Wealth Integrated Service Sdn Bhd

" A Person (Settlor) who transfer his property to another person (Trustee) to take care for the benefit of any person (Beneficiary) name by him."

Majority Malaysian still has misunderstanding about trust. In the right circumstances, trust can provide significant advantages to those who utilize them particularly in protecting trust assets from :

1. The creditors of the settlor
2. The creditors of the beneficiaries
3. The Spendthrift child who misuse of the money

Besides, trust can be excellent vehicles for privacy and probate avoidance. There are numerous types of trust. Here we explores only the most common varieties :

Testamentary Trust VS Living Trust (Inter Vivos Trust)

Testamentary Trust is a Trust create in will.  It takes effect on the death of the testator and the property set aside in the trust is not in the ownership of the Trustees but ownership is still in the Testator and the beneficiary(ies)’s rights in the property will only be recognized when payment of debts/liabilities of the testator has been settled.

Meanwhile, Living Trust will takes effect immediately when the property is transferred / conveyed to the Trustees and the property set aside in the trust is in the legal ownership of the Trustees.  Trustee holding on trust for the beneficiary(ies) who has an equitable interest in the trust property i.e. the beneficiary can legally enforce his/her rights in the trust property if the Trustee does act in accordance with the instructions in the Trust Deed.

Revocable VS Irrevocable Trust

There are two basic types of Living Trust: Revocable and Irrevocable Trust.

As their name implies, revocable trust are fully revocable at the request of the settlor (trust maker). This is the most common type of trust. Below are some examples trusts being set up:

1. Family Maintenance Trust
2. Children Education Trust
3. Elderly Parent Trust
4. Long Term Care Trust
5. Charitable Trust
6. Property Trust

The assets transferred (or funded) to a revocable trust remain within the control of the trust maker. During his / her life time, the trust maker can simply revoke the trust and have the assets returned.

Alternatively, irrevocable trust as their name implies, are not revocable by the trust maker. Only this type can protect trust assets from the claims of creditors (The trust owns the asset, not the debtor). So, logically a creditor cannot reach assets not owned by the debtor. Note that this will not work when the transfer was done to defraud or hinder a creditor or creditors. In this case, the trust will not protect the assets from those creditors. The trust assets can be either transfer from existing assets list or funded through wealth creation method.

We encourage you to seek the advisor from our Wealth Integrated Advisory Team to further clarify the application of these concepts to your specific needs, or if you have questions about specific types of trust.