WEALTH & ESTATE DISTRIBUTION
At the end of the day, all wealth accumulated during our lifetime has to be distributed to our loved ones or other intended parties. Estate Planning is a very important Wealth Distribution strategy that involves Planning before “departure” to minimise problems to our loved ones.
WILL
The Will is a legally binding document to express the intention of the deceased person about how he/she wishes to divide and distribute his/her wealth upon death. One of the major benefits is to be able to distribute one’s wealth according to ONE’s WISHES rather than follow the Distribution Act. A Testator may choose his/her Executors, Guardians, Beneficiaries and Witnesses.
A Will takes effect only upon death and is sometimes referred to as a testamentary trust. An individual or corporation may be appointed as as administrator or executor. Two witnesses are required to validate the Will but both the witnesses should be independent and have no beneficial interest in the Will.
While the law recognises a personal draft of a Will, it would be advisable to seek the services of an estate planner, advisor or a trust corporation. Would you seek medical treatment from an untrained practitioner?
TRUST
A Trust Deed is a legally binding document that allow the Settlor to Instruct the Trustee to carry out certain duty or hold assets on behalf for the benefits of Beneficiaries. There are two types of Trust, i.e. Living Trust and Testamentary Trust. Both have their advantages and disadvantages which require a lengthy discussion.
A Trust is an arrangement in writing in which the estate is managed by an individual or entity for the benefit of an individual or a group of individuals, eg. a charitable organisation. A Trust may be created by a settlor or donor, for the beneficiaries, and executed while the settlor is still alive or upon death.
The Trust Deed governs the terms of the Trust while the Trustee is obligated to act according to the Trust Deed under the Malaysian Trustee Act.
It is important to review the Will or Trust regularly to ensure they continue to meet the objectives and intentions of the testator or settlor and to keep the records of estates current. In addition, there may be changes in beneficiaries or distribution of the shares of the estate.
NOMINATION
Nomination of Life Insurance and Nomination of EPF (Employee Provident Fund) are very important Wealth Distribution vehicles. Trying to understand the law behind would definitely give you a better picture on how to distribute the above assets. In Life Insurance, a Statutory Trust is created once you nominate your Parent (while single), or Spouse & Children (while married). This would allow your nominees to receive the insurance proceeds without having to probate in court. In addition, it is creditor proof under schedule 10 FSA 2013. Nomination of EPF money would have similar advantages as well.
ASSIGNMENT
Life insurance policies may be assigned. While you can nominate a non-trust beneficiary to receive your insurance proceeds, such nominees may receive proceeds as executors only. To overcome this, you may opt for Assignment. There are two types of Assignments, i.e. Absolute Assignment (AA) & Conditional Assignment (CA). They have different purposes and pros & cons. AA is like a transfer of OWNERSHIP that will take effect immediately upon the policy being in-force. While CA will only take effect upon death, changes are allowed while the life assured is still alive.