Charitable Planning

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Charitable PlanningCharitable Planning

Leaving Your Legacythrough

Chua Tia Guan Head of Tax & Financial Planning

Great Vision Advisory Group

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Definition of Legacy

• Moral values?

• No clear definition

• Reputation?

• Vision?

• Money or Wealth?

• Contribution to the society?

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Why the RICH use charitable planning as a means of leaving their Legacy?

• Strong sense of calling

• Visionary

• Tax benefit purposes

• Reputation and recognition

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Why the RICH use charitable planning as a means of leaving their Legacy?

• Preservation of wealth

- legacy for generations

- children not capable

- fish vs fishing net

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Charitable Planning

(a) : Determine your Cause

(c) : Decide how much to set aside

(b) : Determine who can benefit

(d) : Determine the type of vehicle

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Generally in Malaysia, the work 'charitable' can be classified into four categories;(a) for the relief of poverty;(b) for the advancement of education;(c) for the advancement of religion;(d) for other purposes (e.g. medical, sports, cultural etc) beneficial to the community

(a) : Determine your Cause

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• is it limited by nationality?

• whether for specific race, colour, religion or group of people?

• whether the founder’s family members can benefit from the trust or foundation

(b) : Determine who can benefit

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• will it be a lump sum contribution or periodical contribution

• will the trust/ foundation be dependent on the founder’s contribution only or also from the general public

• Depends on the distribution requirement and budget

(c) : Decide how much to set aside

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(d) : Determine the type of vehicle

Types of charitable planning vehicles available:-

• Setting up foundation/ institution/ trust

• Using testamentary trust

• Using insurance trust

• Outright gift

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(d) : Determine the type of vehicle

Tax Approved

Organization/ Institution/

Trust

Non-tax Approved

Organization/ Institution/

Trust

vs

If using Charitable Foundation/ Institution/ Trust

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Benefit of Tax Approved institution/ organisation/ trust

• Tax deduction on cash donation paid

- Individual/ corporate donors allowed deduction up to 7% of Aggregate Income

• Tax exemption on income (including donation)

- Income fully exempted

(d) : Determine the type of vehicle

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Tax Approved vs Non-Tax Approved BodyIssues for consideration:-

• Approval from IRB

• Board of Trustee

• Beneficiaries

• Minimum fund disbursement requirement

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Tax Approved vs Non-Tax Approved BodyIssues for consideration:-

• Approval requirement for changes

• Investment

• Tax benefit

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• The institution or organisation may be established through the following

(A) Company limited by guarantee (Companies Commission Malaysia)

(B) Other organisation/ institution (Registry of Societies)

(C) Trust Fund under Trustees’ Incorporation Act (PM’s department)

(d) : Determine the type of vehicle

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A) Company limited by guarantee (Companies Commission Malaysia)

• Need to obtain approval from Minister of Domestic Trade and Consumer Affairs

• Need to prepare project paper to state the following:-

i)Company’s Objective ii) Cash flow projection for first 2 years iii) Background and profile of the founder

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A) Company limited by guarantee (Companies Commission Malaysia)

• Need to prepare project paper to state the following (Cont’d):-

iv) Donation commitment letter from the founder on the amount to be donated into the Company

v) Background and profile of the board of directors

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A) Company limited by guarantee (Companies Commission Malaysia)

• Any amendment to M&A or appointment of new directors will need Minister’s approval

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B) Other organisation/ institution (Registry of Societies)• Terms of the Foundation governed by the

constitution & Societies Act

• Lengthy process to set-up

• Management of the society (i.e. meeting, voting, etc) need to be clearly stipulated in the Constitution

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C) Trust Fund under Trustees’ Incorporation Act (PM’s department)• Trust Fund incorporated under Trustees (Incorporation) Act, 1952

• Terms of the Trust Fund governed by the trust deed

• Need to apply to the PM’s department for

the incorporation of the Trust Fundso

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C) Trust Fund under Trustees’ Incorporation Act (PM’s department)• Appointment of Trustee subject to approval from the PM’s department

• Any subsequent changes need to apply to the PM’s department for approval

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Conclusion• Objectives?

• Beneficiaries?

• Eligibility or criteria?

• Board of Director/ Board of Trustee?

• Funding

• Project paper (including projection of receipt and expenditure)

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Thank youwww.greatvision.com.my