1. Expiry of Trust Period
For instance, a parent sets up a trust to bequeath a sum of cash to his son upon him reaching the age of 30. Once his son hits 30, the trustee shall distribute the sum of money to his son and with that, ending the trust. Alternatively, an individual can form a trust where its period is for 3 years. Thus, the trust shall end upon the expiry of 3 years.

2. Maximum Trust Period
A private trust (testamentary and living trust) shall not be set up indefinitely. As of today, the maximum fixed period of a trust is set to be 80 years in Malaysia.

3. Complete Distribution of Trust Assets
A living trust can be terminated in advance prior to its trust period if the estates had been fully distributed. For instance, Mr. A set up a living trust for a period of 10 years. Subsequently, in the 8th year, the trustee had distributed all the trust’s assets to the beneficiaries in full. Hence, Mr. A’s living trust shall then be terminated effectively.

Yes, you can amend the trust deed if it is a revocable trust.
There are several circumstances that you may consider amending the clauses in the trust deed. They are as follows:
1. Change in Marital Status
This includes a marriage, a divorce or a remarriage.

2. Change in Family Household
This includes the birth or an adoption of a child and the passing of a loved one.

3. Change in Beneficiaries and/or Percentage of Distribution
For instance, an individual formed a trust for his immediate family members. As time goes by, he wishes to include a relative and a charitable organisation as his beneficiaries of his existing trust. Hence, he shall amend the list of beneficiaries and the percentage of distribution of trust’s assets in the trust deed.

4. Change in the Size of Estate
For instance, a business owner has sold off his company for millions in cash. For his case, he may consider forming a trust and allocate a portion of the proceeds into his trust for greater wealth protection purposes.

5. Change in Laws and Regulations that Could Impact Your Estate
It is ideal for the settlor to amend his trust deed to ensure that his assets would enjoy the most efficient legal, tax and privacy protection in accordance with the latest laws and regulations governing in Malaysia.

Conclusion:
Due to changes in life circumstances, it is important to work closely with a local, highly experienced and professional trust consultant in order to ensure that our wealth protection needs are updated so that they can fulfil our life objectives.

A testamentary trust is a trust set up within a will document.
For instance, in his will, Mr. A wishes to bequeath RM 1 million to Ben, his 5-year old son, when he hits 25 years old. He entrusts a Trust Company to withhold this sum of cash if his son is below 25 at the time of his passing in the future.

A living trust is a trust created and is effective during and beyond the lifetime of its settlor.
For instance, Mr. D sets up a living trust with a Trust Company, parks RM 1 million into it and nominates Lin, his 5-year old son as its beneficiary. Mr. D instructs a Trust Company to distribute this sum of cash to Lin upon him reaching 25 years old.
There are four key differences between the two trust structures. They are as follows:

1. Legal Ownership
The setting up of a living trust involves a transfer of legal ownership of assets to the trustee. From above, Mr. D would transfer RM 1 million to a trust company in order for the trust company to administer and safeguard it for the benefit of Lin, his son. But in the case for a testamentary trust, there is no transfer of asset ownership during the settlor/testator’s lifetime. Hence, Mr. A shall continue to hold onto his cash, after he had set up his testamentary trust. This leads us to:

2. Protection from Creditors
Supposedly, both Mr. A (testamentary) and Mr. D (living) pass away: Testamentary Trust:
In Mr. A’s case, his RM 1 million shall be frozen and will form a part of his estate. To unlock it, the executor shall first apply for the Grant of Probate (GP) from the High Court. Then, the executor could retrieve all his estate, settle all of his taxes and debts owed and transfer the remainder of his estates to his beneficiaries as stipulated in his will document. This includes the RM 1 million to the trust company if Ben is below 25 years old.
There is no protection against creditors for the money is only transferable to his trustee after a full settlement of taxes and debts owed to both his creditors and the government. Living Trust:
In Mr. D’s case, the RM 1 million placed in his living trust shall not be frozen. This is because the trustee has legal ownership of this sum of cash and hence, is able to continue its administration with accordance to its trust deed.
Therefore, a living trust could offer asset protection against creditors.

3. Effective Date
A testamentary trust is effective upon the settlor/testator’s death.
Whereas, a living trust is effective upon its creation by the settlor. This is vital as the trustee could distribute cash in the trust to offer financial relief to its settlor if he loses his ability to self-manage his finances due to major life circumstances such as dementia, major disease, or permanent disability.
For instance, if both Mr. A and Mr. D has dementia in the future: Testamentary Trust:
Mr. A’s testamentary trust remains ineffective as Mr. A is still alive. Hence, Mr. A would need to depend on his family members to care for him financially.

