Hi, I’m Mr. Ling, a 67 year old retiree living in Ipoh. Just recently, my wife passed on and I’d received RM 300,000 from our life insurance companies. In addition, I have RM 300,000 in cash, RM 400,000 in EPF and a terrace house worth around RM 400,000. As I write, I live a modest lifestyle where I spend about RM 2,500 a month in living expenses, which include paying for two insurance policies where the combined sum assured is RM 400,000.
I’m living alone in my terrace house. Jenny, my only daughter is married and has settled down in Melbourne, Australia. Her family pays me a visit once every two years. Presently, Katie, my little sister and her family keep me company with our regular evening walks and church activities. They are a source of strength to me in this difficult times.
But, I have my concerns.
What will happen to me if I fall sick or have dementia in the future? Who will be paying for my living and medical expenses if I fail to have access to my money in my bank accounts as a result of me forgetting my own username and password to my internet banking account?
Is there a way for me to be financially prepared for this, without me becoming a burden to Katie and her family?
Also, in the event of my passing, I like to leave RM 30,000 in cash to Katie as my final gift to her as an elder brother. Subsequently, I want to bequeath the rest of my estate to Jenny, my only daughter.
So, what should I do?
There are three things Mr. Ling can do to manage his finances. They include:
1. EPF and Life Insurance Policies
Mr. Ling could have nominated his wife as a beneficiary to both his EPF and also his life insurance policies. But, his wife has predeceased before him. As such, he should update his nomination of his EPF monies and life insurance policies with having Jenny as his intended beneficiary.
Mr. Ling now has RM 600,000 in cash, consisting of RM 300,000 in cash and RM 300,000 in insurance receipts from his wife’s life insurance policies. But, he only needs RM 2,500 in living expenses a month.
So, if Mr. Ling has the following concerns:
a. Dementia. He fails to access his internet banking accounts and thus, couldn’t make banking transactions by himself.
b. Total Permanent Disability (TPD) and Comatose. This involves him losing his ability to pay for his living and medical expenses due to accidents, major illness, or him becoming comatose in the future.
c. Financial Loss. This could be due to falling victim to scams, schemes, and also sincere failures into any business ventures or investments. In addition, this may include losses resulting from Mr. Ling’s offering of financial help to his relatives and friends.
Mr. Ling could set up a private trust and place, let us say, RM 500,000 into it. He can instruct the trustee to do the following:
a. Parked RM 500,000 in a basket of money market funds until he hits 70 years old as he has a total of RM 100,000 in his bank account which could finance his living expenses for the next 3 years.
b. The Trustee shall distribute RM 2,500 a month to Mr. Ling to fund his lifestyle once he turns 70 years old for as long as he lives.
c. The Trustee shall make payment for his living, medical, and nursing expenses if Mr. Ling has dementia or becomes comatose or totally permanently disabled at any time after he has set up the Trust. The payment shall be made from monies placed within the Trust.
d. The Trustee shall have access to his remaining monies in his bank account for the purpose to cover any shortfall in expenses from Note (c).
e. In the event of Mr. Ling’s passing, the Trustee shall first distribute RM 30,000 to Katie and subsequently, distribute all remaining monies to Jenny.
f. Mr. Ling may appoint Katie, his little sister, as the protector of his Trust. In this case, Katie shall act as the bridge to communicate Mr. Ling’s current needs with the Trustee. If the Trustee fails to exercise its duties and responsibilities, Katie is able to change the appointment of Mr. Ling’s Trustee to a new Trust Company from his previous one.
Mr. Ling should revise his Will if he has one written, as his wife has predeceased before him. In his last Will and Testament, Mr. Ling could choose to leave behind the following:
a. His property solely to Jenny. Alternatively, the property can be disposed of by his appointed executor and the sale proceeds could be distributed to Jenny.
b. His remaining cash solely to Jenny.
c. Also, Mr. Ling could nominate his substitute beneficiaries to inherit his estate in the event Jenny predeceases before him. They may include Jenny’s children, if any, or Katie or other relatives or to his church or any charitable organisations that Mr. Ling supports. This allows his property, cash balances and sum assured from all his life insurance policies to be distributed effectively if Jenny passes on prematurely.
d. For the benefit of all, Mr. Ling may appoint a Trust Company to execute his Will. This will speed up the process of estate distribution for a Trust Company would have the expertise and manpower to execute it accordingly.
Mr. Ling can have his finances sorted out beforehand with the leverage of a will and a Private Trust. This ensures that his livelihood would be well taken care off without placing a burden on Katie and her family. Thus, what if your situation is similar to Mr. Ling’s?
Well, you should engage a professional estate planner to help you in this issue. You can book an appointment by first filling up the details below: