Whether you already own a business or are deciding to do so, everyone requires a secure financial plan that will act as its backbone. Before delving deep into the details of your business, we must first see the big picture. First of all, business owners have two entities – individual entity and the business entity.
It is vital to adjust the needs of your developing business with your capacity to meet your own commitments. With enough time on your hand and professional consultants from relevant fields, you and your family will easily be able to create a sound financial plan.Image may be NSFW. Clik here to view.
However, what if there are other partners not from your own immediate family – then it gets a little bit more complicated. Too many partners often cause conflict of interest for instance, when equity investors are involved. Nonetheless, if all partners come to a mutual understanding and have nothing but the company’s best interest at heart, then it shouldn’t be a cause for concern.
Tax Planning
Before all else, choosing the legal structure of your plan should be top priority, since it will determine how your profits will be taxed. Now in Malaysia there are 4 main types of business entities: Sole Proprietorship, Partnership, Limited Liability Partnership and Sendirian Berhad (Private Limited).
Sole Proprietorship: Having unlimited liability may not seem like the best option however it does come with its perks. For instance, there is less paperwork and formalities while cost of entity formation relatively inexpensive and is not needed by the Malaysian government to be audited. Moreover, your business income is dealt with the same as your own salary, making tax compliance significantly more straightforward.
Partnerships: According to the Companies Commission of Malaysia the partnership must include at least a minimum of 2 and a maximum of 20 members. Sendirian Berhad (Sdn bhd): While Berhad is a public limited company, Sendirian Berhad is Private. Sdn Bhd can be either limited by shares (most common) or by guarantee (more common for non-profit organizations). In the former case, should the organization gets to be bankrupt or goes into liquidation, individuals are not committed to pay off the debt.
Limited Liability Partnership (LLP): After a hiatus of almost a decade, LLP has only recently started to make its mark. The partners in an LLP enjoy limited liability and choose a decentralized management structure unlike general partnerships, When your business profit is over a certain threshold, having an LLP or Sendirian Berhad will give better tax savings because the first RM500,000 profit is taxed at a flat rate of 20%, relatively lower than the high income earners’ personal income tax rate.
Investment Planning
Most SMEs are self-financed by their proprietors, which brings about the business turning into the proprietor’s one and only investment. Even when he has additional funding to make different ventures, he injects cash to his business, where he feels he has the most control over his profits.
In most cases, the owners fail to diversify investment risks. By understanding how capital is used in his business, resources should be employed to spread out the danger that comes with his business. Moreover, business owners often make the mistake of neglecting the importance of assets outside of their business. If you reinvest everything, there might be liquidity issues. There must always be a balance of personal assets and not only your business assets.
Retirement Planning
As mentioned above, you must refrain from reinvesting all of your profits and count on that ‘big score’ for your retirement plan. Alternatively, you may see the business as a wellspring of capital that will finance your retirement needs. Such a way of thinking may lead to catastrophe later in life, when you retire and require other means of fulfilling your financial needs.
You might believe that you’ll never part ways with your beloved business. However, do not end up as the employer whose employee retires before him. In the meantime, you can add to your EPF contribution and you’d be surprised how much of a difference it can really do! Because you can contribute up to 19% as employer to your own EPF account and the contribution is tax free.
Succession Planning
If one day if your business grows to be a valuable asset, and you are finally ready to hand over the mantle, don’t think a simple ‘Will’ or Trust will suffice. To guarantee business congruity after your departure, your entire estate planning may need to be revised.
Business succession plan includes the succession agreement, especially if there are other parties involved, not including your family. This is to ensure your business runs without a hitch. Funding the purchase of the shares being transferred is another issues that need to be arranged before it actually happens.
Risk Management
From the moment you own a business, unfortunately the risks multiply. Most of them are out of your control such as natural disasters, sudden death or disability of a key employee, loss of business assets, lawsuits arising from negligence or defective goods etc. A sound financial plan must therefore include a failsafe for such instances so it doesn’t completely cripple the business overnight.
Although some may be remedied by your trade’s own legal structure, however others may require more focused insurance coverages. Just keep in mind that the amount might come up to beyond your reserve and in some cases, you may have to compensate your employees as well.
The most important fact to remember is to do what you do best: that is ‘Doing business’! Financial planning requires years of experience and not to mention, several fields of interrelated study.
Thus, the ‘DIY’ approach may not be beneficial for you in this case. Be smart. Seek professional help.
A quality of a good leader is not to take all the responsibility but also to delegate the task to someone more efficient. It can make the difference between winning or losing your business.
What happen to the asset of a Muslim when he/she passed away?
Is it simply distributed, smoothly, according to Faraid Law? It is in fact not that simple at all.
Mr. Mohd Zulkifli bin Ismail, Deputy General Manager as-Salihin Trustee Bhd shared about the real problems faced by Muslim when it comes to estate distribution.
The reality on estate is that while we are alive all the properties that we own, all the assets that we have are all absolutely in our control. We are the sole owner. We can do whatever we want with it. We can sell it if we want, we can take the money from the bank, and any time we want we can transfer the property. Why? Because we are the sole owner. We are the absolute owner of the property.
The problem starts when this line comes in, the “dark line of death” Ataupun “selepas meninggal dunia”. When death occurs we will lose control on all the assets which we have bought and control because we are no more in the world.
So, all our assets now will be converted or will go down to the bottom and becomes the estate of the diseased.
The questions that we need to ask are: Who has the power now? Who has the authority to take the money out of the bank? Who has the authority to pay off all the loans, all the debts that you have left behind? What about the business that you have set up? Who is going to transfer the ownership of the shares and so on? These are the questions. This is where estate planning comes in.
A lot of Muslims out there thought that whenever they pass away, whenever they pass on, all their assets will be transferred to all their loved ones. Why? Because all the Muslims out there think that there is such a thing as “Islamic Law of Inheritance,” or in Bahasa and Arabic what call “Faraid”. So, because of the existence of Faraid, all the Muslims out there thought that upon death, all their properties will go to their loved ones. Unfortunately, it is not true.
Ladies and gentlemen, I will show you some of the facts proving why. Somewhere in the year 2007, a newspaper printed something about RM40 billion worth of assets being frozen. Why? Because the diseased were not able to transfer their properties – RM38 Billion in land property, RM1.5 billion under the registrar of unclaimed money, RM70 million in EPF.
So, even if your EPFs have nominees, in 2007, RM70 million of EPF money got frozen. There are RM1 million worth of titles still in the name of the diseased. So, imagine that is the figure in 2007. This is the figure in 2011: from RM40 billion, it has gone up to RM52 billion.
A lot of Muslims out there are still not conscious about this.
In the unclaimed balance in 2007 it was only RM1.5 billion. But, in 2011 it’s already RM4 billion. Imagine, the figure is going higher and higher. Yet, Muslims out there are still not thinking about doing estate planning.
What about EPF? In 2007, it’s only RM70 million. You’re going to be shocked to see the figure in 2011. It has gone up to more than RM300 million. My God! Yet, a lot of people outside there are still not thinking hard about this. These are true stories that we got from paper clippings. Imagine.
OK, so why should you write a will in the first place?
Why do you need a Will?
There are a number of reasons. Firstly, you need to prepare for contingencies. Life is not certain. In the event of an unforeseen occurrence, you will still need to continue to provide for your family and loved ones. Secondly, you have by this age after several years of working, amassed some personal assets such as liquid funds, investments, property etc. In the event of an unforeseen circumstance, your assets will be in limbo. They do not “automatically” pass to your beneficiaries just like that.
A will is needed in order for the transfer and vesting of assets and properties to be legally recognized.
What if you don’t have a Will?
What happens if you don’t write a will? In short, a mess. In the event of your demise without a will, your assets will be frozen. That means no one can deal with your accounts, properties, and other assets. Your estate will be distributed according to the Distribution Act 1958 (and amendments thereto). Your family members will find themselves needing to apply for Letters of Administration, which is, a court order vesting someone with the right to administer the estate of a person who has died without a will (this is also called dying intestate).
This is a cumbersome process and sometimes requires guarantors (also called “sureties”). You would have no control over who is ultimately appointed. There could be difficulties finding such persons to step forward or with the necessary financial means to do so. So not only does the family have to cope with the emotional aspects of bereavement, they now have to worry about all the procedural hurdles as well.
It is much easier to extract Grant of Probate
So as you can see, there are some very clear advantages in making sure that you have a valid will in place. It is cheaper to extract grant of probate (meaning, there is a will) than it is to extract Letters of Administration (where there is no will). It is also faster. No guarantors are required for probate.
You also get to choose and specify clearly who will administer the estate and who should be the rightful guardian of children if any. You can also provide for your beneficiaries in a very specific way and know that your wishes will be carried out. It also serves to avoid bickering and squabbles amongst family members which as we know, can be very damaging. As we have seen all too often, even families can fight bitterly, when money is involved.
Here are some easy tips to help you get started (just note that this applies to non-Muslims only, as Muslim testamentary matters are governed by different laws and procedures).
Easy Guide to Write your Will
1. List your assets
Here’s a tip to get started. First, list out your assets. Include details of bank accounts, properties, businesses, vehicles, jewellery, antiques or other valuables, investments such as shares or other instruments. Note whether these are held in your name or jointly with a spouse or family member. While you are at it, you might as well gather all the supporting documents and place them together in an easy-to-retrieve file or folder.
2. Appoint Executor(s)
Once you have done this, think about who you will name as an Executor in your will. There could be more than 1, you can appoint up to 4. It is best to have more than 1 in fact, so that if that Executor dies or is unwilling to act, there is another. It is important to discuss first, with the person you have chosen. Don’t assume he/she is willing to act. You want to be sure that the person you have chosen is going to do the job properly. You could also appoint a trust corporation instead of a natural person, as the Executor.
3. Who is the beneficiaries
Now, let’s talk about your beneficiaries. This would normally be your immediate family, but it may not necessarily be so depending on circumstances. You are actually free to choose who, or which entity, you wish to leave your assets to. Some people have willed all their assets to charitable or non-profitable organisations, as their children are grown up and have acquired their own wealth. For most folk however, we would want to leave our assets to our family.
4. Signed with two witnesses
Finally, some procedural steps to bear in mind. The will must be signed in the presence of two witnesses, who must also sign it. There are certain rules governing this. The two witnesses cannot be beneficiaries (or spouses of beneficiaries). Next, the will needs to be kept in a safe place. However, not so safe to the point where the beneficiaries cannot find it! There will be no point at all to the exercise if no one can locate the physical will once you have passed on. Make sure you tell your beneficiaries where the will is located.
Should you consider the service of Professional Will Writer
A last point to think about – while there is no provision under statute that invalidates a will, it is best to use the services of a professional will-writing service such as Rockwills, or a legal firm specializing in probate matters. You would not want to save a few ringgit on something this important, at the expense of a valid and workable will. Will-writing is really not something you should try to DIY.
For those who have yet to take the all-important step, make it your personal goal to get started on this process right away. It will give you peace of mind that when it is time, you would not have left any loose ends untied, and comforting the knowledge that your family and loved ones will be taken care of.
Planning to buy or sell a home? You’re just going to make one of the most important and biggest financial transactions of your life and you definitely do not want to go through the entire process alone. When you have a good real estate agent at hand, it can make all the difference in your property investment. A good real estate agent knows everything about the current market backwards and forwards.
They have a well-developed network of contacts to keep you well communicated throughout the transaction and they can also work as fantastic negotiators. If your agent is an inexperienced or ineffective one, the outcome can be really disappointing. The key point in choosing a real estate agent is to find someone who will work with your best interests at heart and will do everything required to help you get the very best deal. Let’s check out how you can find the best real estate agent you can possibly get.
Ways & Means to Search and Screen for a Good AgentImage may be NSFW. Clik here to view.
1. Get Referrals This is how most of the real estate agents primarily find work. When they complete job successfully, the satisfied customers share their experiences with other homebuyers and sellers and they get new work. To get honest and good referrals, it’s wise to ask for referrals from your friends and family. Asking around for referrals is particularly important when you’re planning to invest in a new area.
2. Do Your Research The recommendations of your friends or family are important, but you still need to do some independent research to find the best real estate agent. First of all, make sure the agent has valid licensing requirements. Apart from the licensing, you should also look for someone who has closed on many properties and is a local expert in your area of investment.
