The Covid-19 pandemic has definitely disrupted the lives of many, causing hardship around the world and in Malaysia too.
With the ongoing movement control order (MCO), many Malaysians face an uncertain future especially from a financial perspective. That being said, Malaysians should take active measures to safeguard their finances by planning for worst case scenarios.
In this sense, proper estate planning might save you (and your loved ones) from a dark rainy day.
Here are some key points to note when conducting integrated estate planning.
Freezing of estate
One of the main challenges faced by many people in Peninsular Malaysia and Sabah, is when someone with a gross estate value of over RM2 million (before outstanding debt deductions) dies, his or her family members will then have to apply to the high court for a Letter of Administration (under Probate Administration Act 1959) to claim the estate.
This lengthy process can cause additional hardships to your loved ones who are dependent on your income or assets. Thus, you should plan ahead to avoid heaping additional misery on them in the event of your untimely demise.
Express will writing solution
One of the first things you should do is draw up a valid will. Without one, most of your movable and immovable assets will be frozen and might get stuck in a never-ending legal maze.
True, this lockdown makes it difficult to get in touch with a will writer or a legal office, however, this is where an express online will writing service comes into play.
By drawing up a standard will with an express online will writer, you will eliminate the hassle of meeting with legal officers. What’s more, many back office operations at such legal companies are not fully-operational during the MCO.
Once the MCO is lifted and you’ve had time to plan out your entire estate, then you can go ahead and draft out a full and comprehensive will. In the mean time, do explore an online will writing service.
Check your EPF nomination
It is crucial that you check and update your Employee Provident Fund’s (EPF) nomination status. If you haven’t, then your account will be frozen upon your untimely demise.
When you’ve nominated an adult to inherit your EPF funds, it will be automatically be released to the said nominee upon your demise. It’s important to note here, that marriage will not nullify an EPF nomination.
For instance, there was a case when a young single man selected his father to be his EPF nominee. Sadly, after the son got married, he died unexpectedly in an accident.
However, EPF paid the money to his father and even though his widow challenged EPF’s decision in court, she was unsuccessful.
Update your life insurance nomination
If you haven’t updated the nomination for your life insurance, then this is the best time to do it. One thing to note however, is that life insurance nomination laws in Malaysia were updated in 2013 and it is now governed under the Financial Services Act 2013.
Under the new law, policyholders taking a life insurance cover on their own life, are not allowed to appoint themselves as the trustee of the policy. In the event that there is no trustee appointed, an adult nominee will automatically be made trustee by the life insurer.
For example, let’s say a husband buys a life policy on his own life and nominates his wife as the nominee, but chooses to leave the trustee column blank.
Should the husband die, the life insurer will release the funds to the wife. This is because she automatically becomes the trustee of the policy, as she is considered an adult nominee.
On the other hand, if the husband nominates his wife and a child below 18 years of age as his nominees, then if the husband dies, some insurers will entrust 100% of the money to his wife as the trustee of the money. She in turn, will withhold the child’s portion until the child is 18 years old.
However, there are some insurers who would pay the wife her portion, while the child’s portion is paid to a public trustee to hold on to until the child reaches the age of 18.
To add, if you are a parent with minors, and you are concerned about their future welfare, then you should consider setting up a children’s maintenance trust using your life insurance policies.
You can also do this by using your cash funds, so that you avoid the tricky circumstances mentioned above.
In conclusion, an integrated approach to estate planning is definitely more than purchasing financial products and expecting them to solve all your estate problems.
More importantly, you should consider some short term immediate measures during this challenging economic climate.
But of course, when restrictions ease up, take the time to explore your estate planning in a comprehensive and integrated manner with certified legal advice.
Lee Khee Chuan is a Securities Commission and Bank Negara-licensed financial advisor/representative who has been practising estate planning for over 17 years. He also researches and writes extensively about the subject besides lecture courses for the Certified Financial Planner certification programme.
For more information, visit www.estateplanningmalaysia.com