I had been very busy for the past one week promoting the Business Value Protection Programme (BVP). To my surprise many people have not heard about such an arrangement and many thought that it is a new insurance product and it is too good to be true.

Business Value Protection Programme, Business Continuity Programme, Business Succession Planning and Business Estate Planning are essentially the same thing but from different parties’ perspective.

From the business enterprise perspective – Business Continuity Programme is meant to ensure minimal interruptions to the operations of the business in the event of a loss of one or more of its key partners/shareholders.

From the business owners’ perspective – Business Succession Planning is meant to ensure there is somebody capable to take on the leadership role to carry on the business.

From the estate and heirs of the deceased business owner – Business Estate Planning is crucial in safeguarding their interests by ensuring they get a fair price for the disposal of the interests in the business held by the deceased business owner.

It is worthwhile to note that business buy-sell agreement is only a component of the Business Value Protection Programme (BVP). A complete BVP includes a business buy-sell agreement, the power of attorney to transfer the shares, the insurance plan and the trust deed.  

In my opinion, Business Value Protection Programme is the best terminology to describe the arrangement, as its main purpose is essentially to protect the value of the business so that the interests of all the stakeholders are taken care of.

More than 95% of Malaysians do not have a will!

More than RM40 billion worth of estate is stuck at the Public Trustee (Amanah Raya Berhad) due to poor estate planning.

It took Malaysia 50 years to produce 15 billionaires, the RM40billion is enough to triple that number to 55 overnight!

What is a will?

A will is actually a letter in which you state your wishes, just in case you took a one way ticket to the Neverland.

Some people leave without saying a word, because they thought they will know when the time has come …..

What is intestacy?

To die without a will is called intestacy. In other words, if you have not chosen who to give your assets to , the Law will choose for you. For example, under the Distribution Act 1958, if a person dies without a will, ¼ of his estate will go to his parents, ¼ goes to the wife and ½ goes to the children. If the decease leave behind only a house, it means that the house now belongs to a few people. And to make matters worst, if the parents die without a will, the ¼ portion will be given to the parents’ children, i.e. The in-laws of the wife.

What’s in a will?

A will contains your wishes on who and how you want to give your assets to, and very importantly the words you want to say, if you had the time to say.

Who are the parties to a will?

1. Testator

2. Executor x 2 (person)

3. Trustee x 2 (person)

4. Guardian x 2 (person)

5. Witness x 2 (person)

Testator

The testator is the person who writes the will.

Executor

The Executors are people whom you appoint to take charge of all the affairs of your estate, including hunting down all the properties you have, listing down the debts, settling all the debts, including taxes, and distributing the remaining estate to the beneficiaries according to your wishes.

It is a messy job and sometimes a thankless job. That’s why, it is best to appoint 2 executors. Just in case the first one chooses not to act or predecease the testator.

Generally in the case of intestacy, the High Court will appoint the Administrator, as there is no will, therefore no executor. In order to be qualified as a Administrator;

1. all the beneficiaries must agree to the appointment. Yes ! All. Unanimously.

2. The Administrator must have 2 sureties. That means, he must have 2 person who is willing to act as guarantor for him, just in case he abscond the money in the estate.

3. The 2 sureties must have a net worth of the same or higher than the Gross value of the estate. Which means that if the estate has a house worth RM800,000, the two sureties must worth least that much. Gross value is based on the market price of the house, even if there is an outstanding loan of RM700,000, RM800,000 will still be used.

So the difficulties are 2 folds;

a) first where to find 2 persons with at least RM800,000 and,

b) if you are the relative and have RM800,000, are you willing to be the guarantor?

For estates with gross value less than RM600,000, the beneficiaries can go to the Land office or the Public Trustee. i.e. without going through High Court.

Trustees

The job of the trustees is usually to hold the assets on behalf of the children. e.g. Under a will, a child gets a house from the deceased. Since the child cannot legally own the house, it will have to be held by an adult on his behalf until he reaches the age of majority.

This means that you really need to trust your judgement on the trustworthiness of the trustees you have appoint to hold the properties.

Testamentary trusts

The above example of holding the house in trust until the child reaches age 21, is a testamentary trust. A trust set up by/within the will.

The testator can set up a testamentary trust with the conditions such as :

a) to pay for child’s monthly education allowance of say RM2,000

b) to pay for all the education expenses of the children up to University

c) to pay ‘ang pow’ of RM500 if the child get No.1 in school.

