Category: business

Retirement, is defined as the ending of working phase in life, which is anticipated to be one that is dominated by leisure that is paid for by savings and benefits accumulated during the employment phase. This is how most investment companies sell retirement plans ideas anyway.

There seems to be a great divide of lifestyle – before and after retirement period.  But most people who have experienced the shift would tell you otherwise, especially as we journey into the future with increased longevity, greater responsibilities, eroding filial piety, shifting attitudes and different economic landscape.

The idea of retirement would be rather different, say by 2050. I would think that in the future, the younger cohorts may not know the word retirement, either due to circumstances or by choice.

Stop Working? No Way!

“Oh I don’t plan to retire. I’ll work till I die. It’s more fulfilling.”

This is a phrase we hear increasingly often nowadays. Unfortunately, this may soon be a reality for many of us, as the sociographic landscape is bound to evolve in years to come.

The societal acceptance of single living or family without kids has dropped birth rates historically low, causing our projected population to be made out of a growing number of the elderly.

This would undoubtedly affect our dependency on the older generation to contribute to the workforce. Coupled with the increase in retirement age following the increase in life expectancy in the next 30 years, we would have no choice but to let the elderly continue working for the betterment of our economy.

Work? Leisure? Why Not Both?

Friedmann and Havighurst who first defined the concept of retirement  which we think of today, in a 1954 research found that people at that time viewed retirement as a time that they could truly engage in leisure activities and that their working age was the period of time to save towards this end.

However, fast forward to today and towards the future, when general standard of living increase and leisure becomes more accessible and affordable, not to mention more varied, we tend to enjoy both work and leisure at the same time.

This makes the concept of retirement seems less convincing and attractive. In the past, people did not see work and the workplace as central to their life interests.

Today, as the pace of economic growth quickens, we look at our career as being central to our lives, and as work and leisure become inextricably interwoven, Friedmann and Havighurst’s idea of retirement as a discrete phase of life dedicated to leisure becomes less relevant.

Blessed With Longevity

With progress in medical treatments and the rise of health-conscious lifestyle through better awareness, an extended life expectancy can be expected.

There is a high probability that life expectancy will continue to increase in industrialised countries in the Americas, Australia and the Asia- Pacific. Already, the average life expectancy will increase in many countries by 2030 – with South Korea expected to exceed 90 years of age. (Source: A 2017 analysis by Imperial College London and the World Health Organisation)

As life expectancy increases, people are also living healthier lives both physically and mentally, and being “too old” to work may seem to come much later in life than anticipated.

Some would argue that the elderly would become irrelevant due to technological knowledge demands. We might be able to say this about the elderly of yesteryear, but it certainly would be different for current generations which grew up with technology and the Internet of Things, and whose lives are being intertwined with technology whether they like it or not.

Shifting Attitudes – Do You Even Want To Retire?

As jobs turn into careers and knowledge or experience is prized over physical labour, we value our contributions to the society.

With mundane jobs and repetitive tasks are replaced by technology and artificial intelligence, our society in the future would be left with nothing but intellectual jobs.

Having to stop working all of a sudden would certainly leave a gap in a person’s purpose in life, especially when filial piety is on a downtrend as well.

As we crystal-ball into the future, the very idea of retirement may seem invalid as people would continue working until they are mentally incapable. Indeed, the very idea that a person stops working and becomes irrelevant to society does not sound like a very appealing thing to do.

Do You Still Need Financial Planning?

With all that said, having a financial plan will allow you to successfully not retire. Financial planning is far more expansive than just “save for retirement.” There’s a lot of life to live between now and when or if you decide to stop working.

There are plenty of other short-term goals and milestones in your life that you likely want to hit – starting a new venture, growing your family or buying a new home and traveling around the world. And financial planning provides a system and a process to make some of these goals possible.

About the Author

Alvin Kwan, CFP ^{CERT TM} is the executive director and head of financial planning at Redvest Wealth & Asset Management. He has over 12 years industrial experience in the financial industry, specifically in wealth advisory, private banking and stock broking. He was also a lecturer in areas of investment management, derivatives, and financial markets.

We at Smart Investor and Redvest is committed to help you better manage your financials. Get a free consultation from an expert by filling in your details here: https://www.smartinvestor.com.my/SIxRedvest

I learned my first money lesson from my parents. Did you?

My parents are thrifty folks. They are always on the lookout for a bargain, down to the smallest item even when grocery shopping. The first thing they taught me about money is to always spend less than I make.

It is the first rule in personal finance – never spend more than you earn.

The Jews are one of the best wealth creators on earth. As part of their culture, Jewish parents teach their children about wise money management as soon as they can talk. One of the critical lessons is to have a “savings” jar. Children are required to put money in the jar, and they can only open it on special occasions like a medical emergency. 

Now we can agree that saving is essential. But the problem is that saving money is hard. It is a money habit that is hard to practice due to the human nature of desiring instant gratification. If everybody can help themselves, there will be no need for charity. Kudos to you if you can regularly save a portion of your income.

During the old days, some determined families save their cash in Milo tins. It took a long time for them to trust the banks and deposit their money with financial institutions.

Back then those who did not bank in their money were losers because let’s face it, you don’t gain any interest return by having your cash sitting idly under your pillows, do you? Moreover, what if you got robbed?

After decades of changes, people are more comfortable depositing their money in banks nowadays. Most people perceive Fixed Deposit as the safest investment that gets guaranteed interest income, and capital protected. In Malaysia, we also have PIDM to safeguard your bank deposits with insurance. However, the same situation still persists – savers are still losers. You might be robbed too.

Now you must be wondering why I say saving money could get you robbed later. I am referring to the effect of inflation. Imagine your FD interest being 3.5%, and the inflation rate is 4%. The phenomenon depletes your buying power day by day, year by year…until it might be too late for you to do something about it.

Banks run a leveraged business. Your money in a bank’s savings account allows the bank to lend a higher amount to someone else, who is more capable of making good use of it. Borrowers fund their business ventures and real estate investments with the money you put in the bank.

In other words, think of the bank as the middleman. On one side, the poor and the middle class try to save as much as they can with the banks. On the other side, business owners and investors borrow more money through bank loans to leverage up their business expansions and investments.

Savings is for losers. Inflation and also the government that prints more money are probably “robbing” the savers. Going to the other side, when you take a loan from a bank, they become your business partners because they have confidence in you to make better use of the funds.

When you face problems while trying to pay back, they will share your fear as well. Therefore, if you want to beat inflation and do not want to see your savings depreciate over time, you will need to be the player on the other side.

In fact, saving money is just halfway to financial success. If you do nothing with the money to generate a higher return, you will always be on the losing side. Investing your savings and also borrowing more from the bank to invest will make you a player on the other side.

Treat the bank as your financier to fund your business and your investment. Don’t treat them as a safekeeper of your money. If you do, just wait to be robbed.

About the Author

This article is written by KC Lau. KCLau is a financial educator, having published seven books including the current bestseller Money Smart, and co-created a dozen online financial courses. He gives away his popular Money Tips e-book volumes free at his website: https://KCLau.com

Life can throw us curveballs unexpectedly. Some of the events can be devastating and when we get hit, it could make life hard for many. To some, it may not be a significant event but to others, it may be a huge blow.

Whether or not it is a huge blow, it boils down to whether or not we are in a good or healthy position to deal with the consequences and many a time, it involves spending or using money to solve or put off the fire.

When these surprises happen, we have to deal with it and make adjustments.  Generally, we have these three choices:

• Extend our timeline;
• Forgo our goal;
• Live with regret.

Of Critical Importance

That is what makes having emergency funds or savings a critically important item.

I have seen many people in “thin” situations financially. In fact, not too long ago, it was reported in news that many young people (75% as a matter of fact) admitted that they would not be able to fork out RM1,000 to deal with unexpected emergencies. This shows how fragile we are.

If you think that this news is unfounded, please know that the source of the alarming data is the central bank of Malaysia, so, this is certainly no fake news. In another news, we were told that working Malaysians could not survive six months if they were to lose their income.

How to Put Money Away Easily

Is there a good way for people to save money and ensure the money gets saved? The easiest way − and I have seen it working countless times − is to save the money you bring home without you being aware of it, or having to remind yourself to do it.  

Automatically Move It

The first way is pretty simple. You just have to login to your internet banking and look for the transfer of fund button, make it automatically repeat on a monthly basis on a date you are certain your salary will be credited to the account (don’t pick a date that is too far away from this date but try to be within a three-day range).  

This mean you will have successfully “outsourced” this job to your online banking system in that it moves your money from your salary-receiving account to another account without you having to worry about forgetting to do it.

