A Personal Finance Blog for Malaysian: Why create a Trust (when you have written a Will) ??

Saturday, June 18, 2016

Why create a Trust (when you have written a Will) ??

You don't need to be rich or super rich to create a Trust.

Trust can do many things that the Will cannot:

  1. Distribute immediately;
  2. Protect against creditor in bankruptcy (conditions apply)
  3. Provide confidentiality 
  4. Provide for beneficiaries secretly (by using discretionary trust).
Despite advantages of Trust, Will must always be written to cover the rest, i.e. you can have both Will and Trust together.

How to fund the Trust?

No one will put all money they have now into a Trust, so how can create a Trust now? Actually, one can create Trust and fund it later with something like Insurance Policies.

Insurance policy and Trust can work hand-in-hand towards common goals, e.g.
  • financial support to you and your loved one in the event of death or total permanent disability (or even critical illness)
  • pay for children's future education and expenses
As there are short-coming of named beneficiaries in the insurance policy, the alternative is using a Trust to distribute the insurance proceeds. An insurance policy cannot do the following:-
  • Conditions to distribute (it is not possible to set conditions)
  • Periodical distribution to beneficiaries (it pays one lump sum)
  • Pay to Minor (it pays to surviving parent or ..... Amanah Raya Berhad as public trustee)
Who can benefit from Insurance Trust?
(A Trust funded with Insurance Policies)
  • Anyone with Minor (young children) / Dependents
  • 2nd Family
  • Children with special needs 

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