Trust

Building lasting relationships through unwavering 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 a modern, and the fiduciaries, being the Trustee, in the ancient trust system under an arrangement called the fiducia cum amico. The arrangement describes that the assets passed on to the fiducarius by the fiduciant is not owned by the fiducarius, rather administered by the fiduciant on very specific terms. In 12th Century England, when an individual left England to fight in wars, the individual would often transfer ownership of his assets to another. This other individual entrusted with the ownership would then in turn manage the estate to the requirements of the transferor. Upon the transferor’s return, the ownership would then be transferred back.

 

A Syariah Perspective

The concept of Trust, often linked to Roman and Germanic law, is also thought to be 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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TRUSTS

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Family Trust
Intervivos Trust
Private Trust
Custodial Service
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The Malaysian Trust

What is the Modern Trust?

The Modern Trust is a legal relationship which enables a party (the Settlor) 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 for 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 Settlor’s wishes.

How does a Trust work?

The Trustee is responsible for administering and managing the properties in the best interest of the Beneficiary according to the terms set out in the Trust Deed and ensuring that the assets are distributed according to the Donor’s wishes. A Trust is a legal relationship that 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 properties solely for the benefit of a third party (the Beneficiary).

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 Syariah 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 be designed to be tax-efficient, reducing the overall tax burden on assets passed to the Beneficiary. This ensures that more of the Donor’s wealth is preserved for future generations.
Can the Settlor be a Beneficiary?

The Settlor may appoint anyone to be beneficiary as he wishes including himself but not as the sole beneficiary.

What type of assets can be transferred to the Trust?

The assets that are commonly contain in Trust includes cash, insurance policies, shares but the Settlor can be transfer any assets that he owns legally, except for the assets under joint ownership whereby a written consent of the joint owner must be obtained.

Can the Settlor amend or revoke the Trust?

Yes, the Settlor can amend and modify or revoke the Trust provided it is a Revocable Trust.

Revocable Trust is when Settlor preserves the power to revoke or make any changes to the Trust at any time, whereas Irrevocable Trust is when the Settlor does not have power to make any changes or amendment to the Trust. An Irrevocable Trust can only be revoked when the Settlor relinquishes all properties under the Trust to the intended Beneficiary.

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

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

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

How long can a Trust last in Malaysia?

The Rules against Perpetuity applies to Trust wherein the distribution of assets to 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 determine:

  • According to the terms provided in the Trust Deed;

  • If a Trust is created for period of life time, it is based on the lives in being at the time the Trust is created +21 year;

  • When all the properties have been distributed to the Beneficiary;

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

  • Custodial Service

    Having a will written, establishing a trust and keeping the associated documents is rendered pointless if they become damaged, tempered with or lost. We offer Custodial Services to ensure the safe and confidential storage of your important documents.

  • Insurance Trust

    Life insurance is often relied upon as the primary asset for protecting loved ones in the event of death or disability. However, without proper management, beneficiaries may face vulnerabilities. An Insurance Trust provides control over the distribution of proceeds according to your preferences.

  • Private Trust

    We provide a streamlined approach to developing your Private Trust. This approach allows for a customised wealth distribution plan and donor-centric asset protection. From Business Succession Planning to the establishment of your very own Family Office we provide tailored solutions for all your estate planning needs.

  • Intervivos Trust

    Estate Planning entails envisioning legacies and ensuring financial security for loved ones. We offer a well structured long-term goals, representing more than just wealth preservation but also the transmission of financial wisdom.

  • Family Trust

    We understand the importance of safeguarding your family’s future and preserving your hard-earned assets. That is why we offer comprehensive Family Trust services. Family Trust allows you to safeguard your legacy, provides for generations to come and ensure your wishes are carried out exactly as you intend.

  • 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 his wealth over the long term in order to accomplish his personal and financial goals.

    1. The Donor may use the Trust to safeguard against his / her nominated Beneficiary who is lacking the capacity to properly administer the properties themselves. By setting up a Trust, the Donor can control not only to whom the properties will be distributed but also how and when the distributions be made. It is important to protect the properties from any Beneficiary whose ability to properly handle money is questionable.

    2. A Trust can be established to provide legal protection for the Donor’s assets. Once the Donor has transferred his / her properties into a Trust, he / she is no longer the legal owner of the properties. This allows the Donor to protect his / her properties against creditor(s) or any future claims while continuing to receive discretionary income and principal distributions from those properties.

