Arguably the two primary objectives of estate planning, therefore, by mzo16564



Albert Einstein once said “Our death is not an end if we can live on in our children…..
For they are us, our bodies are only wilted leaves on the tree of life”. One of the
most important objectives of estate planning is to ensure that your assets will be
inherited by the persons of your choice when you are no longer around. As in the
case of most Malaysians, it is probably your intention that the wealth accumulated in
your lifetime will ultimately be passed on to your children and descendants, who are
in essence, an extension of yourself. It may also be your wish that in the event of
your untimely departure, your parents and spouse will be adequately provided for.

However, as discussed in my earlier articles, one must be aware that there is always
a possibility that the property which your parents and spouse inherit from your
estate, may, after their lifetime, end up in the “wrong hands” – i.e. persons other
than your children. Gone are the days where the widow jumps into the husband’s
funeral pyre. Your spouse may remarry, and the property which he or she inherits
from your estate may pass on to the new spouse and their children. Likewise, your
siblings and their children may have the good fortune of inheriting some of the
wealth which was originally yours, when your parents depart. It must be emphasized
that once your property is inherited by your parents and spouse, you have no control
over who will thereafter, receive ‘your’ property. Thus, how do you provide for your
parents and spouse whilst ensuring that any balance of the funds or assets which
they did not utilize will upon their deaths, be passed on to your children? Therein lies
the challenge.

The answer is to have a clause in your Will which provides for a testamentary trust
to be created after your lifetime. Under a trust, a person called a trustee will hold
the legal ownership of the property for the benefit of a person called the
beneficiary. Although the legal title to the trust property is held by the trustee, it is
the beneficiary who enjoys most of the rights of an owner. For example, where the
trust properties are real properties and shares, it is the beneficiary who will benefit
from and enjoy the rental income and dividends.

                               Trustee                  Control &
                            Legal Owner

                       Holding the property for

                                                      Profits & Benefit

                          Beneficial Owner

The purpose of creating such a trust is to allow your parents and spouse to benefit
during their lifetime without giving them full control. As the trustee rather than your
parents or spouse is the legal owner, they will not be able to sell or transfer the
property and upon their demise, it will not form part of their estate.
The beauty of a trust is that the beneficiaries who will benefit from the trust income
during the trust period and those who will receive the trust property otherwise called
the trust capital can be different persons. Such a trust is said to be created with
successive interests. For example, the trust deed (which is the document setting
out the terms of the trust) may provide that the beneficial interest lies with your
spouse and thereafter upon her demise, with your children. In other words, your
spouse will be entitled to the income of the trust during her lifetime and thereafter
the trust property will pass to your children.

                                             When spouse dies

                      Spouse gets                                         Children become
                        income                                            Beneficiaries and
                      during trust                                      receive trust property
                         period                                            when trust ends

Your spouse as the beneficiary who is entitled to the trust income is known as the
life tenant whereas your children who are entitled to the trust property are called
the remainder beneficiaries.


                  Holding the property for
                                                        Life Tenant
                                                       (e.g. Spouse)                   Income


                                                      Remainder man                    Capital
                                                      (e.g. Children)

Knowledge is power. With a trust, you will be able to achieve the objective of
providing maintenance for your parents and spouse without transferring the property
to them. Give careful thought to the planning of your Will. Ultimately, the choices we
make are our responsibility.

Ong Eu Jin [LLM, MBA, LLB(Hons), CLP], a qualified lawyer and Chief Operating Officer of OSK
Trustees Berhad (formerly known as OSK-Signet Trustees Berhad), is the author of “Your
Guide to Estate Planning and Administration”.

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