However, it is important to note that you nominate an account you will not have easy access to, like an account without an ATM card, or an account that has very few branches or that each MEPs withdrawal will cost more than RM1.06.  The trick is to move the money where it will not be easy to make unplanned withdrawal or spending.

Park at Flexi Mortgage Account

If you have a flexi mortgage account, you can also “park” your money there. It will benefit you and help you to retain the money as a rainy day fund.

Liquid Cache

Alternatively, you may set up a standing instruction to move this saving into a money market fund or cash management fund. It is important for our rainy day fund to be liquid-like cash and money in a savings account, as these two options provide this feature.

Big No-No

If you are trying to force yourself to save money by signing up for an insurance endowment or savings plan, this may not be the best thing to do because when you signed on the dotted line, you are in fact agreeing or committing to pay the fixed amount of premium over a long term period which could be five to 20 years or even longer. This means you will not be able to withdraw the amount you may need in an emergency, unless you are in the late stages of the policy life or have past the guaranteed premium paying years.

It is important to note that the instrument or place we choose to park our emergency or rainy day fund has the right criteria and characteristic, and is safe, liquid, and cost-free.

About the author

Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my. 

The search for “the fountain of youth” has had a long history, from tracking down sacred, life-giving water sources in the days of antiquity, to the invention of “miracle pills” and stem cell research in the modern age.

You are born with approximately 20,000 blood stem cells, which your body uses to replenish your blood. Over time, and depending on the “abuse” you put your body through, these cells become damaged and die. As your blood stem cells dwindle, your body becomes less efficient at repairing and regenerating itself.

In essence, your blood stem cells may be the proverbial “clock” that eventually runs out, no matter how well you take care of yourself. In the meantime, however, you have a great deal of control over how quickly those cells perish.

Is your personality geared for longevity?

Personality for Long Life

According to results from The Longevity Project, a Stanford study spanning 80 years, your level of conscientiousness may have a great deal to do with how long you end up living. Having a personality that strives to do things well; being thorough and vigilant − this is a trait that most of the people who live the longest share.

Sense of Purpose

The Longevity Project also dismisses the idea that hard work will kill you early. On the contrary, those who stayed productive and worked hard all their lives tended to be happier, healthier, and more social compared to those who didn’t work as hard. That’s not to dismiss work stress as a factor that needs to be addressed and kept in check.

Social Connection

But being productive can also lend a sense of purpose, which is very important for longevity. And working—especially in your later years—tends to keep you socially connected, which has repeatedly been shown to be an important factor for longevity.

You Are What You Eat

No discussion about longevity would be complete without addressing diet. A processed, high-sugar diet is undoubtedly the quickest route to an early death, barring a lethal accident. This is because consuming sugar and grains increases your insulin and leptin levels, which is the equivalent of slamming your foot on your ageing accelerator. Besides that, research by Professor Cynthia Kenyon shows that carbohydrates have a direct and detrimental effect on two key genes that govern longevity and youthfulness.

Ideally, you’ll want to replace all forms of processed and refined sugars and grains with healthy fats such as butter, olive oil, coconut oil, avocado, grass-fed meats, and raw nuts. Many would benefit from getting as much as 50-85 percent of their daily calories from fats.

Mindfulness and Perpetual Motion

There’s compelling evidence suggesting that having a calm mind and active body are two important ingredients for longevity. The meditative technique known as “mindfulness” has even been shown to have a beneficial effect on genetic expression. Meditation has also been found to affect the enzyme telomerase, which some researchers believe is actively involved with the process of ageing. As for keeping your body active, avoiding sitting is perhaps of even greater importance than having a regular workout regimen.

The science is very clear on this point: sitting too much is a surefire way to take years off your life! And that applies even if you exercise vigorously a few times a week. Basically, what the research is telling us is that getting too hung up on a once-a-day exercise routine is to put the cart before the horse. First, you need to make sure you’re engaging in more or less perpetual non-exercise movement, as this is an independent risk factor for chronic diseases like diabetes and heart disease.

Life Long Learning

Education is also strongly correlated with a longer life. If you think you know it all just because you went to high school or college, you might as well pack it up. It’s all downhill from there. My perspective is to be a lifelong student. If I lived for several hundred years, I don’t think there is enough time to learn all the topics I would like to. That said, merely getting an education can have a great impact, and perhaps it’s because it teaches you to be a student.