3. Meet Agents Out and About You can’t just choose a real estate agent before you’ve met him or her in person. You can’t also schedule a sit-down visit at an office. Instead, you should meet them in their own world. For instance, call the agents and ask to view the properties. Even if you’re not interested to purchase that property, check out the agent in action.
You’ll get the time to chit chat with the agents to assess their capability and understanding about that particular housing area. Home sellers can get a very good idea of how well the agent is at selling a home from their interaction with potential buyers. This allows you to meet a prospective agent in a more comfortable and low-pressure environment.
4. Look out for the Web Savvy In these days of modern technology, most real estate agents are likely to have a website of their own and many use these sites to acquire business. This does not necessarily mean that they are great at property marketing. However, with the increasing trend of home-buyers and tenants shopping around online before heading out to an open house, the power of online marketing cannot be ignored. So make sure that your agent or his or her team offers online marketing services too.
5. Don’t Get Passed to an Assistant Hiring a busy agent is a very good idea. This type of agents works harder for marketing your property. They can dig up more properties for you and are great at doing their jobs. The problem with these agents is that they might be too busy to carry out the business with you in person. A real estate agent can handle around seven or eight clients at the same time. So if the agent you’re interested in is working with a dozen clients at once, it’s more likely that you’ll be passed to an assistant.
6. Invite Multiple Agents to Value Your Property When you’re short-listing your agents, make sure to have at least three agents to value your property. During property valuation, don’t be too impressed with the agents who value your property the highest, because this could just be a trick to win your business. You’ll want an agent who will be honest and fair, who will not overvalue or undervalue your property and can get potential buyers/tenants at that price.
7. Ask a Lot of Questions Questioning an agent brings out his or her weakness and strengths. If it’s your first time as a homebuyer, ask the agent how many first-time buyers he has worked with. Ask about the process of marketing and if you were a buyer, how many properties you might expect to see. Discuss about your budget and ask questions about the locality. All details should be discussed thoroughly to make sure that your agent is prepared to help you go through the whole process step by step.
Here are some of the questions you should ask:
How much will the agent charge for his services? The fee may vary from 1% – 2.5% of the selling price.
How much experience does the agent have? A well-established agent must have sufficient experience in selling properties surrounding the locality of your property.
How will the property be advertised? Is it going to be showed up in the local paper? Will it be on a property website? Can the agent show examples of previously advertised properties?
Will the agents be present at the time of viewings? Also make sure to check if the agents will be available throughout the day and at weekends, because many prospective buyers/tenants can only look out for properties after work or during weekends.
8. Go Undercover Without letting the agent know that you’re planning to hire him or her, visit the shortlisted agents pretending to be a potential buyer/tenant. Observe their attitudes and ask yourself: Would you be satisfied if your property was being described just like the one in front of you? Would you be interested to buy/rent a property from the agent?
9. Ask for Recommendations from the Agent While going through the interviewing process, ask for recommendations from the agent. They can recommend contractors, insurance companies, mortgage brokers, bankers, lawyers and other personnel related to real estate buying and selling. The best real agent will be well-connected, but will never push you towards a specific choice.
Key Signs to Spot A Good Agent
How to spot a good agent when you see one? These are some of the characteristics you must watch out for while choosing your real estate agent. When an agent fails to answer most of your questions regarding property investment, for instance – the age of property, the rental demand, expected rents, cost of maintenance, etc., he is not an expert agent and should be avoided.
But if the agent is honest and would do his best to find out the information for you, it is also a good sign that you can work with him and grow together. When an agent does not reply your calls, it’s probably because he is too picky when it comes to clients. When an agent does not respond your enquiries fast enough, it’s probably because he is not interested to work for you.
When an agent prefers to text you instead of calling, unless the text provides important details like contact numbers or addresses, it means he is stingy and very calculative. He may not spend enough money to advertise for his clients. A good property agent can be spotted with two simple rules of thumb:
Someone who is willing to go extra miles by providing more services and information than you expected.
Someone who values time and responds instantly.
Normal customs apparently dictates that the seller of a property will employ a property agent. However, if you’re a buyer, you can also employ an agent to help you find an investment in return for a professional payment. He is then obligated to represent you and help you purchase your desired property at the best terms and lowest rates.
The most important things to allow a good agent to work seamlessly for you is to establish an effective communication and mutual respect. With the knowledge and expertise of an established real estate agent and a perfectly cooperative approach from your side, it’s possible to make out a win-win investment situation with any property.
The services and investment guidance you can receive from a good property agent is well worth what you pay him. Do remember, if you like his services, do pay him well and pay in time.
About the authors
This article is contributed by me and Dr. Ong Kian Leong, and we are both the co-founders of the first ever online property investment course for Malaysians, called Property Method . Dr. Ong Kian Leong (commonly addressed as Dr. OngKL), is the creator of GoFinanceTM, a tool that allows investors to accurately evaluate if an investment is worth investing as well as worth financing for maximum return. Claimed by himself as a student in the life-long learning journey, he is also the master trainer of Property Method and the blogger behind Real Estate Investment Blog.
Whether you already own a business or are deciding to do so, everyone requires a secure financial plan that will act as its backbone. Before delving deep into the details of your business, we must first see the big picture. First of all, business owners have two entities – individual entity and the business entity.
It is vital to adjust the needs of your developing business with your capacity to meet your own commitments. With enough time on your hand and professional consultants from relevant fields, you and your family will easily be able to create a sound financial plan.Image may be NSFW. Clik here to view.
However, what if there are other partners not from your own immediate family – then it gets a little bit more complicated. Too many partners often cause conflict of interest for instance, when equity investors are involved. Nonetheless, if all partners come to a mutual understanding and have nothing but the company’s best interest at heart, then it shouldn’t be a cause for concern.
Tax Planning
Before all else, choosing the legal structure of your plan should be top priority, since it will determine how your profits will be taxed. Now in Malaysia there are 4 main types of business entities: Sole Proprietorship, Partnership, Limited Liability Partnership and Sendirian Berhad (Private Limited).
Sole Proprietorship: Having unlimited liability may not seem like the best option however it does come with its perks. For instance, there is less paperwork and formalities while cost of entity formation relatively inexpensive and is not needed by the Malaysian government to be audited. Moreover, your business income is dealt with the same as your own salary, making tax compliance significantly more straightforward.
Partnerships: According to the Companies Commission of Malaysia the partnership must include at least a minimum of 2 and a maximum of 20 members. Sendirian Berhad (Sdn bhd): While Berhad is a public limited company, Sendirian Berhad is Private. Sdn Bhd can be either limited by shares (most common) or by guarantee (more common for non-profit organizations). In the former case, should the organization gets to be bankrupt or goes into liquidation, individuals are not committed to pay off the debt.
Limited Liability Partnership (LLP): After a hiatus of almost a decade, LLP has only recently started to make its mark. The partners in an LLP enjoy limited liability and choose a decentralized management structure unlike general partnerships, When your business profit is over a certain threshold, having an LLP or Sendirian Berhad will give better tax savings because the first RM500,000 profit is taxed at a flat rate of 20%, relatively lower than the high income earners’ personal income tax rate.
Investment Planning
Most SMEs are self-financed by their proprietors, which brings about the business turning into the proprietor’s one and only investment. Even when he has additional funding to make different ventures, he injects cash to his business, where he feels he has the most control over his profits.
In most cases, the owners fail to diversify investment risks. By understanding how capital is used in his business, resources should be employed to spread out the danger that comes with his business. Moreover, business owners often make the mistake of neglecting the importance of assets outside of their business. If you reinvest everything, there might be liquidity issues. There must always be a balance of personal assets and not only your business assets.
Retirement Planning
As mentioned above, you must refrain from reinvesting all of your profits and count on that ‘big score’ for your retirement plan. Alternatively, you may see the business as a wellspring of capital that will finance your retirement needs. Such a way of thinking may lead to catastrophe later in life, when you retire and require other means of fulfilling your financial needs.
You might believe that you’ll never part ways with your beloved business. However, do not end up as the employer whose employee retires before him. In the meantime, you can add to your EPF contribution and you’d be surprised how much of a difference it can really do! Because you can contribute up to 19% as employer to your own EPF account and the contribution is tax free.
Succession Planning
If one day if your business grows to be a valuable asset, and you are finally ready to hand over the mantle, don’t think a simple ‘Will’ or Trust will suffice. To guarantee business congruity after your departure, your entire estate planning may need to be revised.
Business succession plan includes the succession agreement, especially if there are other parties involved, not including your family. This is to ensure your business runs without a hitch. Funding the purchase of the shares being transferred is another issues that need to be arranged before it actually happens.
Risk Management
From the moment you own a business, unfortunately the risks multiply. Most of them are out of your control such as natural disasters, sudden death or disability of a key employee, loss of business assets, lawsuits arising from negligence or defective goods etc. A sound financial plan must therefore include a failsafe for such instances so it doesn’t completely cripple the business overnight.
Although some may be remedied by your trade’s own legal structure, however others may require more focused insurance coverages. Just keep in mind that the amount might come up to beyond your reserve and in some cases, you may have to compensate your employees as well.
The most important fact to remember is to do what you do best: that is ‘Doing business’! Financial planning requires years of experience and not to mention, several fields of interrelated study.
Thus, the ‘DIY’ approach may not be beneficial for you in this case. Be smart. Seek professional help.
A quality of a good leader is not to take all the responsibility but also to delegate the task to someone more efficient. It can make the difference between winning or losing your business.
Anybody with assets and loved ones ought to have a Will. But why are there still many Malaysian who do not have their Wills written? According to the Star Online, there are a staggering RM60 billion worth of estates unclaimed as at early Feb 2016. Today, I believe this figure is even more substantial, surpassing RM 60 Billion as I write.
Image may be NSFW. Clik here to view.
If you haven’t written a will, it’s about time for you do so. Here’s why:
#1. Save money!
Without a written Will, the deceased is considered to have died intestate. In this situation, his heirs need to apply for the Letter of Administration (LA) instead of Grant of Probate (GP). The legal fee is higher for the application of LA because LA requires more documentations. Besides, it takes more time to get a LA.
#2. Your wish vs Government’s wish In Your Will, you can state:
– Who should get your assets?
– How much your wife and children should be receiving?
– Should you leave some ‘souvenirs’ to your siblings, parents or members of your extended family?
If you have the same thinking of the government, just follow the Distribution Act 1958 (amended 1997). It is because, for those who died intestate, the law has a standard distribution schedule. Your wife, parents, and kids will each get their portion where the proportion is fixed by the government.
#3. Executor vs Administrator You can appoint an executor in your will. If none is appointed, others can apply to be the Administrator of your estates. Those who are eligible would include your legal heirs, your creditors, your not-so trustworthy or ‘just plain evil’ relatives.
#4. Appoint Guardian
Yes! If you have children whose age are below 18 (minor), you’ve got to write your will now! There is no other way to appoint a legal guardian except by writing a Will.
#5. No need two sureties
Two sureties (someone act as a guarantor to your estate administration) is necessary for the application of LA. Imagine if your best friend passed away without leaving a will. His son asks you to be one of the sureties required by the court. You will have to disclose all your assets to prove that you have more than the deceased estates. If his son runs away with the estate money, you will need to compensate the legal heirs with your asset. Do you want to sign the paper? (It’s complicated)
Before I forget, may I ask, ‘Did you keep your Will in a bank’s safe deposit box?’ If so, here’s a problem of that. Your heirs will have no way to retrieve it because it is against the law for the banker to grant them access to your deposit box if they couldn’t provide any legal proof of the administration of your estate.
What happen to the asset of a Muslim when he/she passed away?
Is it simply distributed, smoothly, according to Faraid Law? It is in fact not that simple at all.
Mr. Mohd Zulkifli bin Ismail, Deputy General Manager as-Salihin Trustee Bhd shared about the real problems faced by Muslim when it comes to estate distribution.
The reality on estate is that while we are alive all the properties that we own, all the assets that we have are all absolutely in our control. We are the sole owner. We can do whatever we want with it. We can sell it if we want, we can take the money from the bank, and any time we want we can transfer the property. Why? Because we are the sole owner. We are the absolute owner of the property.
