Trust

Built on lasting relationships and a steadfast commitment to your future.

History of Trust

The general concept of the Trust existed in ancient Roman and Germanic law and was thereafter further developed in Medieval England into what we now call the Modern Trust. The term fiducia was used by the Ancient Romans, referring to the contract between parties whereby one transfers property to another for a myriad of reasons, and the said transfer will be on condition that it would be restored or administered under instruction. Such contracts would then be utilised in a variety of ways; fideicommissum is known as the transfer of property from one to others. This system shares many similarities with the Modern Trust.

The Romans also introduced the fiduciant, bearing close similarities to the Donor, and the fiduciarius, being the Trustee, in the ancient trust system under an arrangement called the fiducia cum amico. The arrangement holds that the assets passed by the fiduciant to the fiduciarius are not owned by the fiduciarius, but administered by them on very specific terms. In 12th-century England, when an individual left to fight in wars, he would often transfer ownership of his assets to another. That person, entrusted with ownership, would manage the estate according to the transferor's requirements. Upon the transferor's return, ownership would be transferred back.

 

A Shariah Perspective

The concept of Trust, often linked to Roman and Germanic law, is also thought to have been influenced by Islamic law through the Waqf - a legal institution combining trust, family entail and charitable foundations to preserve property for religious or humane purposes.

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Trust in Malaysia

What is the Modern Trust?

The Modern Trust is a legal relationship which enables a party (the Donor) to entrust the legal title of property or assets to another party (the Trustee), who is required by a Trust Deed to hold such property solely for the benefit of a third party (the Beneficiary).

The Trustee is responsible for administering and managing the property in the best interest of the Beneficiary according to the terms set out in the Trust Deed and to ensure that the assets are distributed according to the Donor's wishes.

How does a Trust work?

A Trust operates through three parties. The Donor transfers legal title of their assets to the Trustee. The Trustee holds and manages those assets according to the terms of the Trust Deed - administering and safeguarding them in the Beneficiary's best interest. When the conditions set by the Donor are met, the Trustee distributes the assets to the Beneficiary as instructed. The Donor's wishes, set out in the Trust Deed, govern the entire arrangement.

What constitutes a valid Trust?
  • Certainty of Intention
    (Purpose of Trust)

    There must be a clear intention or purpose to establish a Trust. The Donor must clearly express in the Trust Deed that he/she intends to establish a Trust for a specific purpose and to transfer his/her ownership of the property to the Trustee and subsequently, the Beneficiary.


  • Certainty of Subject Matter
    (Asset or Property of the Trust)

    A Trust is not valid unless it is clear what property forms part of the Trust. The Trustee must be certain about what property is to be held by the Trust and to what extent each Beneficiary is entitled.


  • Certainty of the Objects of the Trust
    (The Beneficiary)

    The Beneficiary of the Trust must be clearly identified or at least ascertainable. A Trust is not valid if it has no Beneficiary or if the identity of the Beneficiary is uncertain and cannot be ascertained. The Beneficiary can be anyone chosen by the Donor and may not be related to the Donor.

What is the purpose of the Trust and why establish a Trust?

Trust is an effective instrument that allows the Donor to preserve and manage wealth over the long-term to accomplish personal and financial goals.

  1. The Donor may use the Trust to safeguard assets for a Beneficiary who lacks the capacity to properly manage them. By setting up a Trust, the Donor can control not only to whom the assets are distributed, but also how and when distributions are made. This helps protect assets from any Beneficiary who may struggle with financial responsibility.

  2. A Trust can be established to provide legal protection for the Donor's assets. Once the Donor transfers ownership of assets into a Trust, they are no longer the legal owner. This protects the assets from creditors or future claims while allowing the Donor to receive discretionary income and principal distributions.

  3. A Trust created by a Muslim Donor is exempt from Shariah and Faraid Law. Trust assets are not frozen upon the Donor’s death, eliminating the need for probate and allowing immediate distribution. In the event of the Donor’s bankruptcy, assets remain protected, ensuring the Beneficiary continues to receive income from the Trust.

  4. Trusts offer a high level of confidentiality, as they can be established offshore or privately. Additionally, the details of the Donor’s assets and the identity of the Beneficiary remain private even after the Donor’s passing.

  5. A properly structured Trust can support tax efficiency in how assets pass to the Beneficiary, helping preserve more of the Donor's wealth for future generations. Specific tax outcomes depend on individual circumstances and should be confirmed with a qualified adviser.
Can the Donor be a Beneficiary?

The Donor may appoint anyone to be the Beneficiary as he/she wishes including himself/herself, but not as the sole beneficiary.

What type of assets can be transferred to the Trust?

The assets commonly held in a Trust include cash, insurance policies and shares. The Donor can transfer any asset they legally own, except assets under joint ownership, for which the written consent of the joint owner must be obtained.

Can the Donor amend or revoke the Trust?