Lifestyle Choices Today Impact Tomorrows

The takeaway message here is that you have a great deal of control over your life expectancy, based on the personal choices you make − from how you think to how you move, and what you choose to eat − and when.

In the end, there is no quick fix when it comes to longevity. There is no magic pill and no fountain of youth. Although some people seem to be blessed with longevity in spite of their lifestyle choices, this is the exception and not the rule. For most of us, becoming healthy Centenarians will require effort and attention to the factors discussed above.

This article was brought to you by Dr Mercola, a New York Times bestselling author. For more helpful articles, please visit Mercola.com

Insurance planning is the foundation of a good financial plan, ensuring that you have a backup plan to provide enough family income and to fund medical expenses in the event of unforeseen circumstances such as premature death, total permanent disability, critical illness, accidents and hospitalisation, in terms of personal risk.

You should also extend your insurance planning to cover properties risk, liability risk and professional liability risk based on your circumstances and needs.

In the financial planning process, you must first determine your current financial position and make sure you have emergency funds for six to 12 months before you proceed to insurance planning.

With proper assessment of your current financial position, which includes your cash flow and net worth statements, you can determine your insurance needs more clearly in terms of family expenses and outstanding debts obligations.

As a financial planner, I would normally advise my clients to have adequate emergency funds and insurance coverage before they consider venturing into investment. As far as investment is concerned, all investment assets need time to mature to meet your financial goals without any disruption from personal risks, property risks, liability risks or professional liability risks arising from unforeseen circumstances.

Insurance serves as the cheapest and most effective tool to cover potential financial losses without touching your investment assets.

When engaging in insurance planning, seek advice from your trusted professional financial advisor to assist you while working out which insurance plan will best fit the requirements of you and your family, according to the following guidelines:

• What kind of insurance do you need?
• What will your insurance policy cover?
• How much insurance coverage do you need?
• How much will you be paying for the insurance coverage?
• What happens if you fail to pay the required premiums?
• Should you replace an existing insurance policy?
• What happens if you terminate your policy?

Your active participation is required when working with your financial advisor to work out an insurance plan that best suits your needs. Be honest about your financial situation. Communicate your goals and objectives. Do not be afraid to ask questions! 

In the attached charts, I have provided some guidelines as to the types of insurance coverage to consider. You may then determine the quantum of coverage to ensure you and your loved ones are protected. Take time to make your decision. Regard your financial advisor as a trusted partner, and not merely a salesperson.

What Type of Insurance Do You Need?

If you are worried about…	You may want to consider this type of insurance…	How it helps…
Life insurance
Death of breadwinner	Life	Provides some money for your family if you die.
Total & permanent disability	Life	Provides some money for your family if you suffer from a total or permanent disability.
Death of mortgagor/main borrower of home loan	Mortgage term reducing insurance (form of life insurance)	Pays off mortgage if mortgagor dies.
Health insurance
Trauma/critical illness	Critical illness	Pays a portion or lump sum on first diagnosis of serious illness.
Medical bills for major illness or accident	Medical expense, other hospital and medical plans & riders	The main medical expense insurance plan pays a portion of hospital and surgical costs if you are ill or suffering from injuries due to an accident. Complementary plans such as riders cover co-payment portions (eg deductibles and co-insurance) that are not covered under a main plan.
Long-term care for disability	Long-term care, eg supplements	Pays a fixed monthly amount for long-term treatment upon the insured’s inability to perform a number of “activities of daily living” like bathing, dressing, etc.
Loss of income because due to hospitalisation	Hospitalisation cash plans	Provides income if you are hospitalised.
General insurance
Loss of or damage to your belongings	Home contents	Pays for repairs or replacement if you suffer loss or damage to your home or contents.  If you are renting your home, it’s your responsibility to cover loss of or damage to the contents of your home.
Damage to car/theft	Car	Pays for repairs or replacement if your car is stolen or damaged.
Damage to your home	Fire/home	Pays for repairs or replacement if you suffer loss or damage to your home as a result of perils such as fire, flood, and burglary.
Loss of luggage/trip delays/cost of medical care while travelling	Travel	Pays for repairs or replacement if you suffer loss or damage to your belongings. Also pays for financial loss if there are delays or cancellations. Pays for costs related to personal accidents while overseas, including medical and repatriation expenses.

About the Author

Tan Kim Book, CFP, IFP is a Licensed Financial Planner with Phillip Wealth Planners Sdn Bhd and certified member of Financial Planning Association Malaysia (FPAM). 

