Question: 

Hi, I’m Rick, a 45-year old surgeon working in a private hospital in Petaling Jaya. Presently, I’m happily married with Su Mi and together, we are blessed with two sons namely, Andrew and Peter aged ten and four respectively. As I write, I have bought four life insurance policies with a combined sum assured of RM 3 million and have written a will to bequeath my estate comprising a bungalow, cash and a small oil palm plantation estate in Sabah equally to my wife and two sons. 

So, my question is: ‘Is having life insurance policies and a will more than enough to safeguard the financial future of my loved ones?’ 


Answer: 

First, I would say that Rick is pretty advanced in offering a financial safety net to his family members for he has a sizable life insurance coverage and had his own will written. It shows that Rick is a family man and has a desire to safeguard the future livelihood of his wife and two sons to the best of his ability. 

As such, I’ll leave Rick a few pointers that he could consider: 


1. Time and Purpose 

What do I mean by ‘time and purpose’? 

The question is: ‘Does Rick want to have a say on when his beneficiaries will get his estate, how much, and what the estate can be used for?’ 

For instance, Rick will leave a sizable estate to his beneficiaries via his insurance policies and will. He could specify who his intended beneficiaries are, what, and how much they will collect in the event of his passing. If Rick passes on, his wife and two sons will inherit his estate and Su Mi, the wife will determine how best to manage the estate bequeathed to her and entrusted to her by her sons. 

Rick has no say in how his estate is to be managed by his beneficiaries. Worst, it is quite possible for Su Mi to mismanage the estate and lose the family’s wealth due to theft, fraud, errors, or any future misfortunate events. 

Here, instead of a lump-sum payout, what if Rick prefers to: 


a. Offer RM 20,000 a month in living expenses to Su Mi and his wife and

b. Provide RM 500,000 in university fees to his sons when they hit 18 years old


with the estate left behind for his family members?

In this case, Rick should set up a trust where he could appoint a trustee to carry out his wishes above in the event of his passing. This allows him to also prolong the estate and prevent it from being squandered away easily for his estate shall be managed in accordance to Rick’s objectives. 


2. Speed

How fast will Rick’s wife and two sons inherit his estate? 

If Rick passes on prematurely, his wife and two sons would receive RM 3 million in sum assured from Rick’s life insurers pretty quickly. As for his bungalow, cash, and oil palm plantation estate in Sabah, these estates shall be frozen and they’ll take about 1-2 years, depending on who the executor is, to complete the whole estate distribution process and transfer the ownership to his beneficiaries. 

So, what if Rick doesn’t want his estates to be frozen upon his passing? 

Well, Rick can form a trust, transfer the ownership of his estates to his trust and nominate his wife, two sons, and himself as beneficiaries of the trust. So, if Rick passes on, the assets placed in the trust (bungalow, cash, and plantation estate) would not be frozen and will be managed and/or distributed by Rick’s trustee in accordance to his trust deed (instructions to operate the trust). 

But, this leads to a couple of questions: 


‘Why should Rick place his assets or a portion of them into a trust?’ 

‘Wouldn’t it better for Rick to hold onto his assets under his own name?’ 


To answer this, let’s move onto: 


3. Ironclad Protection 

As mentioned above, Rick is a practising surgeon. So, questions: 


Is it possible for Rick to be sued for negligence in the course of his practise? 

What will be the impact on his finances if it happens? 


If Rick is sued for negligence and he places all of his assets under his name, Rick could lose some or all of his belongings if he loses the court case. This would be a major blow to Rick’s finances and will certainly affect his ability to provide for Su Mi and their two sons in the future. 

But, if Rick has placed some of his assets, let’s say, his bungalow, oil palm estate and some excess cash in his trust, Rick’s wealth could still be retained within his family as these assets are fully owned and protected by his trust. This is despite Rick being made ‘poor’ or bankrupted after losing his court case. Hence, life for Su Mi and his two sons will continue to go on as they are provided for by assets that are held within the trust. 


Conclusion: 

In short, why set up a trust when you already have your will written? 

Well, many don’t realise that a will is meant as a document to distribute estates to your loved ones. The ownership transfer of these estates is not immediate. A will doesn’t protect your estates from your creditors and taxman and even after the estates have been distributed to your beneficiaries, it is entirely possible for your beneficiaries to mismanage the estates bequeathed to them and thus, not fulfilling your intended objectives of leaving behind a blessing to them. 

The above issues can be effectively eradicated by setting up a trust. So, if you’re looking into enhancing your overall estate plan by having a trust set up, you can book yourself an appointment by filling up the details below: 


Jocelline Chee
Jocelline Chee

As a Full-time Senior Professional Estate Planner, Jocelline seeks to understand every client’s unique asset holdings and legacy wishes, before recommending a suitable Will and/or Trust structure to meet their needs. She is well-equipped to point out various blindspots in Legacy Planning, that her clients may have. With Jocelline, you can be assured that your legacy planning journey will feel more like having an open-hearted coffee session with a trusted friend, as compared to a formal and awkward session with an equipped advisor.

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