Your gateway to wealth management

By David Kinloch, CEO, Labuan IBFC

Bill and Melinda have one. Bill and Hilary have one too. Warren thinks they are wonderful. The Rockefellers and Du Ponts have had ‘em for generations. Bob uses his for Africa. Even the Blessed St. Tony swears by his. As tools for wealth management and succession planning, trusts and foundations have, in one form or another, been around for many, many years.

And now you can have one too. Safe, cost effective and close to home. Once regarded as only available to, and suitable for the extremely wealthy, Trust and Foundation structures are now regarded as tools for sensible, long term financial planning for any family having reasonable assets and businesses of substance

The very concept of a Trust where, literally, a family gives its wealth to another company or individual to own, keep and manage on their behalf came into existence many centuries ago and has been refined down the years into a highly sophisticated mechanism for the management of wealth and the minimisation of the taxes inevitably associated with it.

The Foundation, with its implication of charity and benevolence is, in essence just the same as the Trust but operates more effectively in a Civil law environment, (Trusts, simplistically, operate in Common law jurisdictions), but in either case, although there may be some level of philanthropy attached. The idiom “charity begins at home” applies and both these instruments are most often used for the family’s generational benefit.

Unknown thus far to many, here in Malaysia, there is a wealth management centre of excellence which has been developing but has now blossomed. The development of Trust structures in Labuan has been going on for some time but with the passage of the Labuan Financial Services and Securities Act 2010 (LFSSA), the Island took up its (rightful) place at the forefront of international Wealth Management planning.

There has already been very considerable interest internationally in the new legislation as Family Offices, Fund managers and Private Banks seek safe, secure and reputable domiciles for their own, and their clients’ funds in the light of the recent international financial turmoil.

The various road shows and events undertaken by Labuan International Business and Financial Centre through its sales and marketing arm, Labuan IBFC Inc. Sdn. Bhd. have been extremely well received. New or redomiciled Trusts and Foundations have been, or are arriving into Labuan from domiciles as varied as Denmark and Panama, Guernsey and Switzerland.

But it is in the local Malaysian context that Labuan Trusts and Foundations are most interesting.  As a bit of history, until August 2008, Malaysian nationals were pretty well forbidden from dealing with, in or through Labuan. Then limited permission was given for some activities were allowed, subject to various approvals being given by the Authorities in advance.

Further to the enactment of LFSSA in February 2010, Labuan is now open for business to Malaysian’s and non-Malaysian residents alike and both international and domestic assets can be placed into Labuan Trusts and Foundations for the ongoing benefit of future generations.

Labuan now offers unique opportunity as a tool for international financial planning – whether for a Malaysian managing this wealth or seeking to do business abroad, or acquire assets abroad or for expatriates wishing to put their affairs in order (either before coming to Malaysia or whilst already resident here).

Using a structure involving a Labuan Foundation, a Labuan Limited Partnership and a Holding Company (Labuan incorporated, of course) can also enable the family and beneficiaries to retain control of the business and its assets whilst at the same time reaping the long term benefits from the arrangement.

Labuan represents a convenient, competent and cost effective option to the more ‘exotic’, usually more expensive and certainly less credible options that have historically come to mind, such as BVI, Cayman, Panama, Mauritius and ... oh, does the list goes on!

The Labuan Financial Services Authority is a member of all of the major recognised Bureaux of Regulators and Supervisors and takes its global responsibilities very seriously. The Association of Labuan Trust Companies, the Labuan International Insurance Association and the Association of Labuan Banks all have members who are licensed and regulated by the LFSA and are happy to provide advice. Lists and contact details of these associations are available at www.LabuanIBFC.my.

One final word. This article can only scratch the surface of a very complex, though effective method of wealth management. Whilst putting your affairs in order through Labuan is probably a much safer long term option than any other available locally or internationally, you MUST take the appropriate professional advice before considering any of the structures mentioned. Talk to your lawyer, accountant, bank or Advisor before proceeding.

It can only help your family’s long term future. Isn’t it nice to have cutting edge financial technology right on the door step?