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.

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.