Living Trust:
The trustee could distribute cash to Mr. D’s family members (wife or children) on a regular basis. This enables Mr. D’s family members to use the cash proceeds in fulfilling Mr. D’s financial obligations such as living and medical costs, debts and other commercial obligations.

Conclusion:
Overall, it is key to know the differences between testamentary and living trust. Each type of trust has its unique attributes and plays a different role in ensuring financial security. A professional trust consultant could explain their differences and offer customised solutions to cater to the financial protection needs arising from our esteemed clients.

A trust is set up to fulfil its settlor’s life objectives.
Upon formation, the trustee shall administer the assets placed within on behalf of its settlor. This structure shall enhance protection and privacy to these assets as their legal ownership is transferred to the trust.
In life circumstances, such as death, disability and a diagnosis of a major illness, the trustee is able to continue its administration of the assets. They shall not be frozen or inaccessible. The trustee can distribute and/or retain the assets which were placed within to the trust’s beneficiaries in accordance with its trust deed.

Such arrangements would benefit the trust’s beneficiaries, including the settlor, in the following manners:
1. Quick Cash Distribution
Supposedly, if an individual passes away prematurely, the trustee can distribute an amount of cash (as instructed in the trust deed) to his family members. Such a distribution can be made quickly as the cash is not frozen upon his death. This enables his loved ones to use the cash proceeds for:

Bereavement-related costs. Legal fees to apply for the Grant of Probate (GP) from the High Court. Immediate living expenses, including the servicing of debt commitments.

Retain Wealth for Beneficiaries’ Interests

Alternatively, the settlor can instruct the trustee to retain either, all or a portion of the trust’s assets, for its beneficiaries in the trust period via a trust deed.
For instance, a parent intends to fund his child’s tertiary education in the future upon his enrollment at the age of 20. His child is 2 years old currently. Thus, the parent could set up a living trust, put his cash into it, and instruct his trustee via the trust deed to either withhold and/or invest the cash until he reaches 20 and enrols into a university. Upon which, the trustee shall release the money for the purpose of paying his child’s university fees.

3. Staged Distribution to Loved Ones
In a trust structure, the settlor could determine who, how much, when, and the purposes of distributing the trust’s assets. Such flexibilities enable the settlor to support his loved ones namely, his spouse, his children and his aged parents. As such, the settlor’s objectives of protecting the interests of his dependents could be fulfilled effectively.
For instance, if an individual wishes to support his family’s living expenses upon his death, he can set up a living trust, place cash into it, and instruct the trustee to begin distributing a fixed sum of cash on a monthly basis to his loved ones so that their living expenses are taken care of in the trust period, upon his death.

4. Financial Relief to the Settlor
Unlike a will, the trust’s settlor can nominate himself to be its beneficiary. Thus, in the event of a major life event, such as a stroke, a heart attack, dementia and permanent disability, the trustee could distribute out the trust’s assets in stages or in one-lump sum to offer financial support and relief to the settlor himself. In such an arrangement, the settlor can set up a financial safety net for himself.

Conclusion:
In brief, a trust is a versatile and flexible tool that allows its settlor to offer great asset protection and privacy to both the settlor and its beneficiaries. Therefore, it is common for a trust to be set up to offer both immediate financial relief and to prolong a financial legacy to meet the settlor’s life objectives in the future.

Will and trust are commonly used in estate planning. While they are created for wealth preservation purposes, each tool has its own functions and hence, differ from one another. Their key differences are listed down as follows:

1. Commencement Date
A will document is effective upon the passing of its testator. Meanwhile, a trust, except for a testamentary trust, can be effective during the settlor’s lifetime.
For example, Mr. A has written a will and set up a living trust. He has placed RM 100,000 into his trust. Thus, as long as Mr. A remains alive, his will is ineffective. Meanwhile, his trust remains active and the trustee shall administer the cash as instructed by Mr. A via his trust deed.