The problem starts when this line comes in, the “dark line of death” Ataupun “selepas meninggal dunia”. When death occurs we will lose control on all the assets which we have bought and control because we are no more in the world.
So, all our assets now will be converted or will go down to the bottom and becomes the estate of the diseased.
The questions that we need to ask are: Who has the power now? Who has the authority to take the money out of the bank? Who has the authority to pay off all the loans, all the debts that you have left behind? What about the business that you have set up? Who is going to transfer the ownership of the shares and so on? These are the questions. This is where estate planning comes in.
A lot of Muslims out there thought that whenever they pass away, whenever they pass on, all their assets will be transferred to all their loved ones. Why? Because all the Muslims out there think that there is such a thing as “Islamic Law of Inheritance,” or in Bahasa and Arabic what call “Faraid”. So, because of the existence of Faraid, all the Muslims out there thought that upon death, all their properties will go to their loved ones. Unfortunately, it is not true.
Ladies and gentlemen, I will show you some of the facts proving why. Somewhere in the year 2007, a newspaper printed something about RM40 billion worth of assets being frozen. Why? Because the diseased were not able to transfer their properties – RM38 Billion in land property, RM1.5 billion under the registrar of unclaimed money, RM70 million in EPF.
So, even if your EPFs have nominees, in 2007, RM70 million of EPF money got frozen. There are RM1 million worth of titles still in the name of the diseased. So, imagine that is the figure in 2007. This is the figure in 2011: from RM40 billion, it has gone up to RM52 billion.
A lot of Muslims out there are still not conscious about this.
In the unclaimed balance in 2007 it was only RM1.5 billion. But, in 2011 it’s already RM4 billion. Imagine, the figure is going higher and higher. Yet, Muslims out there are still not thinking about doing estate planning.
What about EPF? In 2007, it’s only RM70 million. You’re going to be shocked to see the figure in 2011. It has gone up to more than RM300 million. My God! Yet, a lot of people outside there are still not thinking hard about this. These are true stories that we got from paper clippings. Imagine.
OK, so why should you write a will in the first place?
Why do you need a Will?
There are a number of reasons. Firstly, you need to prepare for contingencies. Life is not certain. In the event of an unforeseen occurrence, you will still need to continue to provide for your family and loved ones. Secondly, you have by this age after several years of working, amassed some personal assets such as liquid funds, investments, property etc. In the event of an unforeseen circumstance, your assets will be in limbo. They do not “automatically” pass to your beneficiaries just like that.
A will is needed in order for the transfer and vesting of assets and properties to be legally recognized.
What if you don’t have a Will?
What happens if you don’t write a will? In short, a mess. In the event of your demise without a will, your assets will be frozen. That means no one can deal with your accounts, properties, and other assets. Your estate will be distributed according to the Distribution Act 1958 (and amendments thereto). Your family members will find themselves needing to apply for Letters of Administration, which is, a court order vesting someone with the right to administer the estate of a person who has died without a will (this is also called dying intestate).
This is a cumbersome process and sometimes requires guarantors (also called “sureties”). You would have no control over who is ultimately appointed. There could be difficulties finding such persons to step forward or with the necessary financial means to do so. So not only does the family have to cope with the emotional aspects of bereavement, they now have to worry about all the procedural hurdles as well.
It is much easier to extract Grant of Probate
So as you can see, there are some very clear advantages in making sure that you have a valid will in place. It is cheaper to extract grant of probate (meaning, there is a will) than it is to extract Letters of Administration (where there is no will). It is also faster. No guarantors are required for probate.
You also get to choose and specify clearly who will administer the estate and who should be the rightful guardian of children if any. You can also provide for your beneficiaries in a very specific way and know that your wishes will be carried out. It also serves to avoid bickering and squabbles amongst family members which as we know, can be very damaging. As we have seen all too often, even families can fight bitterly, when money is involved.
Here are some easy tips to help you get started (just note that this applies to non-Muslims only, as Muslim testamentary matters are governed by different laws and procedures).
Easy Guide to Write your Will
1. List your assets
Here’s a tip to get started. First, list out your assets. Include details of bank accounts, properties, businesses, vehicles, jewellery, antiques or other valuables, investments such as shares or other instruments. Note whether these are held in your name or jointly with a spouse or family member. While you are at it, you might as well gather all the supporting documents and place them together in an easy-to-retrieve file or folder.
2. Appoint Executor(s)
Once you have done this, think about who you will name as an Executor in your will. There could be more than 1, you can appoint up to 4. It is best to have more than 1 in fact, so that if that Executor dies or is unwilling to act, there is another. It is important to discuss first, with the person you have chosen. Don’t assume he/she is willing to act. You want to be sure that the person you have chosen is going to do the job properly. You could also appoint a trust corporation instead of a natural person, as the Executor.
3. Who is the beneficiaries
Now, let’s talk about your beneficiaries. This would normally be your immediate family, but it may not necessarily be so depending on circumstances. You are actually free to choose who, or which entity, you wish to leave your assets to. Some people have willed all their assets to charitable or non-profitable organisations, as their children are grown up and have acquired their own wealth. For most folk however, we would want to leave our assets to our family.
4. Signed with two witnesses
Finally, some procedural steps to bear in mind. The will must be signed in the presence of two witnesses, who must also sign it. There are certain rules governing this. The two witnesses cannot be beneficiaries (or spouses of beneficiaries). Next, the will needs to be kept in a safe place. However, not so safe to the point where the beneficiaries cannot find it! There will be no point at all to the exercise if no one can locate the physical will once you have passed on. Make sure you tell your beneficiaries where the will is located.
Should you consider the service of Professional Will Writer
A last point to think about – while there is no provision under statute that invalidates a will, it is best to use the services of a professional will-writing service such as Rockwills, or a legal firm specializing in probate matters. You would not want to save a few ringgit on something this important, at the expense of a valid and workable will. Will-writing is really not something you should try to DIY.
For those who have yet to take the all-important step, make it your personal goal to get started on this process right away. It will give you peace of mind that when it is time, you would not have left any loose ends untied, and comforting the knowledge that your family and loved ones will be taken care of.
Planning to buy or sell a home? You’re just going to make one of the most important and biggest financial transactions of your life and you definitely do not want to go through the entire process alone. When you have a good real estate agent at hand, it can make all the difference in your property investment. A good real estate agent knows everything about the current market backwards and forwards.
They have a well-developed network of contacts to keep you well communicated throughout the transaction and they can also work as fantastic negotiators. If your agent is an inexperienced or ineffective one, the outcome can be really disappointing. The key point in choosing a real estate agent is to find someone who will work with your best interests at heart and will do everything required to help you get the very best deal. Let’s check out how you can find the best real estate agent you can possibly get.
Ways & Means to Search and Screen for a Good AgentImage may be NSFW. Clik here to view.
1. Get Referrals This is how most of the real estate agents primarily find work. When they complete job successfully, the satisfied customers share their experiences with other homebuyers and sellers and they get new work. To get honest and good referrals, it’s wise to ask for referrals from your friends and family. Asking around for referrals is particularly important when you’re planning to invest in a new area.
2. Do Your Research The recommendations of your friends or family are important, but you still need to do some independent research to find the best real estate agent. First of all, make sure the agent has valid licensing requirements. Apart from the licensing, you should also look for someone who has closed on many properties and is a local expert in your area of investment.
3. Meet Agents Out and About You can’t just choose a real estate agent before you’ve met him or her in person. You can’t also schedule a sit-down visit at an office. Instead, you should meet them in their own world. For instance, call the agents and ask to view the properties. Even if you’re not interested to purchase that property, check out the agent in action.
You’ll get the time to chit chat with the agents to assess their capability and understanding about that particular housing area. Home sellers can get a very good idea of how well the agent is at selling a home from their interaction with potential buyers. This allows you to meet a prospective agent in a more comfortable and low-pressure environment.
4. Look out for the Web Savvy In these days of modern technology, most real estate agents are likely to have a website of their own and many use these sites to acquire business. This does not necessarily mean that they are great at property marketing. However, with the increasing trend of home-buyers and tenants shopping around online before heading out to an open house, the power of online marketing cannot be ignored. So make sure that your agent or his or her team offers online marketing services too.
5. Don’t Get Passed to an Assistant Hiring a busy agent is a very good idea. This type of agents works harder for marketing your property. They can dig up more properties for you and are great at doing their jobs. The problem with these agents is that they might be too busy to carry out the business with you in person. A real estate agent can handle around seven or eight clients at the same time. So if the agent you’re interested in is working with a dozen clients at once, it’s more likely that you’ll be passed to an assistant.
6. Invite Multiple Agents to Value Your Property When you’re short-listing your agents, make sure to have at least three agents to value your property. During property valuation, don’t be too impressed with the agents who value your property the highest, because this could just be a trick to win your business. You’ll want an agent who will be honest and fair, who will not overvalue or undervalue your property and can get potential buyers/tenants at that price.
7. Ask a Lot of Questions Questioning an agent brings out his or her weakness and strengths. If it’s your first time as a homebuyer, ask the agent how many first-time buyers he has worked with. Ask about the process of marketing and if you were a buyer, how many properties you might expect to see. Discuss about your budget and ask questions about the locality. All details should be discussed thoroughly to make sure that your agent is prepared to help you go through the whole process step by step.
Here are some of the questions you should ask:
How much will the agent charge for his services? The fee may vary from 1% – 2.5% of the selling price.
How much experience does the agent have? A well-established agent must have sufficient experience in selling properties surrounding the locality of your property.
How will the property be advertised? Is it going to be showed up in the local paper? Will it be on a property website? Can the agent show examples of previously advertised properties?
Will the agents be present at the time of viewings? Also make sure to check if the agents will be available throughout the day and at weekends, because many prospective buyers/tenants can only look out for properties after work or during weekends.
8. Go Undercover Without letting the agent know that you’re planning to hire him or her, visit the shortlisted agents pretending to be a potential buyer/tenant. Observe their attitudes and ask yourself: Would you be satisfied if your property was being described just like the one in front of you? Would you be interested to buy/rent a property from the agent?
9. Ask for Recommendations from the Agent While going through the interviewing process, ask for recommendations from the agent. They can recommend contractors, insurance companies, mortgage brokers, bankers, lawyers and other personnel related to real estate buying and selling. The best real agent will be well-connected, but will never push you towards a specific choice.
Key Signs to Spot A Good Agent
How to spot a good agent when you see one? These are some of the characteristics you must watch out for while choosing your real estate agent. When an agent fails to answer most of your questions regarding property investment, for instance – the age of property, the rental demand, expected rents, cost of maintenance, etc., he is not an expert agent and should be avoided.
But if the agent is honest and would do his best to find out the information for you, it is also a good sign that you can work with him and grow together. When an agent does not reply your calls, it’s probably because he is too picky when it comes to clients. When an agent does not respond your enquiries fast enough, it’s probably because he is not interested to work for you.
When an agent prefers to text you instead of calling, unless the text provides important details like contact numbers or addresses, it means he is stingy and very calculative. He may not spend enough money to advertise for his clients. A good property agent can be spotted with two simple rules of thumb:
Someone who is willing to go extra miles by providing more services and information than you expected.
Someone who values time and responds instantly.
Normal customs apparently dictates that the seller of a property will employ a property agent. However, if you’re a buyer, you can also employ an agent to help you find an investment in return for a professional payment. He is then obligated to represent you and help you purchase your desired property at the best terms and lowest rates.
The most important things to allow a good agent to work seamlessly for you is to establish an effective communication and mutual respect. With the knowledge and expertise of an established real estate agent and a perfectly cooperative approach from your side, it’s possible to make out a win-win investment situation with any property.
The services and investment guidance you can receive from a good property agent is well worth what you pay him. Do remember, if you like his services, do pay him well and pay in time.
About the authors
This article is contributed by me and Dr. Ong Kian Leong, and we are both the co-founders of the first ever online property investment course for Malaysians, called Property Method . Dr. Ong Kian Leong (commonly addressed as Dr. OngKL), is the creator of GoFinanceTM, a tool that allows investors to accurately evaluate if an investment is worth investing as well as worth financing for maximum return. Claimed by himself as a student in the life-long learning journey, he is also the master trainer of Property Method and the blogger behind Real Estate Investment Blog.
