Setting Up a Trust

Few facts on setting up a Trust:

1. You need a lawyer who is familiar with Trust or Private Wealth Management. He/ she should understand the criteria of an irrevocable trust.
2. The legal fees of setting up a simple Trust can be as low as RM600. Depending on the complexity, the price ranged from RM600 to RM2,000
3. To protect against bankrupcy, in Malaysia, the Trust has to be irrevocable
4. Be prepare to pay stamp duty upon transfer of property. A good lawyer in the subject of Trust will be able to tell you what structure can be adopted to avoid stamp duty.
5. There are corporate trustee companies who provide services as trustee (when you choose to let others as your trustee) Find out the list of corporate trustee companies from Financial Planning Malaysia's directory.

Part 1: Trust, a shield for financial certainty
Part 2: Trust, a shield for financial certainty (2)
Part 3: Setting up a trust

Trust: A Shield For Financial Certainty (2)

So you create a Trust to protect your family wealth from creditors and banks. Is this an easy way to cheat banks and creditors? That you can transfer all your assets into a Trust and squander all money you borrowed from banks. It is hardly possible. If the settlor becomes bankrupt within two years after the date of transfer (assets, from settlor to the trustee), the transfer is void. If the settlor becomes bankrupt within five years after the date of transfer, it has to be proven that the settlor was at the time of making the transfer able to pay all his debts without the aid of the property.

If you plan right from the beginning determining to run a loss making business, get the loans from banks and never to pay back, you are short changing yourself. A well run business can make more money for you than you can ever borrow as loan. It is simply stupid to do it even if you do not hold on to any principle of life.

Trust is an excellent instrument to protect. However, when you attempt to abuse the instrument, it can only bring you little further with repercussion.

Part 1: Trust, a shield for financial certainty
Part 2: Trust: A shield for financial certainty (2)
Part 3: Setting up a trust

Personal Guarantee

"In The Art of the Deal, I had warned readers never to personally guarantee anything. Well, I hadn't follow my own advice. Of the $9.2 billion I owed (in early nineties), I'd personally guaranteed a billion dollars." --Donald J. Trump, page 9 of How to Get Rich.

If a person so street smart and rich like Donald Trump could fall into giving personal guarantee, what makes you think that your banks will not get what they want, your personal guarantee, when you ask money from them for your new startup?

If you ever give personal guarantee for the business loans you take, you'd better make sure your business plan works out well and your assets for basic needs are in -- Trust.

Trust: A Shield For Family's Financial Certainty

If business is what you intend to do one day, then, set up a Trust to shield your family away from your business risks. You will have to do it now because it will be too late when your family needs its protection.

You may have heard that Trust is a better alternative for Will. It protects the beneficiary from foolishly spending away huge inheritance. But I guess you have never heard that Trust is an instrument to provide financial certainty that shield your family away from your business risks. Create a Trust and transfer the title of your house and stocks for your children's education into the Trust. Appoint yourself and your wife as Trustee. The beneficiaries are your wife, your children and you. Legally you have given away your assets to the Trust. You are no longer the legal owner of the assets. You and your wife hold the legal title of the assets as trustees, not owners. If you, the trustee, become bankrupt, these assets under Trust will not be subjected to claims by your creditors! You have shielded your family's financial certainty away from the risks your take as a businessman. There will be a roof on top of your family, there will be sufficient funds for your children’s food and education no matter how financially ruined you are.

As a businessman there will be times when you need to grow your business beyond your current means or to hold on through a difficult period. You may have to take up credits either in the form of goods, services or loans from banks. Even if you run a limited corporation, banks will ensure that you give personal guarantee and therefore are personally liable to the loans you take. Without a Trust, when your business does not turn out to be as you wish, your family financial security and financial certainty is subjected to creditors and banks' claims. With Trust, the banks and other creditors will not be able to lay their hands on the assets that you have, long ago, transferred to the Trust.

Part 1: Trust, a shield for family's financial certainty
Part 2: Trust, a shield for financial certainty (2)
Part 3: Setting up a trust