Category: Distribute Your Wealth

Will Your Mother be Kicked Out from Your House?
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.
June 15, 2022
Are You The Real King And Queen Of Your Family’s Wealth Kingdom?

As the head of your family and business venture, you are being looked up to as the leader of your family and also the companies you are managing. As a business leader, planning well for the future is something that is expected of you and your management team. As the head of your family, you are expected to exercise the same standard when you plan for your personal wealth transfer as well as your business succession.

When we talk about business estate planning, there is a popular Chinese saying that you may have heard before. It says that a family’s wealth will not last beyond three generations!

Interestingly, the Americans also have a similar expression, “Shirtsleeves to shirtsleeves in three generations”.

Backed By Research

A ground-breaking study conducted by a wealth consultancy firm The Williams Group which involves 3,200 families over a 20-year period, found that 70% of the families tend to lose their fortune by the second generation, while nine in ten families lose it by the third generation!

The popular explanation behind this phenomenon is that, the first generation works hard to accumulate the wealth. The second generation while growing up, sees their parents’ struggles and have a good understanding of the value of sacrifice and hard work. They appreciate the frugal aspects of their lives growing up and will more likely hold on to their parents’ wealth.

However, the third generation do not appreciate the struggles and sacrifices of the previous generations. Therefore, they are more carefree and more likely to spend the wealth easily and may end up squandering the inherited wealth.

Learn From Example

Credit Photo: Ikea

There is a shining example that comes to mind when we talk about planning for your business succession and holding on to your accumulated wealth to benefit the future generations. He is IKEA’s founder, Ingvar Kamprad. When this highly respected business leader died in 2018 at the age of 91, he was ranked No. 8 on the Bloomberg Billionaires Index.

This is thanks to his control of IKEA’s global retail empire that was valued at US$58.7 billion. Interestingly, his wealth will not be dissipated because of a carefully designed and well-thought through wealth preservation strategy that he had put in place to secure the longterm survival of the IKEA business empire.

According to a media report, most IKEA stores are owned by the Stichting Ingka Foundation, a Dutch entity with the purpose of
donating to charity and supporting innovation in design, according to its founding statute. Meanwhile IKEA’s trademarks, brand and concept were placed under the ultimate control of Vaduz, a Liechtenstein-based Interogo Foundation whose subsidiary, Inter
Ikea, is the global IKEA franchisor. “Interogo Foundation is managed by a Foundation Council, consisting of at least two members and a Supervisory Council, as a principle consisting of seven members.”

This was disclosed by Anders Bylund, Interogo’s head of communications. He was also quoted as saying, “The Kamprad family members in the supervisory councils have been and shall always be in minority.”

Meanwhile, Stichting Ingka Foundation, is only partly philanthropic. Its statutes allow for profits to be reinvested in the company, according to Per Heggenes, the chief executive of the IKEA Foundation.

This smartly designed strategy put in place by Kamprad was designed to ensure that IKEA, is not in the hands of his family members, and thus would long outlive its founder. Trust experts say that the set-up ensures IKEA’s business continuity by making it impossible for any individual, whether a manager or heir, to assume control after Kamprad’s death.

It Can Be Done

You can also be the real king or queen of your family’s wealth kingdom just like Ingvar Kamprad, once you have come up with your very own comprehensive personal and business estate planning.

With an intelligently designed estate plan, your wealth can be fortified with a “legal castle” to shield your wealth from all creditors and vultures, as well as to avoid the probable ugly family feuds and disputes, which will tear up and destroy your family’s wealth kingdom. Your legal fort can be watertight against all types of claims and risks, including director’s or professional liabilities.

By utilising well established and advanced legal means and structures to hold the ownership of the bulk of your wealth, you will be able to perpetuate your family’s wealth kingdom, and escape the curse of family wealth being dissipated by the third generation!

You will also be able to protect the interest and well-beings of your beneficiaries and descendants. You get to enjoy serenity and inner peace knowing that when the time comes, your family’s wealth kingdom is intact and it serves the needs of your loved ones.

Let them thrive from the blessings of your wealth kingdom, rather than suffer from the curse of inadequate planning. Your descendants will come to admire and respect your vision and the decisiveness in getting a comprehensive family’s wealth
succession plan, just like the late Mr Ingvar Kamprad.