Working with a financial planner can be an extremely rewarding and valuable experience for you and your family. If you’ve decided to work with a financial planner, it’s important to understand your rights in the professional relationship. By knowing your rights and what to expect from a financial planner, you can take an active role in shaping your financial future.

1. You have the right to a planner who has integrity

Trust between you and your financial planner is central to a successful financial planning relationship. You rely on your planner’s honesty, professionalism and abilities to achieve your financial and life goals.

When you know that your financial planner takes his or her professional obligations seriously, placing principles over personal gain, you can develop the type of partnership that is crucial to the success of any professional relationship.

2. You have the right to objective advice

Your needs should be at the heart of all recommendations made by your financial planner. Your financial planner should use his or her experience and judgment to carefully consider your situation, and provide you with advice that best meets your goals.

Sometimes, this objectivity may require your financial planner to explain that your goals are unrealistic given your current resources and financial commitments. He or she may then suggest alternative goals or priorities.

3. You have the right to be treated fairly

Your financial planner should treat you the same way he or she would like to be treated in a professional relationship. This involves clearly stating what services will be provided and at what price. Your financial planner should also explain the risks associated with his or her financial recommendations and any potential conflicts of interest.

For example, does her or she gain personally or financially from your purchase of a particular product, or from the outcome of a suggested strategy?

4. You have the right to a planner who is professional

Your financial planner should not provide investment advice or stock brokerage or insurance services unless he or she is properly qualified and licensed to do so. If your situation requires expertise that your financial planner does not have, he or she
should suggest other professionals who may assist you.

5. You have the right to a planner who is competent

You have the right to expect your financial planner to demonstrate an appropriate level of knowledge to offer financial planning advice, such as the attainment of CERTIFIED FINANCIAL PLANNER certification, the standard of excellence in financial planning.
Your financial planner should complete continuing education courses as part of his or her ongoing commitment to competency.

6. You have the right to privacy

To get the best results from your financial planning relationship, you need to divulge relevant personal and financial information to your financial planner on a regular basis. Your financial planner should keep this information in confidence, only sharing it with others to conduct business on your behalf, at your consent, or when required to do so by court order.

7. You have the right to a planner who is diligent

Your financial planner should discuss your goals and objectives with you and explain what you can expect from the relationship before engaging you as a client. Once the financial planner has determined that he or she (or his or her staff and/or network of related professionals) can assist you and has gathered sufficient information, the financial planner should make – and, if appropriate, implement – recommendations that are suitable for you.

A diligent financial planner reasonably investigates the products or services he or she recommends. A diligent financial planner also closely supervises any staff working with you.

This article is courtesy of Financial Planning Standards Board Ltd (FPSB).

For many people, there’s nothing quite like taking delivery of your brand new car. However, taking on long-term loan to buy a car can have serious repercussions on your financial health.

We’ll take a look at the key issues and the ramifications of buying a car.

Question:

Hi, I’m Denise. Some people say the one single monthly commitment which can make or break your wealth building is payment of car loans. Is every car loan an upside-down loan as most cars depreciate much faster than we can settle them off, especially if we take a 7 or 9-year loan? In your opinion, how best to finance a car purchase? Is it in cash or a car loan?

First, what does Denise mean with “upside-down loan”?

If your car value depreciates faster than you pay off your loan, you will need to come up with extra money out of your pocket to repay the bank.

For example, when you sell your car at RM20,000, but your outstanding loan is higher, say RM25,000, you will need to fork out that difference of RM5,000.

In other words, it is negative equity.

That might happen in any of these situations:

• If you have a long tenure hire-purchase loan like nine years;
• You buy a car that depreciates too fast i.e. depreciates 50% in two years, versus some brands that only go down 50% after five years; and
• You finance the vehicle up to a maximum of 90%, 100% or even more after the mark-up price.

Or any combination of the above situations, you might end up with an upside-down loan.

Back to the question:

So, what is the best way to finance a car purchase? Should people only buy with cash, and only if they can afford to pay for the car in full?

To understand this issue, you must separate the subjects into two parts:

The Car And Its Value

Let’s get this straight. The value of a car falls over time. It doesn’t matter if you finance it with cash or with a car loan.

The higher price you pay for it, the more you lose. Whether you pay cash, or pay with a short three-year loan, or a long-term nine-year loan, or you only borrow 50%, regardless how you pay for the car, the car still goes down in value at the same rate.

