During a webinar I hosted featuring Evanna Phoon and Chris Foong (Senior Manager of Rockwills Advisory Services), I asked the question: “According to Foong’s past experience dealing with over 40+ multi-billion/millionaires, what is the most common concern of a high-level individual?”

You can watch the video below on Chris Foong’s sharing:

Chris Foong: Actually one of the main and most common concerns , I think you have heard of it, is the Spendthrift Beneficiaries.

KCLau: Oh, that means that one of the heirs will be spending a lot of money.

Chris: Exactly. Let’s say they have a little four or five children, or two, three children for example. The tendency is that one of them will be like that. I mean throughout experience, this is quite real, in the real world I would say. That tendency actually gives some sort of problem if no proper planning is being done.

Of course, let’s say if a client has a multi-billion dollar kind of business empire, you may not want to transfer the shares to such a beneficiary. So, there is proper planning that needs to be done.

We most commonly use a type of a structural trust fund, whereby at the death of the testator of course you will not want to neglect this child. We still want to benefit this child. But, do not want this child to own a lump sum arrangement straightaway.

Maybe, it will be done in staggered payments or we can even design incentives. For example, say if you would like to look at this much allowance or whatever from the trust fund, every month, or year, or whatever it is. You will need to work or prove to us that you have capability of generating income or a way to match that. Otherwise, you will just be given a very minimum kind of allowance just to sustain your living expenses.

Definitely not giving him a big amount at one go.

KCLau: So, this is setting up rules saying that if you are making ten thousand a month, then you’ll get a certain allowance, let’s say another ten thousand from the trust, or something like that.

Chris: Yes, something along that line.

KCLau: Iff the beneficiary is not working, the trust maybe will just pay him…

Chris: A minimum amount.

KCLau: An amount, say, two thousand or three thousand a month.

Chris: Exactly. Correct. And this little worry actually leads on to another worry. Assuming that your child is actually already married or with children, most of the time, the grandparents are worried. I’m like this. I’m also worried that my grandchildren are not taken care of. So, that’s why.

KCLau: I see. How do you arrange that? How do you arrange for the grandchildren to get more money or benefit than the parents?

Chris: Sometimes they will invest on this type of trust called Generation Skipping Trust.

KCLau: Skipping? Generation Skipping?

Evanna: Yeah, they skip the parents.

Chris: Actually in simple terms, it’s just really something for the grandchildren. Again, this something could be cash or it could be an entitlement to shares in the business.

This will be in a proper structure. Whether it will be in the form of a trust or foundation, we will need to look at the customer concerns before we can advise. But definitely these are very real, true worries.

In fact, if you ask me, one of the other common worry I think I should tell you now…

KCLau: Okay, good.

Chris: It also includes the family members that are not in good terms. These are quite common as well.

KCLau: Not in good terms. For example?

Evanna: Internal fighting.

KCLau: Oh.

Chris: Yeah, brothers fighting for roles to be played in the business itself.

Evanna: Sibling rivalry.

Chris: Sibling rivalry is quite common as well. Some of worries like, “I have no problem benefitting my son or my daughter. My worry is that when I pass on, and the spouse will re-marry. I don’t want my inheritance to be given to them, you know, the in-laws, daughter-in-law, son-in-law, and eventually benefitting also their in-laws. That is also one of the worries.

And another will be protection. That’s right – protection. I have a client, of course, I can’t mention names, but he is definitely a high-level client. He actually set up a living trust whereby he transferred almost 30 million worth of insurance into the trust. This living trust is actually an irrevocable living trust.

Why is it called that? It is because after five years of setting up this trust, assuming the entire transaction is done without any fraud and depending on what will happen to the client himself, he does not need to worry about creditors coming to claim from him over the sum of the insurance proceeds. That’s also one of the main benefits of setting up a trust.

KCLau: Oh, great. So, what you are saying is that one of your clients actually transferred or assigned about 30 million worth of insurance into a living trust, and it is irrevocable. Irrevocable means, it cannot be cancelled, right? Once that’s done, it’s already done.

Chris: Right.

KCLau: So, after five years if he’s got a creditor who want to chase over the money, they cannot touch the trust money.

Chris: Yes.

KCLau: That’s very suitable for those kinds of business which is engaging in quite high risk trading or something.

Chris: Exactly.

For Premium Webinar Members, you can watch the full 60 minutes replay of the session here:


Personal finance author and trainer

Leave a Reply

Your email address will not be published.