Will vs. Foundation – Know the Difference

Will vs. Foundation – Know the Difference

Will

A will is a binding testamentary document which enables a testator to appoint executors to administer their estate and dispose of it to the beneficiaries chosen by the testator. A testamentary document is a document taken to be proof of your wishes to be followed on your death. The testator is the person making the Will. If it is your will which it is being referred to, then you are the testator. The executors are the people (it is ideal to have more than one) which you have selected to take care of your affairs.

Your estate is everything you own – money, property, assets and other possessions – minus everything you owe. The beneficiaries are the people who you are leaving something to in your will, whether it is money, assets, individual items, or you are letting them off a debt.

A will is generally divided into clauses, and they usually fall into a normal pattern:-

  • Introductory clauses that determine you and your executors
  • Your funeral wishes
  • Appointing guardians for your children who are below 18 years of age
  • Specific gifts of money, property, possessions and other assets
  • The creation of trusts of property or assets
  • Gifts to charities
  • Disposing of the remainder – called the residuary estate
  • Administrative provisions, to do with the interpretation of the will
  • Execution provisions – the part where you and your witnesses sign

Does a Will Need to be Updated?

It is possible that your will may never require to be updated — or you may opt to update it routinely. The choice is completely yours. Keep in mind, the only version of your will which shall matter is the most recent and valid version in existence at the time of your death.

Remember, you may want to revisit your will at times of major life changes. Consider significant moments in life like marriage, anniversaries, the birth of a child, the demise of a beneficiary or executor, an important purchase or inheritance, and so forth. Your children shall not require guardians listed in a will once they turn adult (ie age 18), for instance, but you may still require guardians for the ‘differently abled’ (physically or mentally disabled). To stay updated, analyse and review your will every two or three years.

The Right to Contest a Will?

Contesting a will refers to challenging the legal validity of all or part of the document. A beneficiary who feels slighted / uneasy by the terms of a will can choose to contest it. Based on the state you live in, so too might a spouse, ex-spouse or child who believes your stated wishes go against local probate laws.

A will can be contested for several other reasons:-

  • It wasn’t properly witnessed
  • You weren’t competent when you signed it; or
  • It is the consequence of coercion or fraud.

It is generally up to a probate judge to settle the dispute. The key to successfully contesting a will is seeking legitimate legal fault with it. A precisely drafted and validly executed will is the ideal defence.

Foundation

A foundation is a corporation body with a separate legal entity, established to manage its own property for any lawful purpose. It is a hybrid between company and trust which confers the Founder a full control of ownership over his/her distribution assets while managing it like company. The Founder can plan ahead by placing the right successor and assign powers for the distribution of assets upon his/her death.

There are two types of foundation – private foundations and grant making public charities.

A private foundation’s money comes from a family, an individual, or a corporation. An example of a private foundation is the Bill and Melinda Gates Foundation or the Rockefeller Foundation. Private foundations must meet a “pay-out requirement,” meaning they have to give away a certain amount of their assets every year. That is why when you are looking for potential funders, the private foundations you see are all active grant makers.

A grant making public charity (frequently called “public foundation”) gets its money from many varied sources, like foundations, individuals, and government agencies. Most community foundations are also grant making public charities.

Labuan

Undeniably, the offshore Private Foundations are gaining more traction over the years, so there is no surprise that offshore centre of Malaysia i.e. Labuan offers one of these tax-free options as well.

In Labuan, one can set up four kinds of foundations:-

– Charity Foundation

– Private Foundation

– Corporate Foundation

– The fourth is a special form of foundation, the Islamic Foundation – regulated by the Shariah Law.

Similar to other locations providing great opportunities to set up private foundations; in Labuan, private foundations are separate legal entities, and they are not impacted by an accidental bankruptcy of the beneficiaries. The Labuan Private Foundations get access to their own assets, and can trade, or involve in other kinds of business, for the sake of the beneficiaries.

Labuan Private Foundation is the most ideal Wealth Management vehicle to hold assets with the objective of managing these assets for the benefit of its beneficiaries for a contracted period. It is a registered corporate body with a separate legal entity from its managers (i.e. its officers and council) and is commonly used for private wealth management, business succession and asset preservation! Feel free to contact our QX wealth advisors at +60 3 9212 6940 or consultant@qx-trust.com for a complimentary consultation.