About the Author

Lee Khee Chuan holds a B.A. from National University of Singapore and a chartered financial consultant (ChFC), chartered life underwriter (CLU), CFP professional, and Fellow, Life Management Institute (FLMI) USA. He is also a licensed financial adviser representative with more than 25 years’ experience in estate planning. He shares a lot more valuable insights at www.estateplanningmalaysia.com

May 17, 2022
Will You Write A Will?
According to MWD Wills Depository Sdn Bhd, only two million (or about 28%) of the total seven million people that make up the Malaysian working population have a will.

(Source: https://www.thestar.com.my/business/business-news/2019/06/18/only-28-of-malaysian-workers-have-a-will)

Just like how it is never too early to plan for retirement, it is also never too early to look into writing your will – especially if you have dependents and beneficiaries. When planning your retirement, it could be worth looking into drawing up your will.

Unlike the anxiety around continuing family legacy and providing for future generations, a will does not require extensive discussions and plans. At best, it is a legal safety net that protects assets and gives full control to you to disseminate as you please.

Furthermore, passing on the wealth of a generation does not need to come at the expense of its retirement.

“Caring for yourself (and not the younger generation) would be the most financially responsible thing to do,” advises Felix Neoh of Finwealth Management. However, with any excess should you outlive your wealth, this can be easily passed on with the right estate planning,” he adds.

It is always difficult to stare down the topic of death, and most of us are reluctant to face the morbid subject of our mortality. Samantha Lim of FA Advisory believes there are plenty of benefits and considerations to writing a will.

“If insurance and EPF nomination is important to you, why not your estate?” she questions.

With a proper will, you can articulate all your wishes, which can run the gamut from what you wish to give to each of your loved ones; and whether they are to benefit from the gift immediately or over a period of time.

You can express the apportionment of your assets to each of them – whether as a measure or endorsement of your love for each of them, or a reflection of your intention to cater to their special needs or nurture their nascent talents, adds Lim.

According to Lim, other benefits of having a will and trust includes, but is not limited to:
- Being clear about who will get your assets, and you can work out the details down to who gets what and how much
- Keeping your assets out of the hands of people you do not want to have them (like an estranged relative)
- Setting up a monthly maintenance allowance for children with special needs or an aged spouse who are not capable or no longer fit to handle their own financials – by setting up a trust
- Setting conditions such as to leave the house or property unsold until the passing of spouse or children
- Your heirs having a faster or easier time getting access to your assets
- Transferring of immovable assets (real property, land) to beneficiaries by way of the will, which only costs RM10 stamping for each property, saving thousands on stamp duty as compared to not having a will
- The Declaration of Trust to handover businesses can be done in the safest and fastest way. Imagine when you are no longer around and creditors start to demand for payment. On the other hand, banks will be concerned if the key shareholder has no proper succession planning, which may affect business operation and growth. They may eventually want to review their existing lending to the business. All this may be a disaster to the business’ cashflow if credit facilities were to clawback or reduce, especially if business risk is exposed to this.
Note: A will facilitates distribution of estate only upon death, while a trust, on the other hand, ensures access of funds without waiting for probate and can be effective immediately.

“We should start to think about estate planning when we start owning an asset of value like property or investment, have someone financially dependent on us like a spouse, children and ageing parents,” advises Jessie Ooi, Senior Estate Planner of Rockwills.

She also notes that when there are significant changes like marriage, birth, death, divorce or when there will be major changes to your financial situation, the Will needs to be reviewed.

“A divorce will not revoke the existing will. So if one passes on after divorce without re-writing the will, the ex-spouse can also inherit your assets according to the will.”

“Not all assets grow at the same pace, sometimes you might need to review and re-allocate the asset among the beneficiaries. If you want fairness in the estate distribution among the beneficiaries, you need to regularly review your estate plan,” adds Ooi.

What Happens If I Die Without A Will?

