Borneo Post with the expert help of Rockwills Trustee Bhd, the leading specialist in estate planning having pioneered wills and trust 24 years ago, is publishing a regular Q&A column on estate planning. It will feature questions which readers have in mind but don’t know who to ask:
Question 1: I have five children and I hope that they can continue the business that I have built, is there anything I need to be aware of?
Rockwills Answer: Business succession can be a very complex matter and there are many factors to consider before reaching for the best planning solutions. Assuming all your children are adults, you have to consider if they are interested in succeeding you in your business. There is not much point in giving the shares of your company to those who are not interested in your business may lead to a deterioration in business, profitability and value. At the same time, you should also take into consideration those among your children who are already involved in your company, because they may feel it is unjust and get disheartened that you give away the company shares to other children of yours who have never contributed to the business.
Without careful planning and proper advice, a family business could be fragmented when your successors cannot agree on a common business direction resulting in dispute and break-up. To avoid such issues, you can consider setting up a business succession trust. A business with a succession plan in place is able to maintain the value of the business while maintaining the confidence and morale of its employees.
A business succession planning would cover the following areas among others:
• The successor – family member, business partner, delegation of powers;
- Succession type – partial or full succession;
- Timeframe – defined period, triggering event (death, illness, comatose, disappearance, etc);
- Key personnel – alternate director, key employee, authorised signatory;
- Legal considerations – exit arrangements, buy-sell agreement, legal succession structure;
- Risk management – risk impact to the business value;
- Financial considerations – cash flow and liquidity, debt extinguishment, sale price, tax implications.
- Protection of capital – protection of beneficiaries from unwarranted or future claims, prevention of squandering, discouraging unwanted behaviour and motivation for goal achievements.
Developing a succession plan may require expertise in estate planning, financial planning and tax planning, to ensure your succession plan is achievable and will not have tax or financial pitfalls. Consult a professional estate planner for the best structure for your succession plan.
Question 2: I have heard a lot of people saying that a Will must be in a written form. With today’s video recording technology, why can’t we video record ourselves of how we want our assets to be distributed?
Rockwills Answer: Yes, part of the requirement for a Will to be valid in Malaysia is that it needs to be written. No doubt video recording nowadays is very advanced, it is also very accessible to anyone but such method of making your Will is not recognised by law, namely the Wills Act 1959. This Act was first enacted in the year 1959 and was last revised in 1988, hence this may explains why the Act did not include other more modern methods of recording the Wills. However, a video recording of the testator and both witnesses signing the Will could be useful to prove that the Will is signed in the presence of each other and also could prove that they signed the Will free from any duress, in case the validity of the Will was being challenged.
This Q&A Column in published as a joint public service and educational initiative with Rockwills Trustee Bhd. Please email your questions related to Estate Planning to [email protected] or Rockwills’ training and business development senior manager Sam Chan ([email protected]).