It doesn’t matter.

The buyer of your used car won’t bother whether it the loan has been settled. They don’t pay you more because you don’t have a car loan. They might pay you more if the used car is well-maintained and looks good.

So, can we agree with these?

If you want to lose less money, just buy a cheaper car. Buy a better brand that depreciates less comparatively. Or the best choice, don’t get a car if you don’t need to. Buy the car that fits your needs now.

Don’t make the mistake I made. I used to own a 12-seater Hyundai Starex, and it was too big for my small family. 

So, if you wish to be prudent about it, you may consider having a lower-priced car that serves your daily needs, or not get one for a car is a liability and its value depreciates in the long run.

How To Finance The Purchase

Now the second part is the one you want to consider – how to finance the purchase?

Short answer: That depends on the rate of return on your fund.

After you decide what specific brand, model and specification of vehicle you are going to get, the next step is to find out the cost of financing the purchase.

If you have 30,000 in a fixed deposit earning 2-3%, you might as well use that cash to pay for a car loan which will cost ~4%-5%.

On the other hand, if you have a stock holding that yields 8% a year, you should take a very long term car loan (nine years). So you keep your stocks… and earn the difference (8% stock yields – 5% car loan interest)

Does that make sense?

In summary, if you are a good investor, and you make an investment return that is way better than 4-5% you pay the bank, it is no-brainer to decide. Take the most extended loan that can offer the cheapest financing cost.

Debt Service Ratio (DSR)

So, let’s say you made that car purchase and your car loan installment amounts to RM 1,100 a month. If you earn RM 5,500 a month, the car loan installment is equivalent to 20% of your monthly income. This works out to be a DSR of 20%, that is if you have no other outstanding debt.

If you have other debt commitments such as a student loan (PTPTN), credit card debts, personal loans… etc, you may want to assess what your DSR is after you buy your car. For instance, if you are paying RM440 a month in PTPTN loan installments, you would increase your DSR from 8% to 28%.

Before buying your car

= (Existing loan commitment / Monthly income) x 100%

= (RM 440 / RM 5,500) x 100%

= 8%

After buying your car

= (Existing loan commitment + Car loan installment) / Monthly Income) x 100%

= (RM 440 + RM 1,100) / RM 5,500) x 100%

= 28%

So, What’s The Significance?

First, calculating your DSR will help you to determine if you can really afford the car purchase with a car loan. For instance, if you find that your DSR after buying the car is above 40%, you may want to reconsider because you could be over gearing. You could put yourself in financial distress if you lose your job, business or your sources of income.

Second, do you plan to buy yourself a home or an investment property some two to three years down the road?

Here is the thing. Little do people realise that the same RM1,100 monthly installment for a RM90,000 car loan is worth as much as RM220,000 in property mortgage.

Essentially, you are committing RM1,100 a month to get a RM90,000 car loan to buy a car that depreciates in value over time while forgoing your opportunity to acquire a property worth RM240,000 that could generate rental income and appreciates in value over time.

So, if you’re looking to buy a property in the near future, it would be helpful for you to refrain from getting a car loan and use your loan eligibility or quota for a piece of real estate.

The Final Piece Of Advice: Don’t Do The Following!

The above discussion is based on the assumption that you already have the money to buy the car. I strongly suggest that you put yourself in this position before considering to upgrade.

A car loan can only break your finances if you are spending your future money to buy it. That means you don’t have the money ready for the car.

So, you take up a loan to buy a car that is not affordable to you, perhaps to impress your colleague who just showed off his latest vehicle.

That’s a big NO-NO. Please refrain from doing that.

Don’t buy something you don’t need, with the money you don’t have, to impress the people you don’t like. That’s plain stupidity.

About the Author

This article is co-written by KC Lau and Ian Tai.

Ian Tai is a Dividend Investor. Financial Content Machine. Producer of 200+ Articles, Weekly Host and Presenter at KCLau.com. Co-Founded DividendVault.com, an online educational membership site that empowers retail investors to build a stock portfolio that pays rising dividends in Malaysia and Singapore. 

KCLau is a financial educator, having published seven books including the current bestseller Money Smart, and co-created a dozen online financial courses. He gives away his popular Money Tips e-book volumes free at his website: https://KCLau.com

Question:

Hi, my name is Ed. I’m happily married to Pei Pei, my wife and together, we’ve been blessed with two daughters namely, Cindy and Mandy aged 5 and 3. As I write, we reside together with my mother in a bungalow located in Penang.