Yes, provided it is a Revocable Trust. A Revocable Trust allows the Donor to revoke or change the Trust at any time. An Irrevocable Trust does not - it can only be revoked when the Donor relinquishes all property under the Trust to the intended Beneficiary.

What is the legal age for the Beneficiary to inherit the Trust assets?

In Malaysia, a person is legally capable of holding a property upon attaining the age of 18. The Donor can have the choice of releasing the asset at a later date, which should be expressly stated in the Trust Deed on their intention to do so.

If there is a minor Beneficiary named in the Trust, the Trustee will hold the Trust property for the minor, until the Beneficiary has attained the legal age or in accordance to the provisions of the Trust.

How long can a Trust last in Malaysia?

The Rule Against Perpetuities applies to the Trust wherein the distribution of assets to the Beneficiary cannot occur at too remote a time in the future or accumulation of income for too long a period. In Malaysia, a Trust can continue for a fixed period of up to 80 years specified in the Trust.

Subject to the Rule Against Perpetuities, the duration of a Trust may otherwise be determined:

  • By the terms provided in the Trust Deed;

  • If created for a lifetime, by the lives in being at the time the Trust is created, plus 21 years;

  • When all the property has been distributed to the Beneficiary;

  • When all the Beneficiaries consent to the termination in complete agreement.

  • Custodial Services

    Writing a will, establishing a trust and holding the associated documents serves little purpose if those documents are damaged, tampered with or lost. Our Custodial Services ensure the safe and confidential storage of your important documents.

  • Insurance Trust

    Life insurance is often the primary asset relied upon to protect loved ones in the event of death or disability. Without proper management, however, beneficiaries can be left vulnerable. An Insurance Trust gives you control over how proceeds are distributed, according to your preferences.

  • Private Trust

    We provide a streamlined approach to developing your Private Trust, allowing for a customised distribution plan and donor-centered asset protection. From business succession planning to the establishment of your own family office, we offer tailored solutions for your estate planning needs.

  • Intervivos Trust

    An Intervivos Trust is established during your lifetime, giving you the ability to manage and distribute your assets on your own terms while you are still here to oversee it. It offers structure and continuity for your loved ones – preserving not only your wealth, but the intentions behind how it is passed on.

  • Family Trust

    We understand the importance of safeguarding your family’s future and preserving your hard-earned assets. Our Family Trust services let you protect your legacy – ensuring it provides for generations to come and that your wishes are carried out exactly as you intended.

  • A Shariah Perspective

    Whilst the concept of the Trust is largely associated with ancient Roman and Germanic law, some schools of thought hold that the concept of Trust under the English legal system was prominently influenced by Islamic law. During the first three centuries of Islam, Muslim jurists developed the legal institution known as the Waqf, which combines the ideas of trust, family entail and charitable foundation in compliance with Islamic law and its related principles.

    The word Waqf, derived from the Arabic waqafa, means “causing a thing to stop and stand still”. Waqf is also known as boniyad in Iran and habs in North Africa. It is used as an instrument to protect property by preventing it from becoming the property of a third person. In other words, Islamic law recognises Waqf as holding property and preserving its ownership for the confined benefit of religious or humane purposes – prohibiting any disposition of it outside that specific objective.

    The origin of the Waqf can be traced to Islam, where Islamic jurisprudence was derived from the Al-Quran and the Sunnah of the Prophet. Although there is no mention of Waqf as such in the Quran, Muslim jurists believe that its underlying object and legal justification rest in the charitable act of a Muslim giving anything good and valuable to others, in anticipation of reward by Allah in the afterlife. Religious factors therefore played a crucial role in the formation of Waqf, with Muslims demonstrating a voluntary and irrevocable dedication of their property to the cause of God.

    During the first and second centuries of Islam, the main function of establishing a Waqf was to finance the jihad (struggle in the cause of God) and the Muslim brotherhood. As Islam spread throughout western Arabia, North Africa and the East, Muslim societies attained a high degree of development. In the later period, Waqf became common across Muslim societies and assumed an important role in the socio-economic order. A notable example is the Ottoman state, where the Waqf was so widespread that, towards the end of the 18th century, some 20,000 existed across the empire, making up one third of the total economy.

    The concept of the Islamic trust requires a person entrusted with such a trust to look after the trust property just as they would protect their own. A Waqf is created when the owner of an asset (the Waqif) declares that the income of that asset is reserved for a specific purpose. A Trustee is normally appointed in the form of a Wakalah, to hold the asset on behalf of the Beneficiary and distribute the Waqf income under the supervision of the judge.

    The Waqf and the English Trust are almost identical in purpose and structure, with both having a Donor appoint a Trustee to hold property for the benefit of the Beneficiary. The only significant distinction is that the Waqf mandates the trust corpus be used exclusively for charitable purposes – whether immediately, in the case of charitable giving, or as a reversion, in the case of a family endowment.