The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is entirely coincidental and unintentional. Hope that we better understand the importance of having a Declaration of Trust.
Simon would not be in a pickle if he trusted in the Declaration of Trust. Neither would his business be in such a predicament.
At the prime of life and particularly having paid much attention to matters of health, he thought he was infallible and would not be robbed of his life at an early stage.
He was right! He was not robbed of his life when a reckless motorcyclist running the red light rammed into him. But, it left him near lifeless in a comatose state due to swelling of his brain.
With Simon in the hospital, his company was in limbo. Simon is the sole business owner. The company’s daily operations were impacted. Whatever he had wanted for the company in terms of succession and equity holding as expressed in his Will could not be effected and fulfilled.
A Will and Last Testament could only be executed upon death and after obtaining the Grant of Probate. It would be different with a Declaration of Trust which would have avoided the current conundrum for Simon and his company.
Simon had dismissed it when an estate planner told him about the Declaration of Trust. He shrugged it off as an attempt to sell him something he didn’t need, as he was confident that he had taken care of his estate planning needs with his Will.
Had he listened, he would have learned that with a Declaration of Trust, he, as Settlor, could create a trust settlement by declaring that his assets are to be passed on to an appointed professional Trustee when anything drastic happens to him, such as incapacity. So, he is keeping the money for someone else, who is the beneficiary of the money.
What Is A Declaration Of Trust?
A Declaration of Trust would make it easy to transfer company shares quickly when certain things happen, such as when the only shareholder goes missing or is permanently disabled and in a coma. This would minimise any disruptions to the operations of the company.
If a company has other shareholders and directors, the shares can be held in trust until the beneficiaries reach the age of majority. Meanwhile, dividends received can be used for the beneficiaries’ expenses such as medical, education, maintenance, etc.
A Declaration of Trust is simple, flexible, and powerful to provide for loved ones by securing their financial well-being. It is NOT subject to Grant of Probate or Letters of Administration. It is REVOCABLE, and the contents can be changed anytime before the Settlor’s death.
Any assets, whether encumbered or not, such as residential property, unit trusts/mutual fund investments, shares of private companies, and money in bank accounts, can form part of the Declaration of Trust.
Under the Trust, the Settlor acts as the Trustee and retains control and ownership of the trust assets until a specified event happens, after which a substitute Trustee takes over to follow his instructions on how the trust assets are to be utilised. This prevents any delay in allowing your beneficiaries to enjoy the trust assets.
As the Trustee, one need not transfer the assets until and unless one of the following events occurs:
Death
Total Permanent Disability (TPD)
Critical Illness
Comatose
Resignation as Trustee
Missing* for a period to be stated in the trust (this resolves the problem of lack of death certificate for the distribution of assets)
No one knows what tomorrow will bring. One can be in perfect health, but circumstances are beyond control. So, be prepared—for your and your loved ones’ sake.
About Rockwills International Group
Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.