Lim informs that there are contingency plans set in place for Malaysians that do not have a will drawn up to ensure a legal safety net for their assets as below:
- Assets will be distributed according to the formulas set out in the Distribution Act 1958, and not according to your wishes or the needs of family members;
- The court will appoint a trustee and executor to administer the estate, and this may give rise to disputes between family members or beneficiaries on who should be appointed; and,
- The distribution process will take longer and cost more, ordinarily requiring a bond and the appointment of two sureties to guarantee the proper administration of the estate, as well as further court orders to effect the transfer of real property.
April 15, 2022
Covid-19 The Catalyst in Estate Planning

Passing your hard earned wealth to the next generation is not as easy as writing a will.

The Covid-19 pandemic which started two years ago still lingers on today, which has affected the planning of individuals and businesses in many ways.

As far as estate planning for one’s estate is concerned, the awareness on the need to do personal estate planning has been heightened. This can be demonstrated by the fact that many will-writing and trustee companies have reported a jump in their will-writing business in the past two years. The unexpected spike in deadly casualties due to the attack by the Covid-19 virus has rattled many who began to worry about their health and safety.

What is estate planning?

Estate planning is actually more than having your will written, though it is a basic instrument in estate planning. To put it in layman’s terms, you can say that it is a well-thought through planning process to ensure that your loved ones are protected, your hard-earned assets are preserved, and your accumulated wealth is perpetuated to more than three generations.

You have probably heard of this Chinese saying that goes “Wealth does not pass through three generations”. Interestingly the Americans have a similar saying, “Shirt sleeves to shirt sleeves in three generations”. These sayings show that estate planning is both necessary and crucial, especially for those who are on their way to, or have accumulated a fair amount of wealth.

Is writing a will estate planning?

Most people have the impression that having a will written is having done their estate planning. Water is essential for soup, but soup is more than just water. In actual fact, there are more legal instruments than just a will, such as a testamentary or living trust, a shareholders agreement, a Labuan foundation, life insurance and its use of nomination. Even an EPF nomination or a joint-account, planned intelligently is an instrument in estate planning.

Integrated approach to estate planning

Thus, there is a need to integrate all your estate planning instruments into a coherent estate plan. This is because the various instruments you choose must work together to address all your concerns in the event you depart from this physical world.

On top of that, your estate planning must also be able to handle the situation, though less likely, in the most tragic event that you and your beloved spouse were to perish at the same time, or die within a short span of each other. We have seen such tragedies occur during this pandemic.

Estate planning must be objective-driven

As the estate planning industry in Malaysia is still very product-driven, financial consumers end up with, and having being sold, a will or a bunch of fragmented products. The danger in such a scenario is that when the time comes, there will still be gaps that will not be covered by the products, and left the beneficiaries dangerously exposed.

To eliminate such a risk, your estate plan must be objective-driven. What this means is that your estate plan must achieve all your intended objectives when the time comes.

To help you think through and to write down your estate planning objectives, you can refer to the 3Ps model in estate planning – protect, preserve and perpetuate your estate.

3Ps model in estate planning

Your first estate planning objective must always start with protecting your intended beneficiaries. Their welfare and financial well-beings must always be highest on your list. This is especially true when you have beneficiaries who are under-aged, be they your minor children or grandchildren. Parents with special needs children must also pencil in this objective when they start thinking about what will happen to their special need child if and when they, as parents, predecease the children.

Secondly, you must set in your mind to preserving your hard-earned wealth if you were to suffer an untimely demise. The tragedies we know of during this pandemic among our friends, and actual incidents we read in the newspapers remind us that life is uncertain and no one is immortal.

Preserving your wealth means you take deliberate strategies to prevent your wealth from being poached by potential creditors. It also includes preserving your wealth from being destroyed or diminished in its financial value from potential business risks as well as unexpected professional liability exposure. You can imagine it as a financial tsunami that hits you when you least expect it. The business and work environments faced by business owners and professionals can be quite unpredictable, especially in the post-pandemic world.

Thirdly, you should plan in such a way that your beloved family members and descendants will be blessed by your hard-earned accumulated wealth beyond three generations. In this modern and IT-centric world, there are many potential risks of losing your wealth when you pass your wealth to the next generation.

We have seen some people’s wealth dissipated due to low financial intelligence of their descendants; and some lost through scams; business failures or in some cases through indulgence of their descendants. It is always wise to be extra careful when you do your planning. When it comes to planning your own hard-earn estate, it is expected of you to exercise the same standard of care.