Whether you already own a business or are deciding to do so, everyone requires a secure financial plan that will act as its backbone. Before delving deep into the details of your business, we must first see the big picture. First of all, business owners have two entities – individual entity and the business entity.
It is vital to adjust the needs of your developing business with your capacity to meet your own commitments. With enough time on your hand and professional consultants from relevant fields, you and your family will easily be able to create a sound financial plan.Image may be NSFW. Clik here to view.
However, what if there are other partners not from your own immediate family – then it gets a little bit more complicated. Too many partners often cause conflict of interest for instance, when equity investors are involved. Nonetheless, if all partners come to a mutual understanding and have nothing but the company’s best interest at heart, then it shouldn’t be a cause for concern.
Tax Planning
Before all else, choosing the legal structure of your plan should be top priority, since it will determine how your profits will be taxed. Now in Malaysia there are 4 main types of business entities: Sole Proprietorship, Partnership, Limited Liability Partnership and Sendirian Berhad (Private Limited).
Sole Proprietorship: Having unlimited liability may not seem like the best option however it does come with its perks. For instance, there is less paperwork and formalities while cost of entity formation relatively inexpensive and is not needed by the Malaysian government to be audited. Moreover, your business income is dealt with the same as your own salary, making tax compliance significantly more straightforward.
Partnerships: According to the Companies Commission of Malaysia the partnership must include at least a minimum of 2 and a maximum of 20 members. Sendirian Berhad (Sdn bhd): While Berhad is a public limited company, Sendirian Berhad is Private. Sdn Bhd can be either limited by shares (most common) or by guarantee (more common for non-profit organizations). In the former case, should the organization gets to be bankrupt or goes into liquidation, individuals are not committed to pay off the debt.
Limited Liability Partnership (LLP): After a hiatus of almost a decade, LLP has only recently started to make its mark. The partners in an LLP enjoy limited liability and choose a decentralized management structure unlike general partnerships, When your business profit is over a certain threshold, having an LLP or Sendirian Berhad will give better tax savings because the first RM500,000 profit is taxed at a flat rate of 20%, relatively lower than the high income earners’ personal income tax rate.
Investment Planning
Most SMEs are self-financed by their proprietors, which brings about the business turning into the proprietor’s one and only investment. Even when he has additional funding to make different ventures, he injects cash to his business, where he feels he has the most control over his profits.
In most cases, the owners fail to diversify investment risks. By understanding how capital is used in his business, resources should be employed to spread out the danger that comes with his business. Moreover, business owners often make the mistake of neglecting the importance of assets outside of their business. If you reinvest everything, there might be liquidity issues. There must always be a balance of personal assets and not only your business assets.
Retirement Planning
As mentioned above, you must refrain from reinvesting all of your profits and count on that ‘big score’ for your retirement plan. Alternatively, you may see the business as a wellspring of capital that will finance your retirement needs. Such a way of thinking may lead to catastrophe later in life, when you retire and require other means of fulfilling your financial needs.
You might believe that you’ll never part ways with your beloved business. However, do not end up as the employer whose employee retires before him. In the meantime, you can add to your EPF contribution and you’d be surprised how much of a difference it can really do! Because you can contribute up to 19% as employer to your own EPF account and the contribution is tax free.
Succession Planning
If one day if your business grows to be a valuable asset, and you are finally ready to hand over the mantle, don’t think a simple ‘Will’ or Trust will suffice. To guarantee business congruity after your departure, your entire estate planning may need to be revised.
Business succession plan includes the succession agreement, especially if there are other parties involved, not including your family. This is to ensure your business runs without a hitch. Funding the purchase of the shares being transferred is another issues that need to be arranged before it actually happens.
Risk Management
From the moment you own a business, unfortunately the risks multiply. Most of them are out of your control such as natural disasters, sudden death or disability of a key employee, loss of business assets, lawsuits arising from negligence or defective goods etc. A sound financial plan must therefore include a failsafe for such instances so it doesn’t completely cripple the business overnight.
Although some may be remedied by your trade’s own legal structure, however others may require more focused insurance coverages. Just keep in mind that the amount might come up to beyond your reserve and in some cases, you may have to compensate your employees as well.
The most important fact to remember is to do what you do best: that is ‘Doing business’! Financial planning requires years of experience and not to mention, several fields of interrelated study.
Thus, the ‘DIY’ approach may not be beneficial for you in this case. Be smart. Seek professional help.
A quality of a good leader is not to take all the responsibility but also to delegate the task to someone more efficient. It can make the difference between winning or losing your business.
What happen to the asset of a Muslim when he/she passed away? Is it simply distributed, smoothly, according to Faraid Law? It is in fact not that simple at all.
Mr. Mohd Zulkifli bin Ismail, Deputy General Manager as-Salihin Trustee Bhd shared about the real problems faced by Muslim when it comes to estate distribution.
The reality on estate is that while we are alive all the properties that we own, all the assets that we have are all absolutely in our control. We are the sole owner. We can do whatever we want with it. We can sell it if we want, we can take the money from the bank, and any time we want we can transfer the property. Why? Because we are the sole owner. We are the absolute owner of the property.
The problem starts when this line comes in, the “dark line of death” Ataupun “selepas meninggal dunia”. When death occurs we will lose control on all the assets which we have bought and control because we are no more in the world.
So, all our assets now will be converted or will go down to the bottom and becomes the estate of the diseased. The questions that we need to ask are: Who has the power now? Who has the authority to take the money out of the bank? Who has the authority to pay off all the loans, all the debts that you have left behind? What about the business that you have set up? Who is going to transfer the ownership of the shares and so on? These are the questions. This is where estate planning comes in.
A lot of Muslims out there thought that whenever they pass away, whenever they pass on, all their assets will be transferred to all their loved ones. Why? Because all the Muslims out there think that there is such a thing as “Islamic Law of Inheritance,” or in Bahasa and Arabic what call “Faraid”. So, because of the existence of Faraid, all the Muslims out there thought that upon death, all their properties will go to their loved ones. Unfortunately, it is not true.
Ladies and gentlemen, I will show you some of the facts proving why. Somewhere in the year 2007, a newspaper printed something about RM40 billion worth of assets being frozen. Why? Because the diseased were not able to transfer their properties – RM38 Billion in land property, RM1.5 billion under the registrar of unclaimed money, RM70 million in EPF.
So, even if your EPFs have nominees, in 2007, RM70 million of EPF money got frozen. There are RM1 million worth of titles still in the name of the diseased. So, imagine that is the figure in 2007. This is the figure in 2011: from RM40 billion, it has gone up to RM52 billion.
A lot of Muslims out there are still not conscious about this.
In the unclaimed balance in 2007 it was only RM1.5 billion. But, in 2011 it’s already RM4 billion. Imagine, the figure is going higher and higher. Yet, Muslims out there are still not thinking about doing estate planning.
What about EPF? In 2007, it’s only RM70 million. You’re going to be shocked to see the figure in 2011. It has gone up to more than RM300 million. My God! Yet, a lot of people outside there are still not thinking hard about this. These are true stories that we got from paper clippings. Imagine.
OK, so why should you write a will in the first place?
Why do you need a Will?
There are a number of reasons. Firstly, you need to prepare for contingencies. Life is not certain. In the event of an unforeseen occurrence, you will still need to continue to provide for your family and loved ones. Secondly, you have by this age after several years of working, amassed some personal assets such as liquid funds, investments, property etc. In the event of an unforeseen circumstance, your assets will be in limbo. They do not “automatically” pass to your beneficiaries just like that.
A will is needed in order for the transfer and vesting of assets and properties to be legally recognized.
What if you don’t have a Will?
What happens if you don’t write a will? In short, a mess. In the event of your demise without a will, your assets will be frozen. That means no one can deal with your accounts, properties, and other assets. Your estate will be distributed according to the Distribution Act 1958 (and amendments thereto). Your family members will find themselves needing to apply for Letters of Administration, which is, a court order vesting someone with the right to administer the estate of a person who has died without a will (this is also called dying intestate).
This is a cumbersome process and sometimes requires guarantors (also called “sureties”). You would have no control over who is ultimately appointed. There could be difficulties finding such persons to step forward or with the necessary financial means to do so. So not only does the family have to cope with the emotional aspects of bereavement, they now have to worry about all the procedural hurdles as well.
It is much easier to extract Grant of Probate
So as you can see, there are some very clear advantages in making sure that you have a valid will in place. It is cheaper to extract grant of probate (meaning, there is a will) than it is to extract Letters of Administration (where there is no will). It is also faster. No guarantors are required for probate.
You also get to choose and specify clearly who will administer the estate and who should be the rightful guardian of children if any. You can also provide for your beneficiaries in a very specific way and know that your wishes will be carried out. It also serves to avoid bickering and squabbles amongst family members which as we know, can be very damaging. As we have seen all too often, even families can fight bitterly, when money is involved.
Here are some easy tips to help you get started (just note that this applies to non-Muslims only, as Muslim testamentary matters are governed by different laws and procedures).
Easy Guide to Write your Will
1. List your assets Here’s a tip to get started. First, list out your assets. Include details of bank accounts, properties, businesses, vehicles, jewellery, antiques or other valuables, investments such as shares or other instruments. Note whether these are held in your name or jointly with a spouse or family member. While you are at it, you might as well gather all the supporting documents and place them together in an easy-to-retrieve file or folder.
2. Appoint Executor(s) Once you have done this, think about who you will name as an Executor in your will. There could be more than 1, you can appoint up to 4. It is best to have more than 1 in fact, so that if that Executor dies or is unwilling to act, there is another. It is important to discuss first, with the person you have chosen. Don’t assume he/she is willing to act. You want to be sure that the person you have chosen is going to do the job properly. You could also appoint a trust corporation instead of a natural person, as the Executor.
3. Who is the beneficiaries Now, let’s talk about your beneficiaries. This would normally be your immediate family, but it may not necessarily be so depending on circumstances. You are actually free to choose who, or which entity, you wish to leave your assets to. Some people have willed all their assets to charitable or non-profitable organisations, as their children are grown up and have acquired their own wealth. For most folk however, we would want to leave our assets to our family.
4. Signed with two witnesses Finally, some procedural steps to bear in mind. The will must be signed in the presence of two witnesses, who must also sign it. There are certain rules governing this. The two witnesses cannot be beneficiaries (or spouses of beneficiaries). Next, the will needs to be kept in a safe place. However, not so safe to the point where the beneficiaries cannot find it! There will be no point at all to the exercise if no one can locate the physical will once you have passed on. Make sure you tell your beneficiaries where the will is located.
Should you consider the service of Professional Will Writer
A last point to think about – while there is no provision under statute that invalidates a will, it is best to use the services of a professional will-writing service such as Rockwills, or a legal firm specializing in probate matters. You would not want to save a few ringgit on something this important, at the expense of a valid and workable will. Will-writing is really not something you should try to DIY.
For those who have yet to take the all-important step, make it your personal goal to get started on this process right away. It will give you peace of mind that when it is time, you would not have left any loose ends untied, and comforting the knowledge that your family and loved ones will be taken care of.
Planning to buy or sell a home? You’re just going to make one of the most important and biggest financial transactions of your life and you definitely do not want to go through the entire process alone. When you have a good real estate agent at hand, it can make all the difference in your property investment. A good real estate agent knows everything about the current market backwards and forwards.
They have a well-developed network of contacts to keep you well communicated throughout the transaction and they can also work as fantastic negotiators. If your agent is an inexperienced or ineffective one, the outcome can be really disappointing. The key point in choosing a real estate agent is to find someone who will work with your best interests at heart and will do everything required to help you get the very best deal. Let’s check out how you can find the best real estate agent you can possibly get.
Ways & Means to Search and Screen for a Good AgentImage may be NSFW. Clik here to view.
1. Get Referrals This is how most of the real estate agents primarily find work. When they complete job successfully, the satisfied customers share their experiences with other homebuyers and sellers and they get new work. To get honest and good referrals, it’s wise to ask for referrals from your friends and family. Asking around for referrals is particularly important when you’re planning to invest in a new area.
