illness or accident
 The person appointed in the power of attorney is called an
attorney-in-fact, who is basically an agent of the donor of
the power. The appointee or attorney-in-fact need not be lawyer
or be legally trained.
• Attorney means anyone authorised to act on another’s behalf
 To authenticate the document, it must bear the words True
Copy
marked by the relevant authority
 Simple power of attorney can be revoked under the
following circumstances:
• W ritten revocation by the donor of the power
• Renunciation by the donee (attorney-in-fact)
• Death or legal incapacity (e.g. of unsound mind) of the donor
• Death or legal incapacity (e.g. of unsound mind and bankruptcy) of
the donee
Power of Attorney
The attorney-in-fact may be
conferred the following duties:
 Apply assets to pay the everyday expenses of the donor and his
family;
 Buy, sell, maintain, settle taxes on and mortgage real estate and
other property;
 Make investment decisions on shares, bonds,
commodities and mutual funds;
 Handle all the donor’s insurance needs and claims;
 File tax returns and make payments;
 Manage the business
 Represent the donor in court or to make arrangements with a
third party to perform the role
 Handle the retirement accounts
 Power of
Attorney
The Power of Attorney can be made
irrevocable or durable:
• Where there is valuable consideration given and is
expressed to be irrevocable; and
• Where the power of attorney is expressed to be
irrevocable for a fixed time

 For estate planning purposes, the durable power of

attorney should be drafted to terminate at the
donor’s death.
 If the donor wishes person to carry on dealing
with his duties conferred by the power of attorney
originally, name that person in the will as an
executor or trustee or both.
 Business Buy-Sell
CThe
ontracts
basic purposes of these contracts are to ensure
that the heirs can sell the business to a ready buyer(s)
at a prefixed price

 The agreement is usually between the estate owner

and his business partners or fellow shareholders, but
for the sole proprietorship, a third party such as an
employee may be the other contracting party.

 Funding Mechanism
• Life Insurance
Thank You