2. One Will. Multiple Trusts.
If an individual passes away, the legislation shall recognise his latest will written and release the Grant of Probate (GP) to the executor of his latest will. All of his previous wills shall be voided effectively upon the writing of his latest will. With respect to this, an individual shall have one effective will document at any point in time under one jurisdiction.
For instance, Mr. A has written a will in 2010 with Lawyer B. Then in 2015, Mr. A rewrote his will with Lawyer C. As such, his will written in 2010 shall be nullified. The High Court shall recognise Mr. A’s last will document written in 2015.
Whereas, an individual can set up multiple trusts within a single jurisdiction.
For example, it is possible for Mr. A to form two or three trusts with a handful of trust corporations for his specific and unique purposes in Malaysia.

3. Estate Distribution Process
Upon the passing of a testator, his estates shall be frozen. The process to unlock his estates shall be administered by the will’s executor. This includes him having to obtain the Grant of Probate (GP) from the High Court, settling all of his debts and taxes owed and distributing all his remaining estates to all his beneficiaries. The estate distribution process could take around 1-2 years to be completed.
Whereas, the assets held within a trust (except testamentary trust) shall remain unfrozen upon the settlor’s passing. The trustee can continue to retain, manage and distribute the assets to the trust’s beneficiaries based on the trust deed. As such, in regards to estate distribution, the process is easier and shorter as there is no need to obtain the GP from the High Court.
For instance, Mr. A has placed RM 500,000 in fixed deposit and RM 500,000 into his living trust. Upon his passing, Mr. A’s fixed deposit shall be frozen and will be forming part of his estates. Mr. A’s beneficiaries shall require a will to unlock the estates. Whereas, the RM 500,000 parked into his living trust remains unfrozen. The trustee shall continue to manage or distribute the assets within based on its trust deed.

4. Protection Against Creditors
As discussed, the executor of a will shall first pay off all debts and taxes owed to the testator’s creditors and tax authorities before distributing the balance of his estates to his beneficiaries.
Hence, a will does not offer asset protection against creditors.
Whereas, when the settlor places his estates into his trust (except testamentary trust), it involves a transfer of legal ownership of his estates to the trust. Hence, it enables a trust to offer greater asset protection against his creditors. But with that being said, such protection is subjected to the relevant laws in Malaysia.

5. Beneficiaries
Obviously, the testator cannot be a beneficiary of his own will document. But, it is possible for the settlor to nominate himself as a trust’s beneficiary, except for a testamentary trust.
For instance, Mr. A placed RM 500,000 into his living trust. In the trust deed, Mr. A nominated himself to be a beneficiary and instructed his trustee specifically to distribute RM 5,000 a month in living expenses to him if he becomes critically ill, or partially disabled, or has dementia in the future.

Conclusion:
In short, both will and trust are complementary to one other as they can offer a much comprehensive protection to one’s financial wealth and legacy. Presently, it is a good practice to have our estate plans professionally reviewed once every 1-2 years.

A trust is an entity created to preserve and distribute one’s wealth.
In contrast to conventional belief, trust is no longer a financial vehicle restricted to the ultra-rich. Today, it is increasingly popular for the masses to set up a trust to protect their finances. This increase is attributable to our nation’s continuous growth in both income and wealth levels over time.

To understand how a trust works, we need to first acknowledge the four parties involved in setting up a trust. The four parties include:

1. The Settlor / Donor
The settlor refers to the person who sets up a trust.

2. The Assets
These may include, but not limited to, cash, shares, real estate, and many other collectibles such as jewelries, coins, artworks, watches, precious metals and the list goes on.

3. The Beneficiaries
The settlor can choose to nominate himself, his family members (including both siblings and relatives), his friends, corporate entities, foundations, charities and religious organizations that he wants to support as the beneficiaries of his trust.

4. The Trustee
The trustee could either be an individual person or a trust company. Basically, it is tasked to conserve, manage and distribute the assets entrusted by the settlor for the benefits of the trust’s beneficiaries. The trustee appointed shall manage these assets in accordance with the clauses as stipulated in the trust deed.
In brief, a trust deed is a document which states the settlor’s wishes, intentions, and instructions on how the trust’s assets are to be administered by the trustee throughout the tenure of the trust. Putting Them Together
Essentially, here is how a trust is created.
The settlor places his personal assets into the trust. He prepares the trust deed, which offers instructions on how these assets are to be managed by the trustee appointed. Also, the settlor nominates his intended beneficiaries of the trust. In this set up, it shall involve a transfer in legal ownership of these assets from the settlor to the trust.
Hence, this will enhance asset protection and offer greater asset privacy for the settlor.