About the author

Lee Khee Chuan is a chartered financial consultant (ChFC), chartered life underwriter (CLU), CFP professional, and Fellow, Life Management Institute (FLMI) USA. He is also a licensed financial adviser representative with more than 25 years’ experience in estate planning. To learn more, visit: www.estateplanningmalaysia.com

March 22, 2022
Legacy Planning – It’s Now or Never!

Legacy planning. Estate planning. Succession planning. What do all these phrases mean? Am I too young or is it too early to consider such plans? Life as we know it, does not always go according to plan. For example, an unexpected pandemic may have forced a career change on you. Suddenly, you need to dip into your retirement fund for some emergency funds – which would leave you with a depleted income when you reach the age of retirement. What is more worrying is that when your business encounters financial trouble, it leads to more money being pumped from your retirement fund into the business. Would your retirement plan that was created a decade ago still be sufficient? Would you still be able to leave a legacy for your family and protect them from uncertainties in life? Unlikely. It is common for us to think of investment and insurance after settling down, but what about legacy creation and why is it important?
Legacy planning
Legacy planning takes on many meanings for different people. However, the focus remains – will I have a lasting and positive impact on the lives of my loved ones? While some have given some consideration to their legacy, most have never put it in writing, and even fewer have established a plan of action. As a doting provider, you would want your family to inherit the fruits of your labour and ensure that they will always be well looked after especially in later years. With legacy planning, it allows you to pass on what is most important to your loved ones without compromising your current and future lifestyle. With adequate legacy planning, you will be able to increase your estate, enjoy greater liquidity and ensure fair distribution should any unforeseen circumstances occur while benefiting from financial freedom in your golden years.
Estate equalisation and succession planning
For those who own a family business, one of the challenges is figuring out how to pass on the business to the next generation, especially when one child participates in the business and the other does not. While you want to leave a good legacy for your family, you would also like to ensure that the inheritance is fairly distributed to maintain the peace and harmony of the family. With fair distribution it can help to mitigate family problems which may arise when the distribution of an estate appears unevenly allocated. If your wealth changes your life for the better, you are successful. If your wealth changes others’ lives for the better, you have created a legacy. What legacy will you leave behind? When is the right time for such commitment? The answer is now or the sooner the better. However, there are a few things to be considered such as:
1. How much do you want to invest?
Are you looking to invest a lump sum, or set aside a regular monthly amount? And how much money do you – make available for investment? Is this your emergency fund? You are advised not to use your emergency funds for investment.
2. How long do you want to invest?
Certain investment products run for a fixed period, so if you have a specific date in mind as to when you need access to your funds, then some product types might not be necessarily right for you.
3. What is your risk profile?
How do you feel about investment risk? As the saying goes: the higher the risk, the higher the potential returns. Imagine if you incur losses on your investment; what is your risk appetite and how much loss can you stomach?
4. How much flexibility do you need?
It is important to note that when you invest your money, it can get tied up and is no longer easily accessible. But, if you have a sudden need for cash, how quickly and easily can you liquidate your asset? And what is the penalty for doing this? It is always a good idea to consult an appropriate professional or financial adviser on the particular investment in relation to your own circumstances. Alternatively, you could consider Affin Maximiser, an investment-linked plan with flexible investment options to help you gain more. You can choose to invest into different investment funds across both local and regional markets to diversify and balance the risks of your investment portfolio. Top-up your investment for more potential returns and get rewarded with loyalty bonus and extra allocation as you invest.
AFFIN Maximiser
Your investment objectives may change over time, and Affin Maximiser gives you greater flexibility to reallocate your investment funds or change your selection of funds without any switching fee. As you may have different financial needs at different life stages, this plan allows you to withdraw your investment funds in part to accommodate your financial needs at any time. Being more than just an investment tool, this plan also provides insurance protection of up to four times in the event of death or total permanent disability. From now till 31 July 2021, all Affin Bank customers can enjoy a fuss-free enrolment via the Maxi Easi Campaign with no medical check-up required. If you have a moderate risk appetite, are able to commit to a long-term investment and looking for protection at the same time, then this might be a suitable plan for you. Or, if you are unsure of your risk appetite, feel free to speak to our Affin Personal Banker/Relationship Manager at your nearest Affin Bank branch. Click here to learn more about this product.

June 16, 2021