A wealthy businessman in his sixties has spent 30 years of his life building his trading company from scratch to a multi-million business. He holds 90% of the shares in his company while his wife holds 10%. He has a son who is also helping him in the business but his 25 year-old son is an alcoholic and a big spender and is always bringing him many proposals for businesses which require his funding. Being the dutiful father, he supports his son but each venture inevitably brings losses to his company. The last straw came when his son brought him yet another proposal about investing in a machine where if you push in a pig on one end, the machine will process a sausage at the other end and the father in a rage, retorted that 25 years ago he pushed in a sausage and a pig came out!
Given such a son, he was in a dilemma and confused as to how to preserve his estate when he dies. One of the things he could do for his 90% shareholdings is to prepare a Declaration of Trust giving the instruction to a trustee company like Rockwills Trustee Bhd. to transfer his shares to a private trust when he is no longer around. The mechanism of this concept is that he holds on to this share as a Settlor and main Trustee while he is alive but in the event of death his shares will be transferred to Rockwills Trustee Bhd. being the substitute Trustee by using an irrevocable power of attorney. When Rockwills Trustee Bhd. holds on to the share, then it has to follow the instructions laid down in the Trust Deed.
These instructions would involve how much to give to the son monthly for dividends received from the shares and the duration of the trust. It is also very important to appoint Protectors or the Protective committees for this Trust so that the Trustee could liaise with them on distribution if the need arises and at the same time the Protectors or protective committees could act as a watchdog on the Trustee. Apart from shares, any asset encumbered or not such as residential property, unit trust fund investments and moneys in the bank accounts can be utilized for this type of Trust. This concept does not require the Grant of Probate to transfer the asset into the Trust.
Having his shareholdings sorted out in the above manner, he still has to take care of the rest of his and his wife’s movable and immovable estate. That is when he and his wife must do a will to give some money directly to their son when they pass away leaving the rest of the assets to be given to him through a Private Trust. In this case, both their estates would require the Grant of Probate to transfer their assets to their Private Trust.
Once the assets are transferred to the Private Trust, the Trustee company like Rockwills Trustee Bhd. must follow the instructions in the Trust Deed which may differ from the above Trust. On the question of why go through the hassle of doing the will and not put all the assets into the Private Trust, the answer is, yes that is possible provided you are willing to give up all your assets to a Trust during your lifetime and pay for all the transfer fees.
Peter Lee is an Associate Estate Planning Practitioner (Wills & Trust) with Rockwills International Group. He is also an Islamic Estate Planner providing Wills & Trust services for Muslims. He is based in Ipoh and can be reached at: 012-5078825/05-2554853 or email@example.com.