2. Do Your Research The recommendations of your friends or family are important, but you still need to do some independent research to find the best real estate agent. First of all, make sure the agent has valid licensing requirements. Apart from the licensing, you should also look for someone who has closed on many properties and is a local expert in your area of investment.
3. Meet Agents Out and About You can’t just choose a real estate agent before you’ve met him or her in person. You can’t also schedule a sit-down visit at an office. Instead, you should meet them in their own world. For instance, call the agents and ask to view the properties. Even if you’re not interested to purchase that property, check out the agent in action.
You’ll get the time to chit chat with the agents to assess their capability and understanding about that particular housing area. Home sellers can get a very good idea of how well the agent is at selling a home from their interaction with potential buyers. This allows you to meet a prospective agent in a more comfortable and low-pressure environment.
4. Look out for the Web Savvy In these days of modern technology, most real estate agents are likely to have a website of their own and many use these sites to acquire business. This does not necessarily mean that they are great at property marketing. However, with the increasing trend of home-buyers and tenants shopping around online before heading out to an open house, the power of online marketing cannot be ignored. So make sure that your agent or his or her team offers online marketing services too.
5. Don’t Get Passed to an Assistant Hiring a busy agent is a very good idea. This type of agents works harder for marketing your property. They can dig up more properties for you and are great at doing their jobs. The problem with these agents is that they might be too busy to carry out the business with you in person. A real estate agent can handle around seven or eight clients at the same time. So if the agent you’re interested in is working with a dozen clients at once, it’s more likely that you’ll be passed to an assistant.
6. Invite Multiple Agents to Value Your Property When you’re short-listing your agents, make sure to have at least three agents to value your property. During property valuation, don’t be too impressed with the agents who value your property the highest, because this could just be a trick to win your business. You’ll want an agent who will be honest and fair, who will not overvalue or undervalue your property and can get potential buyers/tenants at that price.
7. Ask a Lot of Questions Questioning an agent brings out his or her weakness and strengths. If it’s your first time as a homebuyer, ask the agent how many first-time buyers he has worked with. Ask about the process of marketing and if you were a buyer, how many properties you might expect to see. Discuss about your budget and ask questions about the locality. All details should be discussed thoroughly to make sure that your agent is prepared to help you go through the whole process step by step.
Here are some of the questions you should ask:
How much will the agent charge for his services? The fee may vary from 1% – 2.5% of the selling price.
How much experience does the agent have? A well-established agent must have sufficient experience in selling properties surrounding the locality of your property.
How will the property be advertised? Is it going to be showed up in the local paper? Will it be on a property website? Can the agent show examples of previously advertised properties?
Will the agents be present at the time of viewings? Also make sure to check if the agents will be available throughout the day and at weekends, because many prospective buyers/tenants can only look out for properties after work or during weekends.
8. Go Undercover Without letting the agent know that you’re planning to hire him or her, visit the shortlisted agents pretending to be a potential buyer/tenant. Observe their attitudes and ask yourself: Would you be satisfied if your property was being described just like the one in front of you? Would you be interested to buy/rent a property from the agent?
9. Ask for Recommendations from the Agent While going through the interviewing process, ask for recommendations from the agent. They can recommend contractors, insurance companies, mortgage brokers, bankers, lawyers and other personnel related to real estate buying and selling. The best real agent will be well-connected, but will never push you towards a specific choice.
Key Signs to Spot A Good Agent
How to spot a good agent when you see one? These are some of the characteristics you must watch out for while choosing your real estate agent. When an agent fails to answer most of your questions regarding property investment, for instance – the age of property, the rental demand, expected rents, cost of maintenance, etc., he is not an expert agent and should be avoided.
But if the agent is honest and would do his best to find out the information for you, it is also a good sign that you can work with him and grow together. When an agent does not reply your calls, it’s probably because he is too picky when it comes to clients. When an agent does not respond your enquiries fast enough, it’s probably because he is not interested to work for you.
When an agent prefers to text you instead of calling, unless the text provides important details like contact numbers or addresses, it means he is stingy and very calculative. He may not spend enough money to advertise for his clients. A good property agent can be spotted with two simple rules of thumb:
Someone who is willing to go extra miles by providing more services and information than you expected.
Someone who values time and responds instantly.
Normal customs apparently dictates that the seller of a property will employ a property agent. However, if you’re a buyer, you can also employ an agent to help you find an investment in return for a professional payment. He is then obligated to represent you and help you purchase your desired property at the best terms and lowest rates.
The most important things to allow a good agent to work seamlessly for you is to establish an effective communication and mutual respect. With the knowledge and expertise of an established real estate agent and a perfectly cooperative approach from your side, it’s possible to make out a win-win investment situation with any property.
The services and investment guidance you can receive from a good property agent is well worth what you pay him. Do remember, if you like his services, do pay him well and pay in time.
About the authors
This article is contributed by me and Dr. Ong Kian Leong, and we are both the co-founders of the first ever online property investment course for Malaysians, called Property Method . Dr. Ong Kian Leong (commonly addressed as Dr. OngKL), is the creator of GoFinanceTM, a tool that allows investors to accurately evaluate if an investment is worth investing as well as worth financing for maximum return. Claimed by himself as a student in the life-long learning journey, he is also the master trainer of Property Method and the blogger behind Real Estate Investment Blog.
Whether you already own a business or are deciding to do so, everyone requires a secure financial plan that will act as its backbone. Before delving deep into the details of your business, we must first see the big picture. First of all, business owners have two entities – individual entity and the business entity.
It is vital to adjust the needs of your developing business with your capacity to meet your own commitments. With enough time on your hand and professional consultants from relevant fields, you and your family will easily be able to create a sound financial plan.Image may be NSFW. Clik here to view.
However, what if there are other partners not from your own immediate family – then it gets a little bit more complicated. Too many partners often cause conflict of interest for instance, when equity investors are involved. Nonetheless, if all partners come to a mutual understanding and have nothing but the company’s best interest at heart, then it shouldn’t be a cause for concern.
Tax Planning
Before all else, choosing the legal structure of your plan should be top priority, since it will determine how your profits will be taxed. Now in Malaysia there are 4 main types of business entities: Sole Proprietorship, Partnership, Limited Liability Partnership and Sendirian Berhad (Private Limited).
Sole Proprietorship: Having unlimited liability may not seem like the best option however it does come with its perks. For instance, there is less paperwork and formalities while cost of entity formation relatively inexpensive and is not needed by the Malaysian government to be audited. Moreover, your business income is dealt with the same as your own salary, making tax compliance significantly more straightforward.
Partnerships: According to the Companies Commission of Malaysia the partnership must include at least a minimum of 2 and a maximum of 20 members. Sendirian Berhad (Sdn bhd): While Berhad is a public limited company, Sendirian Berhad is Private. Sdn Bhd can be either limited by shares (most common) or by guarantee (more common for non-profit organizations). In the former case, should the organization gets to be bankrupt or goes into liquidation, individuals are not committed to pay off the debt.
Limited Liability Partnership (LLP): After a hiatus of almost a decade, LLP has only recently started to make its mark. The partners in an LLP enjoy limited liability and choose a decentralized management structure unlike general partnerships, When your business profit is over a certain threshold, having an LLP or Sendirian Berhad will give better tax savings because the first RM500,000 profit is taxed at a flat rate of 20%, relatively lower than the high income earners’ personal income tax rate.
Investment Planning
Most SMEs are self-financed by their proprietors, which brings about the business turning into the proprietor’s one and only investment. Even when he has additional funding to make different ventures, he injects cash to his business, where he feels he has the most control over his profits.
In most cases, the owners fail to diversify investment risks. By understanding how capital is used in his business, resources should be employed to spread out the danger that comes with his business. Moreover, business owners often make the mistake of neglecting the importance of assets outside of their business. If you reinvest everything, there might be liquidity issues. There must always be a balance of personal assets and not only your business assets.
Retirement Planning
As mentioned above, you must refrain from reinvesting all of your profits and count on that ‘big score’ for your retirement plan. Alternatively, you may see the business as a wellspring of capital that will finance your retirement needs. Such a way of thinking may lead to catastrophe later in life, when you retire and require other means of fulfilling your financial needs.
You might believe that you’ll never part ways with your beloved business. However, do not end up as the employer whose employee retires before him. In the meantime, you can add to your EPF contribution and you’d be surprised how much of a difference it can really do! Because you can contribute up to 19% as employer to your own EPF account and the contribution is tax free.
Succession Planning
If one day if your business grows to be a valuable asset, and you are finally ready to hand over the mantle, don’t think a simple ‘Will’ or Trust will suffice. To guarantee business congruity after your departure, your entire estate planning may need to be revised.
Business succession plan includes the succession agreement, especially if there are other parties involved, not including your family. This is to ensure your business runs without a hitch. Funding the purchase of the shares being transferred is another issues that need to be arranged before it actually happens.
Risk Management
From the moment you own a business, unfortunately the risks multiply. Most of them are out of your control such as natural disasters, sudden death or disability of a key employee, loss of business assets, lawsuits arising from negligence or defective goods etc. A sound financial plan must therefore include a failsafe for such instances so it doesn’t completely cripple the business overnight.
Although some may be remedied by your trade’s own legal structure, however others may require more focused insurance coverages. Just keep in mind that the amount might come up to beyond your reserve and in some cases, you may have to compensate your employees as well.
The most important fact to remember is to do what you do best: that is ‘Doing business’! Financial planning requires years of experience and not to mention, several fields of interrelated study. Thus, the ‘DIY’ approach may not be beneficial for you in this case. Be smart. Seek professional help.
A quality of a good leader is not to take all the responsibility but also to delegate the task to someone more efficient. It can make the difference between winning or losing your business.
Question: Hi, I’m Sam, a 45-year old business owner from Petaling Jaya. Presently, I own a biscuit factory and a bakery in Klang. I’m happily married with Jenny and we are blessed with three children namely, Jack, Jim and Jason aged 10, 8, and 3 today. I’m planning to write a will where Jenny and our children will be included as the beneficiaries of my estate. Here, my question is: ‘Should I appoint Jenny to be the executor of my will?’
Answer:
For a start, there are three parties involved in Sam’s will document. They are:
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In this case, Sam is a testator. Jenny is to be appointed as his executor of his will and is also nominated as a beneficiary alongside their children. Hence, if Sam is to pass on in the future, Jenny would be entrusted to manage and distribute his estate according to his will. From Sam’s point of view, it seems fitting to appoint Jenny as his executor for she is his beloved wife and the mother to his children.
But, is this a wise move?
To answer this question, I’ll explain the roles and responsibilities of an executor. The executor of a will is very crucial in the process of collection and distribution of the deceased’s estate. Simply put, a will is less effective if the testator fails to appoint an executor to execute his will.
Executor’s Job #1 – Grant of Probate
Let’s say, Sam passes on. His assets namely, his biscuit factory, bakery and other personal assets will be frozen, except for his life insurance policies and EPF.
First, Jenny will need to first apply for the Grant of Probate from the High Court to prove that she is the executor in his last will and testament. To do so, she will need to prepare a list of documents which include Sam’s death certificate, a list of his assets and liabilities, and the original copy of his will. Subsequently, Jenny will engage a lawyer to assist her in her application for the Grant of Probate.
If Jenny is able to locate Sam’s will easily where it states what assets he owns in clarity, Jenny will have an easier time in applying for the Grant of Probate. Most often, the issue lies in locating the testator’s will and having knowledge of what assets the testator owns before his passing on. For instance,
Sam may rent a safe deposit box from a bank to place his will. Jenny does not know which bank Sam chose to place his will.
Sam may write himself a simple will with a simple clause stating that his wish to distribute all ‘immovable and movable’ assets to his beneficiaries. This poses a big obstacle to Jenny as she may not know what exactly Sam’s immovable and movable assets are referring to. This includes Sam’s personal investments into a portfolio of real estate, shares into other businesses, and bank accounts.
Depending on the size of Sam’s estate, this process takes some 3-6 months and the time frame could be longer if Jenny fails to locate Sam’s will and his estate.
Executor’s Job #2 – Asset Collection
Next, Jenny is authorised to collect assets that were owned by the testator with the Grant of Probate. It includes his biscuit factory, bakery, and his other assets. This process can be lengthy as it takes time for the ownership of these assets to be effectively transferred to Jenny, the executor. In general, it could take up to 6 -12 months time for Jenny to collect these assets.
