Will writing is the most traditional way that most rich people have been practicing to pass on their wealth to the next generation. Wealth and succession planning involve a sophisticated structure where in the modern generation, the Ultra High Net Worth Individuals (UHNWIs) fully utilise and leverage on Trust and Foundation structures.

The Labuan Foundations Act 2010 offers a robust legal framework for the establishment of a Labuan Foundation, either in the structure of a Labuan Private Foundation or a Labuan Charitable Foundation.

Similar Features of Trusts and Foundations

Both the Trust and the Foundation are great wealth planning vehicles in which they execute the operation of getting asset ownership out of a Settlor’s (the individual that settles property to the Trust) or a Founder’s (the individual that sets up a Foundation and grants assets to it) names. For succession planning intents, this is critical to make sure the characteristics which are settled to the Trust or granted to the Foundation do not form part of the Settlor’s or Founder’s estate. This is to ensure that the wealth is being passed on to the intended beneficiaries and fully avoid engaging probate matters in the Court.

Variations

Both Trust and Foundation carries similar characteristics i.e. able to carry out the wishes of the Settlor or Founder in the event of his/her demise, the distribution list of the assets is clearly spelled out in the Trust Deed or Charter. A foundation is considered a separate legal entity, it may sue and be sued in its own name and also confers protection against creditors after the claw back period is over.

Trust assets are, generally, held under the trustee’s name on behalf of the Beneficiary. Trustee is the individual that holds the trust property on trust. Beneficiary is the individual for whose benefit the Trust property is held. Ownership of the Trust assets is divided between the trustee and the beneficiary, with the trustee attaining the legal ownership and the beneficiary securing the equitable ownership. This split ownership puts forward incertitude and susceptibility to a trust structure in case of any probable future threat on the trust by a probable disenfranchised beneficiary, for instance.

The genuinely affluent knows that retaining their fortune for generations is as significant as actually gaining it. Many review investments options like trusts and foundations as an impactful way of sustaining wealth. According to a Chinese proverb, “wealth does not pass (survive) three generations”. Americans has their version of this saying, “From shirtsleeves to shirtsleeves in three generations.” As with most ancient sayings, there is hardly any truth to this – – and the freshly affluent are looking for methods to counter this myth.

Labuan Private Foundation is arguably a better vehicle for UHNWIs to secure assets with the target of handling these assets for the advantage of a class of persons on a limited or perpetual basis. It is generally used for private wealth management, business succession and asset preservation. The legal framework laid out for the private foundation will be registered with the Labuan Financial Services Authority. With this structure, the Founder has full control as to who can be the co-founder(s), council members, beneficiaries, supervisory person (optional) and the timeline to dissolve the Private Foundation.

Labuan Foundation is well-known and preferred in the Asian region as an ideal wealth management tool for asset and legacy protection as it is governed and regulated by the Labuan Foundation Act 2010. Currently, there are over 23 jurisdictions all over the world; including Labuan; that offers Private Foundation. The Labuan Private Foundation is the only Wealth Management  vehicle in Asia and is governed by its own Foundation law. In addition, re-domiciliation of a Private Foundation from another jurisdiction to Labuan is permissible.

Necessity for Succession Planning?

• Prevent probate formalities – Circulate assets to heirs efficiently without or minimising the cost, delay and publicity of probate court
• To safeguard your assets from creditors or other claimants if set up adequately
• Monitor how a beneficiary attains assets
• Passing down of family wealth and values
• Family expansion and multiple families
• Offer to charity
• Cross-border assets and beneficiaries
• Tax planning and mitigation in some jurisdictions

10 Important Benefits of a Labuan Private Foundation

• Founder has 100% control at all times
• Founder is able to represent how the foundation is to be structured and organised, the kinds of assets to secure, and its beneficiaries with freedom to alter anytime through the Charter
• Founder can be a person or a corporation
• Relatively reduced price to function and keep a foundation in comparison to a trust
• Founder is safeguarded from foreign claims and cannot be forcefully liquidated to satisfy other obligations like claims arising from divorce, lawsuit or creditors after 2 years
• It is a corporate body entitled to enter contact and execute lawful dealings
• It is a legal entity fully safeguarded by its own Labuan Foundation Act 2010, without the need to refer to other jurisdictions’ law
• Life span of foundation can be constant or for a fixed period of your choice
• No minimum amount of assets required to be seeded / placed for initial set-up
• Permissible to secure global assets including Malaysian assets

Our QX Trust team of private wealth experts is proficient and holds good years of experience in assisting clients with registering their Labuan Foundation including all-round estate planning and family business succession. To understand better the advantages of an Offshore Private Foundation in Labuan and how it can help in your wealth and business succession planning, reach out to us today and let our private wealth consultants assist you in creating the suitable private foundation to safeguard you and your generations to come.

Contact us at +60 3 9212 6940 or consultant@qx-trust.com to schedule a complimentary consultation.