The property has been a family home since my childhood and its ownership was bequeathed to me by my late father who passed away three years ago. Presently, the bungalow has been fully paid off and is valued at RM2 mil.

If I pass on prematurely, I wish to bequeath this property equally to my wife and two daughters via a will. But, I have the following questions and concerns:

a. Will my mother be allowed to continue to live in the bungalow?

b. What will happen if my wife and two children wish to sell off the bungalow?

c. Is it possible to only bequeath the title deed when my daughters attain the age of 25?

Answer:

Lets say, you have a simple will written for the purpose stated above.

If you pass on, the title deed to your bungalow shall be transferred to your wife and two children by your appointed executor. If Pei Pei is the executor, she then shall hold onto your daughters’ stake in the property until they turn 18, the age when they are legally entitled to inherit and hold onto assets.

This means, if your children are minors, Pei Pei shall have full autonomy to hold onto and manage the bungalow as she sees fit upon your passing.

Your wife has the authority to decide who shall reside in the property, apply for loan facilities by offering the property as a collateral and to dispose of the bungalow to a new prospective buyer based on her agreeable price.

Sadly, this could also mean that Pei Pei:

1. Has the authority to ask your mother to vacate the bungalow.
2. Can sell the bungalow, let’s say at RM3 mil, and pocket the full proceeds into her bank account without needing to share her gains with your mother and… your two children.
3. Can obtain a loan facility from the bank via refinancing for the purpose of setting up a new business. The venture may fail which could cause Pei Pei to lose her ability to repay the mortgage and thus, leading to a possibility that the bungalow could be auctioned off by the bank.
4. Can remarry and enjoy her new life with her husband, your two daughters and maybe, her children with her new husband in the bungalow bequeathed to her. Your bungalow or a portion of it could be bequeathed to the new husband and their children via Pei Pei’s written will. OMG!

But My Wife Is Not That Bad…

Of course, your wife is of noble and virtuous character. How could it be possible for your wife to do any of the above mentioned?

I understand. Here, the purpose is to highlight the various possibilities open to your wife legally after having received the title deed to the property if you pass on prematurely and especially if your daughters are still minors.

Thus, bequeathing the bungalow to your wife and two daughters does not offer an ironclad guarantee of your mother’s livelihood upon your passing. This could potentially lead to conflict, strife and bitterness to your loved ones namely your mother, wife, and two children.

So, What Can Ed Do About It?

The answer is simple. Ed could include a testamentary trust in his written will in order to have a say in how the bungalow is to be managed upon his passing.

A testamentary trust is a trust that kicks in effectively only upon Ed’s passing for the trust is embedded within Ed’s written will. Here is how it works:

1. Ed could set up a testamentary trust where he would engage a licensed trustee firm to be his trustee and name Pei Pei, Cindy and Mandy as his beneficiaries of the testamentary trust.
   
   
2. Ed could decide when is best for Cindy and Mandy to inherit their stake in the bungalow. Here, let’s say, Ed wishes for his two daughters to only receive their stake when Mandy, his younger daughter, reaches the age of 25.
   
   
3. Ed could name his mother to be the living tenant of the bungalow. This means his mother is entitled to reside in the property for as long as she lives. The property could not be sold to a buyer as its title deed shall be held by the trustee.
   
   
4. Upon Ed’s passing, the bungalow’s title deed will first be transferred to the testamentary trust. The trustee shall hold onto it for Pei Pei, Cindy, and Mandy.
   
   
5. The property’s title deed shall only be bequeathed to Pei Pei, Cindy and Mandy after fulfillment of two conditions in the Testamentary Trust:
   
   a. Ed’s mother has passed on.
   b. Mandy is 25 years old.  

Conclusion

Ed could protect the interest of his mother, wife and two daughters by having a testamentary trust included in his will and appointing a licensed trustee firm to administer his estate upon his passing.

His mother is guaranteed a place to stay and thus, securing her livelihood in her golden years. His wife and children shall be guaranteed of inheriting their stakes in Ed’s bungalow for as long as they live past Ed’s mother. This helps to maintain harmony among Ed’s family members.

About the Author

Jocelline Chee is the founder of WG Legacy, a leading professional estate planning firm. You can download a Strategy Report at wglegacy.com/report to find out how she preserved her family’s financial future via a combination of insurance, will and trust and how you can do the same for your loved ones too.