    3. A Trust created by a Muslim Donor is exempt from the Syariah and Faraid Law. Trust properties that are held under Trust is not frozen upon the Donor’s death; hence, the necessity of the probate process can be avoided and the distribution of the properties can take place immediately. In the event of the bankruptcy of the Donor, the properties are protected and the Beneficiary is still assured of the income under the Trust.

    4. Trust offers a high level of confidentiality since it can be established offshore or privately. In addition, the contents of the Donor’s assets and the identity of the Beneficiary will remain private even after the Donor’s death.

    5. A properly structured Trust can be designed to be tax efficient, reducing the overall tax burden on assets passed to the Beneficiary, thus ensuring more of the Donor’s wealth to be distributed for future generations.

  • What constitutes a valid Trust?

    In order for the Trust to be valid,
    these are the three (3) requirements to fulfill :

    • 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.

  • How does a Trust work?

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

    A Trust is a legal relationship that 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 properties solely for the benefit of a third party (the Beneficiary).

    Below is a simple illustration in an orderly fashion of how a Trust works:

  • What is the Modern Trust?

    • The Modern Trust is a legal relationship which enables a party (the Settlor) 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 for 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 Settlor’s wishes.

  • How long can a Trust last in Malaysia?

    • The Rules against Perpetuity applies to Trust wherein the distribution of assets to 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 determine:

      • According to the terms provided in the Trust Deed;

      • If a Trust is created for period of life time, it is based on the lives in being at the time the Trust is created +21 year;

      • When all the properties have been distributed to the Beneficiary;

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

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

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

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

  • Can the Settlor amend or revoke the Trust?

    • Yes, the Settlor can amend and modify or revoke the Trust provided it is a Revocable Trust.

    • Revocable Trust is when Settlor preserves the power to revoke or make any changes to the Trust at any time, whereas Irrevocable Trust is when the Settlor does not have power to make any changes or amendment to the Trust. An Irrevocable Trust can only be revoked when the Settlor relinquishes all properties under the Trust to the intended Beneficiary.

  • What type of assets can be transferred to the Trust?

    • The assets that are commonly contain in Trust includes cash, insurance policies, shares but the Settlor can be transfer any assets that he owns legally, except for the assets under joint ownership whereby a written consent of the joint owner must be obtained.

  • Can the Settlor be a Beneficiary?

    • The Settlor may appoint anyone to be beneficiary as he wishes including himself but not as the sole beneficiary.

  • A Syariah Perspective

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

    The word Waqf derived from the Arabic word Waqafa which says ‘causing a thing to stop and stand still”. Waqf is also called boniyad or ha bs in Iran and North Africa. It is used as an instrument to protect a property by preventing it from becoming the property of a third person. In another words, Islamic law recognise Waqf as holding a property and preserving its ownership for the confined benefits for religious or humane purposes and prohibiting any disposition of it outside that specific objective.

    The origin of the Waqf can be traced back to its Islamic origin, where the Islamic jurisdictions were derived from the Al-Quran and the Sunnah of the Prophet. Although there is no mention of Waqf as such in Quran, the Muslim jurists believes that the underlying object and legal justification of Waqf deals with the charity act of Muslim to give anything that is good and valuable to others in the anticipation of reward by Allah in the afterlife. Thus, religious factors played crucial role for the formation of Waqf, where Muslims demonstrates a voluntary and irrevocable dedication of his 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 (struggling in the cause of God) and Muslim brotherhood. However, due to the spread of Islam throughout western Arabia, Northern Africa and the East, Muslim societies attained high degree of development. In the later period, Waqf became very common in the Muslims societies and resumed a very important role in the socio-economic order. The good example of Waqf commonly adopted is provided by Ottoman state, where Waqf is very common and comprehensive to the extent that towards the end of the 18th century, there were 20000 Waqf in the Ottoman empire, which made up one third of the total economy.

    The concept of Islamic trust requires a person entrusted with such trust to look after the trust property just as he would look after and protect his own property. A Waqf is created when the owner of the asset (the Waqif) declares that the income of the subject asset is reserved for a specific purpose. A Trustee is normally appointed in the form of 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 its purpose and structure, where both have a Settlor appointing a Trustee to hold a property for the benefit of the Beneficiary. The only significant distinction between the Waqf and English Trust is the Waqf mandates that the trust corpus be used exclusively for charity purposes, whether immediately in the case of charitable, giving, or as a reversion in the case of family endowment.