Guardian

This is one of the most important concern when drafting a will.

1)Who will be willing to take care of my children ?

2)Who will be able to love and raise the children the way I want them to be raised ?

The guardians are persons appointed in the will to take care of the children. In the will, the testator can also set up a testamentary trust to pay the guardian ’salary’. Imagine if a couple die intestate, a lot of things are left to fate and conscience of others.

Witness

The law requires 2 witnesses for the signing of the will. The witness do not have to read the content of the will, only to witness the signing of the will. The withnesses or the spouse of the witness must not be beneficiaries to the will.

Terms of endearment

This is the part of the will, where the testator can choose to state the words he may not have the time to say, his unfulfilled life wishes, his gratitute to the people who are important to him.

Others

Other common instructions are life, burial preference, explanation on why certain members of the family are given less of the properties (e.g. Maybe has already given the share during lifetime) etc.

People who intend to give their properties to persons other than those stated in the Distribution Act 1958 (Parents, Child and Spouse) can use will to materialise their intention.

For example,

a) A person who was brought up by people other than parents, will to write a will to ensure that the ‘uncle/auntie’ will be well taken care of.

b) To my Sister Daisy ‘Please take care of my Cat ‘Lucky’

Conclusion

The will is a very important piece of document. It not only helps to make known your wishes, it also helps to expedite the process of getting your estate “defrosted” from the process of Law.

Without a will, there will be confusion

with a will, there will be certainty

Get your will done up today! It is only a responsible thing to do.

In Malaysia, if a person dies without a will (intestate), the estate will be distributed according to the Distribution Act 1958 (amended 1997). i.e.

1) Parent(s) will get All if there is no Spouse or Child*

2) Spouse will get All if there is no Parent or Child*

3) Child* will get All if if there is no Parent or Spouse

4) Parent(s) get 1/2 , Spouse get 1/2, when there is no Child*

5) Parent(s) get 1/4, Spouse get 1/4, and Child* get 1/2

6) Spouse get 1/3, Child* get 2/3 when there is no Parent

7) Parent(s) get 1/3, child* get 2/3, when these is no Spouse

 *child - the actual word in the Act is issue(s). This includes all children of the decease. If the the children pre-decease then it means the grandchildren.

 A testator is a person who makes the will.

Writing a will will help to make known the wishes of the testator as to whom and how much he/she wish to give. Some of the situation where having a will is not good enough;

1) there is a lapse time between the death of the testator and obtaing the grant of probate. Usually between 6 months to 18 months. So in the mean time the estate is frozen. Family of the decease may suffer due to lack of cash

2) the time lapse also may cause increase risk of losing the value of the estate due to freeze. e.g. shares in the stock market.

3) a testamontary trust can be created within the will, however the trust cannot be of use until the grant of probate is obtained

The solution is to draw up a Power of Attorney (PA). The PA is given a person / trustee company on passing the rights of the properties, on the condition that, the donor of the PA is disabled, striken by critical illnesses or dead. This complementary way of passing the assets of the decease has a few advantages, i.e.

1) no need to wait for grant of probate, and the assets are not frozen e.g. bank account, house, and shares. This allows the donee of the PA to continue to deal with assets as usual.

2) in the event of the donor’s estate becomes insolvent, the assets passed over via PA will not constitute part of the estate of the deceased. Therefore it is creditors proof to a certain extent.

Trust is a common tool used in estate planning. It helps the individual (settlor) who created the trust to retain some degree of control over the usage of the assets after he is no longer around.

A will’s function ceases when the estate has been given out to the beneficiaries mentioned in the will. After the distribution, the testator will not have any more control over the asset. This is the reason why testamentary trust is created under a will.

e.g a mother wants to will away her only house to her only son. Since her son is still a minor, she created a testamontary trust in her will. She(the settlor) appoints her sister,the boy’s aunt (the trustee) to hold the house until the son (the beneficiary)reaches 21 (as indicated in her will). 

e.g. a father has a RM1,000,000 insurance policy. In the event of his death, he wants to ensure that the money is strictly used for the education of his 3 children. So he creates an insurance trust and appoint a corporate trustee to be the trustee of the would be education fund. In the trust deed, he can instruct the trustee to pay the guardian of the children a monthly alowance and to pay any expenses relating to their education and even reward those who achived good results.

Usually a combination of will, PA and trust will be used for the purpose of Estate Planning.