Executor’s Job #3 – Paying Off Outstanding Debt and Taxes
Subsequently, Jenny may advertise on leading newspapers to notify all of Sam’s creditors so that they can recover their credit given to Sam. In addition to this, Jenny would need to settle the outstanding amount of income tax owed by Sam to the Inland Revenue Board (IRB). The process which involves efforts in advertising, negotiating, and settling of debts and taxes to all of Sam’s creditors including the IRB would take around 12-15 months.
Executor’s Job #4 – Asset Distribution
Finally, Jenny would distribute Sam’s remaining estate to all of his beneficiaries. It would take at least 2 years from Sam’s passing to distribute his estate to all of his beneficiaries. It assumes that there are no hiccups along the entire process.
Let’s put ourselves into Jenny’s shoes.
She will have a lot to do as an executor. She has to engage a lawyer, attend High Court hearings, make trips to banks, advertise, negotiate with creditors, pay tax and debts, and the list goes on. It takes time, effort, and money to carry out the roles and responsibilities required as an executor. Jenny needs to fulfil her tasks while she is mourning for her husband’s passing and has three children to feed and care for. Would you like to be in Jenny’s position?
What if Jenny Could Not Act as an Executor?
Sam may appoint Jenny to act as his executor of his will. With that being said, it is possible for Jenny to lose her ability to act as his executor. This arises in the following situation:
Jenny becomes insane.
Jenny passes on before or together with Sam.
Jenny passes on before obtaining the Grant of Probate from the High Court.
Jenny passes on before fully completing the tasks of an executor.
So, what happens?
In this case, an interested person may apply to Court for an order to ‘substitute’ Jenny as the executor by applying for the Grant of letters of Administration with Will Annexed.
The Court will grant the Letter of Administration with Will Annexed to allow the process of distributing Sam’s estate to proceed to people who are viewed to be fitting to administer the estate. The person chosen will be based on the ranking order stipulated under Section 16 of the Probate and Administration Act 1957.
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In Sam’s case, his children would qualify under Rank #1. But, they are incapable of administering Sam’s estate for they are still very young. This may open up an opportunity for Sam’s relatives such as Sam’s siblings, grandparents, uncles and aunties to step forward to apply for the Letter of Administration. If you are Sam today, would you want your relatives to manage your estate on behalf of you?
Should I Elect a Trust Corporation to Execute My Will?
If I’m Sam, I think, electing a trust company to act as the executor of my will is a lot more practical and convenient. This is because a trust company has a couple of advantages that enable it to perform estate administration works a lot more efficiently than an individual, even if the individual chosen is a lawyer.
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Instead of adding burden and workload onto Jenny, it is better for Sam if he can elect a trust company to act as the executor of his will. It allows Jenny to have a peace of mind because she knows that her finances will be managed efficiently and responsibly by the trust company.
In short, we encourage all to have a well-crafted estate distribution plan so that the financial future of our loved ones will be protected. To learn more, you may watch our webinars on estate planning matters as listed below:
My name is Bill. I have been happily married with Candy since 2017. Presently, I have two life insurance policies where I named my parents to be beneficiaries of my policies. The details of the two policies are as follow:
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Hence, my question is: ‘Will my parents inherit RM 600,000 from the policies if I pass on prematurely?
Answer:
If Bill passes on, his parents will receive RM 600,000 from Bill’s life insurers, A Ltd and G Ltd. But, they are not free to use the full sum for their own benefit. In this article, I’ll be sharing how the RM 600,000 will be distributed in accordance with the Financial Services Act 2013 and the Distribution Act 1958.
Policy 1 – A Ltd
Bill bought this policy before his marriage and thus, is a trust policy. Hence, his parents will be rightful beneficiaries of its sum assured as the amount would be fully protected from Bill’s creditors. Thus, his parents may use the RM 100,000 freely as they wish.
Policy 2 – G Ltd
Bill bought this policy after his marriage. Policy 2 is a non-trust policy as he did not nominate his spouse or children, if any, as his beneficiaries. His parents, the nominated beneficiaries, shall receive the sum assured instead as its executors.
First, the RM 500,000 collected shall be used to settle all outstanding debts and tax liabilities owed by Bill to all of his creditors and the Malaysian government. Subsequently, the remaining sum would then only be distributed in accordance to his testacy status upon his passing.
For instance, if Bill passes on testate (with a will), the remaining sum would be distributed to beneficiaries stated in his will accordingly. However, if his parents are not stated in the will to inherit from Policy 2, they are required to transfer it to his beneficiaries stated in the will, thus, will not inherit his sum assured.
Alternatively, if Bill passes on intestate (without a will), the remaining sum will be distributed in accordance to the formula below:
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In Bill’s case, assuming he has no children, half of his remaining sum assured is to be distributed to Candy. The remaining half shall be distributed to his parents equally. In both cases, testate or intestate, it may defeat the intended objective of Bill when he purchases Policy 2 which could be to provide an additional RM 500,000 in living expenses to his parents in their golden years.
Unless Bill has done this …
The above will not apply if Bill assigns Policy 2 to his parents.
If Policy 2 is assigned to his parents, its ownership shall be belonging effectively to his parents if Bill transfers Policy 2 via absolute assignment. Hence, if Bill is to pass on prematurely, the full sum assured of RM 500,000 would be inherited by his parents as they do not fall a part of Bill’s estate. The RM 500,000 is fully protected from Bill’s creditors. Inclusive of Policy 1, Bill’s parents shall inherit the RM 600,000 in total sum assured from Bill’s two life insurance policies.
Also, it helps Bill’s parents to avoid potential conflicts and legal disputes which could arise from unintended illegal use of sums assured collected from Policy 2. If Bill’s parents believe that the RM 500,000 received from Policy 2 is rightfully theirs and they use it without settling debts and tax liabilities owed by Bill and distributing it to the rightful beneficiaries, they may be sued by Bill’s creditors, the government, and even Candy, their daughter-in-law for her share in the sum assured. Instead of a blessing, Policy 2 could turn out to be a nightmare to both of his parents if they are unaware of their responsibilities.
Have Insurance, No Assurance?
Today, I’m sure most of us would have, at least, one life insurance policy. But, as a policyholder, the question we need to ask is if the policy or policies purchased can fulfill its or their intended purposes. This requires us to reflect what is to us important in life and how much is needed to offer adequate assurance in terms of finances to our loved ones. As such, it would be helpful to keep in touch with our insurance agents and estate planners so that our objectives will be aligned in accordance to our current wishes.
Do you want to find out more about how to protect your family with Wills & Trust? Here is a free strategy report that I highly recommend:
Presently, I noticed a growth in popularity of cash trust as an alternative vehicle to put in a sizable amount of cash among the affluent in Malaysia. Although it is promoted as an estate planning tool, many seem to find its promise to deliver a yearly return that is competitive rather attractive. Thus, it leads the public to be questioning if they should be investing in a cash trust.
So apparently, cash trust is now viewed more as an investment than a tool used for estate planning.
Is it supposed to be that way?
Well, in this article, I’ll share the basics of cash trust, its uses in planning estates and offer a discussion on its viability as an ‘investment vehicle’. Thus, here are 3 quick points that you should know about cash trust before setting yours up.
Point #1: What is a Cash Trust?
‘Ian, when you say cash trust, do you mean UBB cash trust?’
Well, the answer is nope. First, we would make a clear distinction between UBB and cash trust. UBB refers to UBB Amanah Bhd, which is a trust company that is operating in Malaysia. Meanwhile, cash trust is essentially a living trust which is set up to manage one’s excess cash.
Basically, here is how cash trust works:
There are five ingredients to setting up a cash trust:
First, the person who forms the trust is known as the settlor.
Second, the asset to be put into this trust is his cash and thus, the trust is known as a cash trust.
Third, the settlor could entrust an individual or a trust company to safeguard the cash in the trust. As such, this individual or the trust company would be the trustee.
Fourth, the settlor is able to instruct the trustee as to how his cash is to be managed and distributed with a trust deed.
Finally, the settlor can nominate his beneficiaries to the cash trust, which enables his beneficiaries (including himself) to inherit the cash if any one of the events such as death, disability, or illness happens in the future.
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Point #2: What are the Differences between FDs and Cash Trust?
Let’s say, we have Mr. Tan.
Mr. Tan placed RM 500,000 in FDs and another RM 500,000 into his cash trust.
In the event of his death, Mr. Tan’s RM 500,000 in FDs will be frozen. Hence, Mr. Tan’s beneficiaries would need his will document to unlock his FDs. Generally, it could take up to 9-12 months to expedite the will document and have his FDs in the bank distributed to his beneficiaries, assuming that his will is not contested.
But, as for Mr. Tan’s RM 500,000 in cash trust, this sum is not frozen. His trustee will continue to manage this sum based on Mr. Tan’s trust deed. For instance, in his trust deed, Mr. Tan can instruct the trustee to distribute the money to all his beneficiaries immediately upon his death. Hence, this will eliminate the lengthy process of expediting the will document in order to retrieve this RM 500,000.
In addition to this, there are many other estate planning features of a cash trust which is beyond the scope of this article.
As such, let’s move onto:
Point #3: How Does a Cash Trust Promise an Attractive Yearly Return?
Well, the answer lies in the trust deed of your cash trust.
As mentioned, the trust deed is like an instruction guide to administer the cash. You, as the settlor, would provide such instructions in your trust deed. Whereas your trustee is tasked to carry out such instructions, based on what is written in the trust deed. So, the trust deed is an important document in your cash trust.
Let me give you some examples:
Example 1:
Let’s say I want to set up a cash trust and place RM 500,000 into it. I intend it to be solely for estate planning purposes and do not have intentions of investing it for returns. Thus, as the settlor, I could instruct my trustee to place RM 500,000 into FDs for as long as I’m alive and healthy with a trust deed.
In this case, the trustee would have to carry out this instruction and park all RM 500,000 into FDs. Of which, the cash trust would earn interest income from FDs and the trustee could use it to offset any trust-related expenses.
Example 2:
Let’s say I intend to set up a cash trust and place RM 500,000 into it. But, unlike Example 1, I wish to have this money invested in Stock A, Stock B, Unit Trust AB, ETF C and Index Fund D respectively. Hence, as the settlor, I could include these wishes into my trust deed.
Likewise, the trustee would have to carry out these instructions as instructed in the trust deed. In this case, the profits of my cash trust shall be derived from all the investments listed above. However, if these investments failed and incurred losses, I cannot blame the trustee for these losses because the trustee is tasked and responsible in following the instructions in my trust deed.
So, what about UBB cash trust?
Also, what about its other competitors such as AmanahRaya’s Cash Trust?
Well, the answer lies in your trust deed. Understandably, these trust companies offer templated trust deeds where they would list down the instructions, which include how and where your cash is to be invested if you are healthy and alive. I would say that it is important to read and study these trust deeds carefully.
What are the underlying assets that the trustee is allowed to invest in?
How would these assets generate recurring income?
What are the key risks involved?
Here is the thing. Let’s assume that you’ve entrusted a trust company, be it UBB or AmanahRaya or any other trust companies in Malaysia to set up a cash trust. Subsequently, they incurred losses from investing in the underlying assets listed in the templated trust deed.
I believe it is not possible for you to blame any of the above trust companies for it is ultimately you, who gave any of them your consent to invest in these assets or vehicles. Remember: You are the settlor. The trust companies are just merely trustees. You are still ultimately responsible for the outcome of your cash trust.
Conclusion:
Cash trust is essentially a living trust set up to manage and distribute cash more efficiently. It doesn’t necessarily mean a cash trust product marketed by UBB or AmanahRaya or any other trust companies in Malaysia. I believe it is prudent to approach cash trust from the angle of estate planning instead of an investment.
Hence, it is best to speak to your own estate planner first to determine if a cash trust is needed and suitable to your own situation or otherwise.
On 12 July 2022, EPF launched i-Lindung, an initiative which allows its members to buy life and critical illness insurance policies at affordable prices. Personally, I view this favorably as I believe insurance is a key component to proper financial planning. One should have sufficient life, medical and critical illness coverage to face several potential financial calamities, if any arises.
