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Asset Protection | Wealth Management | Estate Planning
Trust, Foundation and Will
GENERAL OVERVIEW
Asset protection is a component of financial planning intended to protect one's assets from creditor claims. Individuals and business entities use asset protection techniques to limit creditors' access to certain valuable assets while operating within the bounds of debtor-creditor law.
The truly wealthy understand that maintaining their fortune for generations is as important as actually earning it. There is a Chinese proverb saying "wealth does not pass (survive) three generations". America has its own version of this saying: “From shirtsleeves to shirtsleeves in three generations.” As with most old proverbs, there is a grain of truth to this—and the new rich are searching for ways to avoid history's curse. Many explore investment options such as Trusts and Foundations as an effective means of sustaining wealth.
SUCCESSION PLANNING
Distribute assets to heirs efficiently that minimise the cost, delay and court proceedings
Protect your assets from creditors or other claimants
Control how a beneficiary receives assets
Passing down of family wealth and values
Give to charity
Cross-border asset distributions to the beneficiaries
Tax planning and mitigation in some jurisdictions
LACK OF SUCCESSION PLANNING
High legal costs and prolonged court proceedings
Inaccessibility of assets due to legal process
Family dispute and breakdown
Family business disruption
Negative publicity
Tax exposure in certain jurisdictions
COMPARISON OF WILL, TRUST AND FOUNDATION
SIMILARITIES BETWEEN A LABUAN FOUNDATION AND A LABUAN TRUST
Assets may be transferred / endowed to both structures
Revocable
Created during the settlor/ founder lifetime or on death
Unlimited in duration (Perpetuity)
Can appoint Protector or Enforcer
Pooled family investment planning
No capital requirements
Can be established for any lawful purpose
DIFFERENCE BETWEEN A LABUAN FOUNDATION AND A LABUAN TRUST
LABUAN FOUNDATION INSTEAD OF WILL?
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For a WILL, it needs EXECUTOR to execute the WILL. COURT ORDER (PROBATE) is required to execute a WILL, thus need to engage legal service to obtain COURT ORDER (PROBATE). The issue is the money in the bank is frozen, not allowed to be used upon the demise of the person. However, if you use Labuan Private Foundation, your beneficiary no need to go through the hassle of going to court. The beneficiary interest is clearly spell out in the Labuan Private Foundation.Your assets might not be discovered by your beneficiary and your WILL might not be up-to-date or inclusive. However, for Labuan Private Foundation, whatever assets that endowed into the foundation will be the asset of the foundation, thus will be distributed/managed in accordance with the Charter and/or Article of the foundation.
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Your assets distributed through WILL might be subjected to any form of tax that’s applicable in the jurisdiction where the assets situated. However, if you use Labuan Private Foundation there is no tax in any form if the assets remain in the foundation.
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You may at risk of unable to preserve your assets if your beneficiaries of the WILL dispose your assets. However, in the Charter and/or Articles in Labuan Private Foundation, you can clearly spell out your intention in preserving your assets. The Council is responsible for the general supervision of the management of the Labuan Private Foundation, ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law.
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If you are using a WILL, your business affair will be disrupted pending the execution of your WILL which might take some time. It worsen if your WILL is challenged in any courts. However, your business will be well taken care of in accordance with the foundation.
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You may at risk of your assets is not distributed according to your WILL due to the unenforceable of certain clauses in the WILL or your WILL is challenged in any courts. However, in the Charter and/or Articles in Labuan Private Foundation, you can clearly spell out your intention in preserving your assets. The Council is responsible for the general supervision of the management of the Labuan Private Foundation, ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law.
BENEFITS
Tax Benefits
Corporate tax at 3% or 0%
No service tax and 6% on imported service
No withholding tax
No stamp duty
100% exemption of director’s fee received by non-citizens individual
Double taxation agreement (DTA) with more than 70 countries
Other Benefits
Varies based on the choice of legal framework
ECONOMIC SUBSTANCE REQUIREMENTS
Minimum Number of Full Time Employees in Labuan is one (1)
Minimum Amount of Annual Operating Expenditure in Labuan is RM20,000
Please refer to Tax Framework in Labuan IBFC - New Development at https://bit.ly/3TQcWrS
he information contained in this document is provided for information purposes only. It does not constitute legal advice and should not be relied upon as such. The readers may need to obtain professional advice on legal or tax issues affecting you before relying on it. However, QX Trust Co. Ltd (千玺信托公司) tries to ensure that the content of this document is accurate, adequate, or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. QX Trust Co. Ltd (千玺信托公司) expressly disclaims any liability to any person for loss or damage incurred as a result of reliance placed upon the information contained in this document.