Most Malaysian have not taken the most basic estate planning step which is writing a will. They should.
Without a will, your estate doesn’t automatically go to your spouse and children, but it ends up being distributed according to the Distribution Act 1958 (as amended by the Distribution (Amendment) Act 1997). In addition, without proper planning, your estate may shrink as money being spend to pay debts and taxes.
Here are 10 steps that can help ensure your final wishes are carried out simply and smoothly.
1. Figure out what you have
Prepare an inventory of your assets. The list should include your home, properties and investments such as PRS, unit trust or gold investments. it should also include bank accounts, personal property like car or jewellery and the value of any insurance policies. You may send us message for a complete listing in pdf format.
2. List any debts
You should list any debts that relate to the above assets -such as loans or mortgages, and record the account numbers and financial institutions where the debts are secured.
3. List of beneficiaries
Once you have a picture of what you have, you can then figure out how to distribute it. List down your beneficiaries, by first going through your list of family members, relatives, you may also wish to recognise other people (e.g. adopted children) and charity organisation (e.g. Women’s Aid Organisation) as one of your beneficiaries.
4. Distribution -Who gets what
Discussing estate planing issues can be challenging, but it is an important step, to at least discuss it with your spouse. Disagreements or disputes after you’re gone can be costly -both in terms of money and family harmony. We always advise client to do this part well, as it’s our belief to have peace in heaven and harmony at home after you’re gone.
5. Estate’s debt burden
Many people overlook their estate’s debt burden. Each assets you left may carry its individual debt which has to be settled before proceed with the transfer of property. Nowadays, we also notice that some of the house owners only sign up a shorter term MRTA to cover the housing loan, and most of these properties are jointly owned. Without careful planning, giving your entitlement of the house to the other joint owner may then become a burden to the surviving owner as he/she has to find money to settle the remaining loan amount held by him/her in order to fully own the property.
There can be other expenses as well, like administration cost. there will be a yearly cost which charge on monthly basis should you decided to appoint a trustee company to implement your wishes in your will, especially the duty has to be done in a longer term. For example, instruction on how much to pay to the guardian or how much school fee / allowance to give to the children upon your demise. all these expenses have to be carefully planned.
6. Distribution method
Once you’ve weighed the debt implication on each of your assets, you’ll need to determine how you will distribute them.
Different distribution methods are designed to accomplish different estate planning goals. there are a number of methods that you may consider as part of a distribution strategy. These can include to distribute it either though will (for those not urgent needs) or using trusts (which it can be used to take care of you if you’re mentally ill or physically disabled).
7. Choose an executor
Choosing an executor is one of the most important estate planning decision. Your executor will be your “runner” after your demise. He/she is responsible for carrying out all the instructions in your will.
While the responsibility is significant, most estates can be settled by appointing a trustee company as an executor or substitute executor. If you prefer to appoint an individual, appoint someone younger than yourself as to reduce the chance of your executor predeceasing you, or being too infirm to act on your behalf. If your estate is particularly complex or you think disputes are likely to arise, we strongly suggest you to appoint a trustee company.
8. What will be documented in your will
Your will is the cornerstone of your wealth transfer plan. It formally outlines your wishes regarding the distribution of your estate, name the executor and beneficiaries.
Once your will is finalised and signed, it’s crucial to review it every two to three years, or whenever your circumstances change significantly -when you marry or divorce, welcome a new child, or acquired a big amount of wealth through business or inheritance.
9. Trust deed / Power of Attorney
Part of the will creation process, and an essential step in any sound estate plan is the establishment of a testamentary trust or a trust deed/Power of attorney.
A Power of Attorney is a legal document that appoints a person or a company to manage your assets (mostly property) in the event you become mentally disabled, or physically disabled, missing etc.
There are two major part in a trust deed: one relates to the management of your property, assets and investments. The other appoints a person / trustee to make decision on our behalf in area of personal care and health care decision. This document will take effect upon specific triggering events, which will be outlined. you may also consider drafting a trust, essentially a set of instructions that spell out as to the kind of personal or medical care you may want, should you ever become incapable of making those decisions for yourself.
10. Update your Assets Inventory listing
It is advisable to update your assets and liabilities listing every year. This listing is crucial in the process of applying for Grant of Probate as our spouse or family members may not know what we own and owe. This document will definitely help them shorten the time it takes to compile documents for submission to the high court for probate application.