I checked out the insurance products offered under i-Lindung. Of which, I like to share 4 pointers that all of us should take note when considering them to boost our existing insurance coverages:
#1: The Insurance Companies & Their Products
Presently, I discovered that there are 3 insurers that offer 10 different insurance products under the i-Lindung initiative. They are FWD, ETiQa and Prudential. Of which, 6 are takaful products and the remaining 4 are conventional products. In terms of insurance coverages, 5 offer both death and total permanent disability (TPD) benefits and the other 5 are critical illness policies. These policies differ in terms of:
1. Maximum Sum Assured.
2. Number of Critical Illness Covered.
3. Entry Age.
I summarize my findings as follows:
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Source: EPF
#2: The Premiums
Their premiums are calculated based on our current entry age. Hence if you are 30 this year, your premium would be lower than one who is 50 this year. After 1 year, the renewal premiums would be based on the age of 31, 32 and so on and so forth. Therefore, the premiums are not exactly fixed for eternity.
Personally based on my current age, the premiums for these products are:
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Source: EPF; Premiums are based on my current age.
Note: The above premiums are based on my current age. Your premiums would definitely be different from mine if we are not of the same age.
Under the i-Lindung initiative, we are allowed to buy all 10 products (1 each). In my case, I could add on RM 700,000 in death and TPD benefits and RM 400,000 in critical illness coverage with an annual premium of RM 1,884 or a total of RM 157 in monthly premium.
From my observation, it is not easy to find such deals with local insurers today. I would say, based on my premiums and benefits, this is worth considering.
#3: i-Lindung vs Individual Life Insurance Policies
So, should I choose i-Lindung over individual life insurance policies?
The answer is nope. Let me explain. First, i-Lindung offers group policies and so, we are not required to undergo any medical examinations to buy these policies. Hence, if you have pre-existing medical conditions, you could check out deals at i-Lindung to secure yourself additional life insurance policies.
But as individual life insurance policies, they are underwritten individually. So, if you are healthy today, I believe you should prioritize them first as you could get these individual policies at normal premium rates. Then, you may use i-Lindung as a sweetener to your existing individual insurance policies.
Second, the maximum tenure of individual policies could go as high as 99 years, which is higher than the maximum tenure of 60 or 70 offered by i-Lindung. So, I think i-Lindung should not be viewed as a substitute over individual policies but rather as a complement to one’s overall financial protection needs.
In essence, it would be ideal to have both.
#4: Tax Planning for Business People
First, we are eligible to obtain tax relief for products bought under i-Lindung. As I write, the only payment method to purchase these products are deduction via our balances at EPF Account 2.
So, let’s say I’m a self-employed dude who didn’t contribute to my EPF account.
Here, I want to buy all 10 products under i-Lindung. Hence, my premium will be RM 1,884 for this year. What I could do is to voluntarily contribute a total of RM 6,280 into my EPF account. Out of which, RM 4,396 (70% of the RM 6,280) shall be credited into my EPF Account 1 and my RM 1,884 (30% of the RM 6,280) will be credited into my EPF Account 2. As a result, I would be able to obtain:
1. RM 4,000 in tax relief for my contribution into my own EPF account.
2. Additional dividends from the RM 4,396 contributed into my EPF Account 1.
3. Tax relief for life and medical insurance premiums
Thus, my net premium for the 10 insurance products would be:
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I would say the more income I make, the more tax relief I would receive. In fact, it is possible for my premiums on the 10 policies to be relatively negligible after factoring in the various tax reliefs and additional EPF dividends to be received.
So, you might want to factor in all these tax reliefs and EPF dividends, when you plan to buy all these insurance policies.
Conclusion:
Personally, I think i-Lindung is a great initiative and would encourage all of us to log into our EPF account and check out these insurance deals. So, if you want to learn more about it, you may check out the following details:
‘Cash Trust’ as commonly promoted by some companies (other names are also used) is very different from the private trusts that trust companies normally provide as a service.
The normal private trust is a trust set up by a person named a “settlor” while alive, for an estate planning purpose, such as to provide for his own medical care on incapacity or to provide for children’s future education.
In private trusts, the settlor transfers to the trustee a trust asset or assets in the form of cash, investments and/or property. If it is cash for investment, it may be referred to as a cash trust.
In the case of the widely promoted Cash Trust,the agents of the trust companies will present to clients from an investment viewpoint. Typically, such products offer high yields and capital protection. The investor signs with the trust company a trust deed that allows the trust company to invest in anything it likes without liability for failure.
The focus when selling Unregulated Cash Trusts explains why some trust companies experience a surge in revenue and profit, far higher than trust companies selling normal trust services.
Q#2 What are the differences between normal and high yield Cash Trust?
Characteristics
Normal trust
Cash Trust
Objective
Meeting estate planning needs
Higher yielding “Unfrozen FD”
Role of trustee
Custodian
Directs how monies are invested
Return
No return promised or indicated
High return promised or indicated
Capital protection
Not available
Presented as guaranteed or protected
Creditor protection
Available if irrevocable
None if can withdraw prematurely
Upfront fee
Fixed fee
4 – 5% of capital invested
Withdrawal penalty
None
10 to 25% of capital
Fund management
Given to licensed fund managers
Given to fund managers who claimed to be licensed
Ownership transfer
After event (death or incapacity)
After death only
Taxation
Return taxable unless from dividend
Return is presented as tax free
Accountability
Account & tax certification provided
Undisclosed
Q#3 Where do monies in an Unregulated Cash Trust go?
This is a mystery. There is no disclosure on where the money goes or who the fund manager is.
FD rates range from 1 – 4%, REITs 5 – 6%, equities have widely fluctuating returns but generally is negative or poor because of poor market conditions this year, while yield on corporate bonds ranges from 6 to 8%.
Trust companies promoting Unregulated Cash Trusts charge around 4 – 5% annual fee. Assuming all funds are invested in corporate bonds, these would have to earn at least 11% to cover trustee fee and the promised return. Such bonds would not be investment grade but would be like high risk junk bonds. We could be wrong. But we simply don’t know anyone who can produce that kind of return, especially in the short term of 1-3 years, and yet able repeat the performance for an extended period like more than a decade. When someone can do that, they will be very famous and highly sought-after in the investment community. For example, billionaire Warren Buffett is someone with this calibre.
So the question to ask is where exactly are Cash Trust monies invested, who manages them and what expertise do they have.
Q#4 Are such schemes regulated?
I am not sure as I am not a legal expert. Promoters quote the Trustee Act 1949 and other legislations governing Cash Trust and that they are supervised by MOF, SSM, SC or BNM.
From my limited knowledge and understanding, there is no direct supervision on trust companies on any retail trust services other than for compliance with anti-money laundering activities. Legislation and supervisory agencies do not specifically cover Unregulated Cash Trusts and even if covered in future, such rules will not guarantee that players comply.
Unregulated Cash Trusts could fall under a legal loophole.
In the case of deposit taking or insurance sales, industry participants must follow stringent rules of BNM. The same goes for SC rules in the case of unit trusts and fund management.
There are no rules established for those who sell Cash Trusts. The promotion of such investment products is through agents who may not be regulated by the SC. The Cash Trust funds are managed privately, not under the supervision of the SC.
This is all I speculate. Take it with a pinch of salt.
In the case of trust companies, licensing is from SSM which is under the Ministry of Domestic Trade and Cost of Living, not under the Ministry of Finance. The capital required is low and there is minimal supervision, if at all. SSM’s jurisdiction relates to the Companies Act and does not cover sale of investment products, acceptance of public deposits or fund management.
Q#6 What are ‘authorised investments’?
Authorised investments are defined in S4 of the 1949 Trustee Act. This section gives a trustee general powers to invest for beneficiaries into specific classes of investments, such as government securities, companies with a 5-year continuous dividend record, and property.
This section is meant to safeguard the interest of beneficiaries in the absence of specific powers under a trust deed, by limiting investments to less adventurous ones.
However, in the case of Cash Trusts, the trust deed that customers sign invariably allows the trust company to invest in ‘authorised investment’. If you entrust a trust company to decide on your investments, why not ask your preferred trust company on“what exactly are the authorised investments?’’ Please proof me wrong if you can identify the clause in the Trust Deed that says otherwise.
In most of the cases, the monies are directed to RPS, Promissory Notes, shares in a private company or property, which are illiquid assets.
Q#7What is a ‘RPS’?
RPS stands for a Redeemable Preference Share. This is a form of preference share.
Preference shares may be issued by a company in addition to ordinary shares. The advantage of doing this is that the company raises funds without diluting voting rights of ordinary shareholders.
Typically, preference shareholders do not have voting rights and get dividends up to a fixed rate, only if there is a profit. They rank before ordinary shareholders in distribution for dividend or when the company is wound up.
Depending on what is provided in the constitution of the company, a preference share can be in various forms.
A preference share can be cumulative or non-cumulative. In the case of cumulative, any dividend unpaid (because of lack of profit) is accumulated as a debt. Such debt is paid when the company is able to, before any further dividend can be paid. In the case of non-cumulative, non-payment of dividend because of lack of profit is not carried forward as a debt.
A preference share can be redeemable or non-redeemable. A redeemable preference share (RPS in short) can be redeemable at the option of the company or at the option of the preference shareholder. A non-redeemable preference share is repaid only upon a stated maturity date.
A preference share can also be convertible to ordinary shares within a stated time frame, or non-convertible.
Bear in mind that a preference share is an investment signifying a share of ownership. It is not a liability of the company. If the company does not make profit, the preference shareholder does not get any return. If the company fails, its assets are sold and distributed to the creditors before preference shareholders, who may get nothing. Unlike in the case of a liability, the company has to pay the debt, whether it makes profit or not.
Q#8 What is a promissory note?
A promissory note is a promise in writing from the borrower to pay the lender a certain sum of money, either on demand or on a stated future date. It can either be negotiable (transferable to another) or non-negotiable.
A bank note is in effect a negotiable promissory note, payable on demand.
Q#9 What is the difference between investing in a share such as a RPS and a promissory note?
The main difference is that the RPS is equity not a liability, i.e. the company has no obligation to pay except when able. You cannot sue the company except when it breaches the terms of the issue.
The promissory note represents a legal debt which the company is obliged to pay when due, whether it is able or not.
Q#10 What is the ‘return’ paid out to customers of Unregulated Cash Trust?
This is supposed to be income from dividends or other forms of income such as gains arising from investment of Cash Trust funds. Such returns that are paid to investors should not come from capital but from income. Otherwise the capital gets less and less.
What is highly unusual about the Unregulated Cash Trust is the payment of ‘return’ to investors consistently at the promised rate. Compare this with EPF and Amanah Saham that provide stable income for decades, Cash Trust’s promised return is very outstanding indeed.
So the question is – how does the fund manager of the Cash Trust manage to achieve such returns year after year, after year, after year…?
Q#11 Are such returns taxable?
Such returns are taxable unless they are from distribution of unit trusts or from company dividends.
For tax free payments, there should always be a tax certification provided to the investor.
Q#12 High yield Cash Trust are compared with bank deposits? What is the difference?
The two are very far apart in terms of risk.
A bank deposit is what the bank owes you as a liability. Which means if the bank fails to pay you on maturity, you can sue the bank.
An Unregulated Cash Trust is an investment not a liability. If the investment fails, you will not be able to sue the trust company, except if fraud, gross negligence, misrepresentation or misconduct was involved.
Q#13 What are the risks involved in investing in Unregulated Cash Trusts?
It is possible for any investment to fail given the risk of illiquidity or business failure.
But the risks are much higher than normal if you do not know where your money goes or who manages the money.
Here are some of the important possible risks you should be aware of before investing:
When you do not know who is managing the money
Potential conflict of interest– when the trustee and the fund manager are not independent, the trustee will be conflicted in his duty to the investor. For example, he may not take action against a bad fund manager who is related to him. Or if he invests in a related party on terms that are unfavourable to the investor, such as investing in preference shares that are redeemable not at the shareholder’s option but at the issuer’s option, or perpetual loan notes where the capital is never returned.
Licensing – the fund manager may not comply with the law, if not supervised by any authority.
Experiences – Funds may be managed by an inexperienced fund manager resulting in loss caused by poor judgement.
Negligence or lack of care – Funds may be managed by a person who does not exercise sufficient care or worse, who does not feel any need to be responsible to look after the interest of investors. For example, he may fail to insure assets against catastrophes.
Abuse
Co-mingling – under the law, a trust company must keep each client account separate, not pooled or co-mingled. Otherwise, one client’s investment loss can affect another client. There is also the danger of the trust company co-mingling the clients’ funds with its own, in which case, it is possible for gains to be kept by the trust company while losses are spread among clients.
Lending to related parties – lending by a trustee to a related party gives rise to conflict of interest. The trustee may give the related party indulgence when he is unable to repay. Until it is too late.
Abscondment – the trustee may disappear with the funds entrusted to him.
When you do not know where the money goes, it could go to fund problematic projects, defaulting debtors or illegal activities or diverted for personal benefit.
Disclosure is very important. Otherwise, how are you going to assess your risks? Supposing you were to board a plane and the plane has some faulty parts that have a 50% chance of causing a crash. You would board the plane if you were unaware of this risk and if you were made aware, you would surely not board the plane. You need disclosure before you part with your money.
The higher the risk, the higher the reward should be. Let us say risks are assessed on a scale going from lowest 1 to highest 10, and the reward is lowest 1 to highest 10. If you have an investment with a risk of 6, you should expect a reward of 6 or better. However, if the promised reward is only 6 but the risk is 10, then obviously this would be a poor investment and not worth doing.
If that risk level is not disclosed to you, you would be investing blind, which is one of the biggest financial traps that I advocate readers to avoid. That is why they will be evasive about disclosing who handles your money or where it goes.
Q#14 The reason given for non-disclosure on investments is “confidential information” or “trade secrets”. Is that a good reason?
Not for me. If you invest in bank deposits, you know where your money goes and you get a statement. When you deal with a licensed fund manager, he will show you his track record, check your risk appetite and give you a regular statement on the composition of your portfolio and its performance. Same when you invest in a unit trust fund. Even when you invest in a company, it will provide annual audited financial statements.
There is no reason why the fund manager should not be able to tell you in general terms (without revealing any trade secrets or confidential information) where he intends to invest and regularly report to you how the monies have been invested and his performance.
Q#15 Are the yields offered by Unregulated Cash Trusts achievable?
It is possible but chances are very high that such high yields will not be achieved consistently.
Consistent pay-outs can only happen from a profitable source. If the investment is not profitable, then the pay-outs can only come from borrowing sources or new funds sold, which makes it a Ponzi.
In terms of yield, it is not unusual for unit trusts that are regulated under SC to achieve 10 to 20% p.a. or even beyond. So why go for uncertain and unregulated schemes when there are alternatives that offer as good a yield if not better, and that are properly supervised.
Since the underlying assets are ‘a mystery’, how would you know if they could / couldn’t achieve those returns? That would be like you giving money to a stranger to invest when he has an unknown track record and no one checks on his performance.
Also, it begs the question – who sweats to make a high investment return and then give you, a passive investor, a big share?
Q#16 The Unregulated Cash Trust has also been compared to the one offered by AmanahRaya Trustees Berhad. Are the two comparable?
The two are not comparable. The one referred to for comparison is a normal cash trust in which trust funds comprising cash go to investments in unit trust or to licensed fund managers to handle the fund management.
Such products do not promise high returns, are not restricted to short term periods, have no heavy withdrawal penalties and there is full disclosure as to who manages the funds and to where the funds go.
And by the way, AmanahRaya Trustees Berhad is not governed under the Trust Companies Act but under Public Trust Corporation Act 1995 after corporatisation. Meaning it has its own special set of rules that are different from that of other trust companies.
Q#17 A senior representative of SSM said that the trust company acts only as a custodian, and hands the fund management to a fund manager regulated by SC. What are your comments?
He is entitled to his opinions and findings. My speculation is that someone might have been misled and was referring to normal trust products for which the trust company acts only as custodian and hands over funds for investment to licensed fund managers.
But those who operate Unregulated Cash Trusts do not act merely as custodian. They receive the funds and either manage such funds themselves or through subsidiaries or related parties, none of whom are licensed. Had these fund managers been licensed, performance reports would have been made available.
The above article is intended to be shared for public awareness. Please share it to people who are interested in cash trust or related products for educational purposes.
Disclaimer: No warranty (whether expressed or implied) is made with respect to the accuracy, adequacy, reliability, suitability, applicability or completeness of the information contained herein, and both the author and the publisher specifically disclaim any responsibility or liability for any damages, lost profits, losses or risks, whether personal or otherwise, which are incurred as a consequence, whether directly or indirectly, of the use and application of any contents of this book.
A house (market value: RM 750k; mortgage balance: RM 250k)
Cash + FDs + Stocks = RM 500k
EPF = RM 500k
Insurance policies (sum assured: RM 500k)
The question is: ‘What is the best way to preserve and distribute these assets in the event of a premature death?’.
Obviously, the answer lies in the article’s title: Will and Trust. But, as easy as the two vehicles are, most in Malaysia don’t have a will and many more don’t know how to use both will and trust to protect their estates which often are the fruits of years and decades worth of labour. So here, I’ll like to share some pointers to you on strategies on using them to preserve the interest of your loved ones.
Let us begin:
#1: House
Upon death, the house will be frozen and shall form part of your estate. Here, it means that the ownership of your house cannot be sold or transferred. Now, as there is a mortgage balance of RM 250k, the banker would require this ‘balance amount’ to be settled first. So, if you purchased a MRTA policy which covers RM 250k, your insurer shall settle the mortgage in full. This situation is ideal.
But, there are two more scenarios.
You don’t have a MRTA policy.
Your MRTA policy covers below RM 250k (mortgage balance).
In both cases, your banker shall require the mortgage instalments to be paid on time, promptly every single month. Your debts don’t ‘evaporate’ after death. As such, your beneficiaries are required to pay the mortgage instalments to ensure that the property is retained. Otherwise, the house would be auctioned off and this will cause your beneficiaries to lose this inheritance.
Tip 1:
MRTA coverage ? Mortgage: Ideal Situation.
Mortgage ? MRTA coverage: Beneficiaries have to service your loan.
Why is this important?
This is because let’s say, you have a will. Your executor could take 3-6 months to apply for the Grant of Probate (GP) from the High Court. The GP enables him to retrieve your estates (house), settle all debts and taxes, and distribute it to your beneficiaries. So, if your beneficiaries like to inherit your house (RM 750k), they will need to pay its mortgage instalments to avoid it from being auctioned off in the auction market.
Can your beneficiaries use your cash to service the mortgage instalments?
Before obtaining the GP, the answer is no because your cash would be frozen as it is also a part of your estate. Hence, to service the mortgage instalments, your beneficiaries would finance them through:
Their own cash (savings).
Your EPF money (if they inherit it from you).
Your Insurance Proceeds (if they are nominated as beneficiaries).
Okay, what if the mortgage is fully settled?
Here, there are two scenarios. Either, you want to distribute your house to your beneficiaries:
Immediately
After a certain period of time (let’s say 5 or 10 years)
So, if the distribution is to be immediate, your will’s executor shall then transfer the house ownership to your beneficiaries. Otherwise, he shall transfer the title deed of the house to your trustee for safekeeping. The trustee shall hold onto it for a stipulated period of time (5 or 10 years). Upon maturity, the trustee would then transfer the house to your beneficiaries.
But, what if you want your properties to be sold off?
This would bring two more scenarios. Either, you want your property to be:
Sold off with the proceeds distributed immediately.
Retain the property for a certain period. Then only sell it off.
In the first case, your will’s executor shall sell off the property and once sold, he will distribute the netted proceeds to your beneficiaries. So, in the second case, your will’s executor shall first transfer the house to your trustee. Then, after the trust period matures, your trustee shall sell off your property and distribute the proceeds to your beneficiaries.
Tip 2:
Decide if the property is to be sold off or to be inherited.
Decide if beneficiaries are to inherit immediately or at a later date.
If the inheritance is immediate, a will should be sufficient.
If the inheritance is delayed, set up a testamentary trust in your will.
#2: Cash + FDs + Stocks
Like the house, cash, FDs and stocks in brokerage accounts will be frozen and as such, form part of your estate. Your will’s executor would need to first obtain its GP to get access to your estate. This enables him to use them to pay off all your debts and taxes before distributing them to your beneficiaries.
Here, the amount stated in this example is RM 500k. Most likely, if beneficiaries that you nominate are capable and mature adults, you can opt to distribute RM 500k immediately to them with a will. But, if your beneficiaries are minors or as you read this, you have a sizable amount of liquid assets (let’s say, RM 2 million, RM 3 million or RM 5 million), I believe you may consider setting up:
A living trust
A testamentary trust
What’s the difference?
You could set up a living trust with a preferred trustee to manage your cash. So, in the event of a premature death, the trustee continues to administer the cash placed in the living trust in accordance with the trust deed. This cash would not be ‘frozen’ as its legal ownership had already been transferred to the trustee. In this case, the cash may either be retained or distributed to your beneficiaries in accordance with the contents of the trust deed.
The process is as follows:
You set up a living trust.
You transfer assets (cash) into your living trust.
Your trustee manages the cash in accordance with the trust deed.
Upon death, your trustee continues to hold onto the cash.
Your trustee can keep or distribute it to beneficiaries.
Cash is not frozen so no ‘GP’ is required.
Alternatively, you may set up a testamentary trust. In such an arrangement, the executor of your will shall collect the cash, settle your debts and taxes and shall transfer the remaining cash to your trustee for safekeeping. The trustee shall be responsible in managing the cash entrusted and distributing it to beneficiaries.
The process is as follows:
You set up a testamentary trust (in your will document).
You retain the ownership of your cash in your bank account.
Upon death, cash is frozen so ‘GP’ is required.
Your executor collects the cash & settles all of your debt and taxes.
The remaining proceeds shall be transferred to the trustee.
Your trustee can keep or distribute it to beneficiaries.
#3: EPF + Insurance
EPF and insurance nomination bypasses nomination in a will document. So if you already have nominated beneficiaries to inherit both the EPF and insurance monies, your beneficiaries shall inherit the money. This would be suitable if you want to distribute them to your beneficiaries immediately.
But, what if you want to distribute your EPF and insurance monies in stages?
Then, you can choose not to nominate your beneficiaries via a will and not with EPF and insurance nomination.
There are a handful of differences between them and they are as follows:
EPF + Insurance nomination:
Bypasses GP. Thus, EPF distribution is executed quickly upon death.
Creditor protection.
Most likely, one-off or lump sum distribution.
Suitable for beneficiaries who are adults that are mature financially.
Suitable as ‘emergency funds’ upon death.
Will nomination (no EPF + Insurance nomination):
GP is required as EPF money forms part of your estate.
No creditor protection.
Distribution can be delayed or be in stages / instalments.
Suitable to stretch and prolong financial wealth.
Suitable for beneficiaries who are financially dependent.
If your EPF and insurance sum assured are huge, you may choose to do a hybrid nomination where you can decide which type of nomination is suitable for your EPF and insurance monies.
Conclusion:
Typically, there are 2 key tools to do estate planning: Will and Trust.
But with them, we can see that there are multiple variations to how both are to be used in protecting and distributing different kinds of assets. Thus, I believe it is practical for one to leave the job of planning our estates to one, who acquires and possesses the right skills and experiences in this area. So here, in summary, let me state the key pointers as discussed above:
1. House
Have MRTA coverage ? Mortgage
Decide the form of inheritance: the house or its disposal proceeds
Decide the time frame of inheritance: immediate or delayed.
If it is immediate, a will is sufficient.
If it is delayed, set up a testamentary trust.
2. Cash + FDs + Stocks
Beneficiaries = financially mature adults: a will is sufficient.
Beneficiaries = financially dependent: set up a trust.
Hand cash ownership to trustee = set up a living trust.
Retain ownership of cash = set up a testamentary trust
3. EPF + Insurance
Determine if inheritance is immediate or delayed.
Immediate = EPF and insurance nomination.
Delayed = use will nomination.
May select a hybrid model.
If you have any questions on estate planning, please post them below:
