How to Use a Will to Protect Your Loved Ones and Assets


Generally, most of us work for an income. After deducting our expenses (for example, basic living expenses, movie, clothes, transportation, internet, phone bills, etc) and income tax from our net income, we will have some savings

We might then put this amount of savings into the bank, fixed deposit and bonds or choose to invest in unit trusts, local or overseas stock exchanges or land deals.

We might even purchase insurance. For those who own a business, it is most likely that they reinvest their savings into their own business for further expansion and development.

This big picture is called financial planning. The whole purpose of financial planning is to grow our income, say from RM100 to RM1,000 or even more.

Most people will focus on this area of wealth of income accumulation and income protection. While you grow and accumulate your wealth, there is another important channel that you need to consider too and that is wealth distribution.

How do you distribute the assets that you have built up after you are no longer around so that your family and loved ones will benefit from what you have worked so hard to accumulate for them?

You have three choices. You can choose not to take any action, without bothering to plan for distribution. Whether you do or do not have a will, all your assets will be immediately frozen.

Let us look at the situation of not having a will. An administrator will be chosen among your beneficiaries. If you have beneficiaries who are below the age of 18, then two administrators will be needed.

Most of the time, delays and conflict will arise due to friction among family members who do not wish for their siblings to be an administrator.

After choosing the administrators, two sureties are needed. The sureties act as guarantors so that in case the administrator flees with your assets, the beneficiaries can claim from the two sureties.

If your asset is worth RM10 million, then the sureties will need to have equivalent assets, which is RM10 million for each surety. There might be further delays as it is not easy to find these two guarantors.

Since there is no will, the administrator will then have to apply for a “Letter of Administration”. They will need to prepare for all assets in a proper manner and if there is no will or asset inventory list, most likely delay will happen again because beneficiaries will “treasure hunt” for the deceased’s assets.

After the “Letter of Administration” is granted, the assets are not to be distributed to the beneficiaries yet as there is one more hurdle to overcome, which is to pay up debts (housing loan, hire purchase loan, other personal loans) and to do income tax clearance with the Inland Revenue Board by filling up Form TP.

After all the mentioned process is cleared, only then can the administrator distribute the assets to the beneficia- ries. So, in cases where the deceased might have RM10 million worth of assets, the family members might only get a fraction of the wealth instead of the whole cake after paying off debts and clearing unpaid income taxes.

With a will, it is easier because an executor will have been appointed in the will to apply for a Grant of Probate. This will save a lot of time.

However, upon the extraction of the Grant of Probate, the executor will still need to pay the debts and proceed to do

income tax clearance before distributing assets to the beneficiaries.

This process might take up to six months to a year or more, which depends on the time taken in each process. This is known as the probate process.

One more option that you can consider to ensure your family can have access to your assets is to consider setting up a trust. By setting up a trust and placing certain assets into the trust, you can actually sidestep the probate process and your beneficiaries can benefit from the trust assets.

In a will, there are some important terms that you should be familiar with: Testator: A person who makes the will Beneficiaries: A person who benefits from the deceased’s will

Witness: Two witnesses are required when the testator signs and finalize his or her will Executor: A person named in the will to obtain the “Grant of Probate” and administer the deceased’s estate Guardian: A person to take care of the testator’s minor children in the event of death of the testator

Important notes before writing your will:

● Your beneficiary could be your executor ● Your beneficiary cannot be your witness. ● Your beneficiary’s spouse cannot be your witness.

You will notice that from the persons mentioned, the one that you should really pay attention to is the appointment of your executor as he or she is really the key person to make sure your assets gets distributed to your beneficia- ries.

Looking at the responsibilities and duties that an executor needs to perform, it is advisable that you ask the consent of the person before making him or her as your executor.

It is also a good practice to always have a professional trustee company as your backup executor or substitute executor in the event the individual executor in your will is unwilling or unable to act as executor.

Below are the duties of your executor: ● Make funeral arrangements ● Locate your will ● Gather documents and information ● Appoint and liaise with lawyer

● Attend court hearing ● Submit tax return and obtain income tax clearance ● Liaise with bankers/financier/creditors ● Advertise notice to creditors ● Insure and protect assets ● Liaise with government departments ● Locate, collect, assemble, call in all assets ● Value and liquidate assets ● Maintain separate trust account ● Invest assets ● Compile list of creditors ● Determine priority of creditors ● Pay debts or liabilities

● Perform detailed accounting for beneficiaries ● Pay estate tax ● Distribute assets or testamentary trust

Usually it is very common for spouses to nominate each other as executor. However, this is a very risky procedure as what if both husband and wife pass away in a common tragedy?

Hence, a backup executor from a professional trustee company will cover this if such unfortunate event should happen.

After writing your will, be sure to keep it in a place where your executor can locate. Besides that, you can always have your will reviewed and changed anytime you want to.

Some of the reasons why people rewrite their will are due to changes in the following: ● Marital status (either married, divorced or widowed) ● Witness, executor or guardian’s status (migration,

death, relationship breakdown or bankrupt) ● Change of mind regarding your beneficiaries, or

addition to the family such as grandchildren ● Substantial increase of wealth (you might have started

a business or purchased more properties)

Another seldom communicated item that I would like to share is the fees for writing a will. You should ask your service providers and be clear on each items on the fees incurred. The following are some of common fee terms you will encounter when writing a will:

Will writing fee: Fees charged by the service provider to write your will Will custody fee: Fees charged by the service provider to safe keep your will

Estate administration fee: Fees charged by the executor to execute the instructions and distribution of your will. The fee charges will start from the extraction of probate until distribution of assets to beneficiaries stated in the will. Other fees: Solicitor fees and expenses for applying for Grant of Probate.

I hope my article can be of an easy checklist and guide for you to better understand how to use a will to protect your loved ones and assets. In the October issue, I will share with you more about private trust. Stay tuned!

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