Estate Planning

Does it mean having your Will written mean that you have sufficiently planned the distribution of your estate. On the contrary, you should have an estate plan, before you have your Will written. This is because your Will merely implements your estate plan. If you refuse or fail to plan, there is a possibility that things may not turn out the way you wish when you are no longer around.

Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity.

An Estate plan will achieve maximum realization of the testator's objectives - which include provision of financial management for the benefit of a surviving widow and children, appointment of trustees or guardians for children and selection of executors and a trusted adviser.

Your estate planning sets up contingency planning to meet your goals and allows you to plan for your disability and direct the distribution of your property upon your death.

With an estate plan you can control all your property, giving what you own to whom you want to receive it, the way you want them to receive it and when you want them to receive it in the event of disability or if you die.

It also provide instructions for your health care matters in the event of your disability where you are unable to give directions. Estate plan also allows you to leave explicit instruction for the care of your loved ones and create protective trusts for your children.

Article extracted from FPAM

In planning your Will, be sure not to make the following common but dangerous presumptions:

i) As your parents are older, they will predecease you
*Possible consequences:
So you leave them out of your Will. Big mistake! If they depend mainly on you financially, could your spouse be expected to support them on your behalf when you are no longer around, especially when your spouse may not be in the position to do so financially, or may remarry?

ii) Your children will be looked after by your spouse in the event of your demise
*Possible consequences:
As a result of this common presumption, many parents fail to appoint testamentary guardians or create testamentary trusts in their Wills. In some cases, a parent may even will everything to the spouse in the expectation that the spouse will look after the children. What happens if the spouse is also unable to be there?

iii) Your spouse will pass on the property she inherited from you to your children
*Possible consequences:
It is likely that some or all of what you will to your spouse, may end up with your spouse’s new husband or wife, parents, siblings and children by the new marriage instead of your own children. Are you willing to take this risk? Would not your children be better protected with a testamentary trust?

iv) Your parents will leave to your children the assets which they inherited from you
*Possible consequences:
You may not mind a part of your estate going to your parents. However, you must remember that they are entitled to do whatever they wish with the portion which they receive, including passing it on to whomsoever they wish. If they do not have a Will, your other siblings may also receive the assets you meant for your children. Is that fine with you? Isn’t there a possibility that your nephews and nieces will be grateful for the inheritance from their grandparents when
it could actually be part of your hard-earned savings for your children’s education or spouse’s retirement?

v) The relative or close friend who you appointed as your executor will not charge an executor fee on your estate
*Possible consequences:
Many Malaysian are reluctant to appoint trust corporations as executors to administer their estates, despite the obvious advantages because trust corporations charge for their professional services. In an attempt to save on estate administration costs, they appoint relatives and friends
instead. Sometimes, this backfires. Under Section 43 of the Probate and Administration Act 1959, an executor or administrator of an estate may be allowed by the High Court a commission of up to 5% of the value of the assets collected by them. This provision is applicable even though your Will does not expressly provide that the executor can charge. In addition, these relatives and friends may not have the time or expertise to administer the estate. As a result, lawyers and other professionals are engaged, whose fees are also charged to the estate. Consequently, the estate administration costs and fees are as much as, if not significantly more than, in cases where a trust corporation is appointed. Is it not worth considering appointing trust corporations, who are specialists in this area, to be your executors?

vi) The relative or close friend who agreed to be appointed as your executor will continue to accept the appointment even years later
*Possible consequences:
It is not uncommon for testators to appoint their friends and relatives as executors of their Wills without informing them. There is no certainty that these friends and relatives are willing to take on the responsibility. Even where an executor is informed of their appointment, a testator may only pass away years after the Will is made. Will the executor still be willing and able to undertake the responsibility then? More importantly, will the executor even remember his
appointment under the testator’s Will? Is there not a possibility that the executor himself may be deceased or no longer reside in Malaysia?