Map Out Your Legacy

Everyone knows that an insurance is a product which enable to protect us as well as our family financially in the event of derailed illness or if we kick the bucket. The concept is very easy. Insurance only protect us if we unable to work, retire, death and as a way to support our child education.

My question is having an insurance is it all we need to do to protect ourselves and our family ? Imagine this. Who do you nominate as your beneficiary in insurance ? If a person pass on and he nominate child which is below 18 years old, can his child inherit ? A person falls into coma and insurance payout credited into his own account, can anyone manage to use the money ? What if this parent are buying an insurance to benefit his special kids, who help to manage the money ? If is guardian, will there be possibility that the money is not benefiting your kids at all ? If the insurance payout is to spouse, will they know how to manage the money wisely or prone to being cheated by friends or relatives ? What will our heirs do with this windfall money ?

Is it better if one can mitigate all the above risks ? First, if a parents nominate his child (below 18years old) as beneficiary and he kick the bucket before the child reach age 18, where will the payouts going to ? Surviving spouse or guardians ? NO. The child’s entitlements will be divert to public trustee, Amanah Raya Bhd and the child able to redeem it upon age 18. But by using a products call Trust, the owner of the policy can appoint a trustee to administer the assets held by the trust and provides the terms under which they should be administered.

Example, Mr Wealthy set up a Trust for the insurance he bought. He decide how he want to distribute, the intervals and the purpose. First, he can assign the trustee to pay for his children tuition and education expenses. Besides, he can set up a monthly allowance of RM1,000 for his child living expenses. After graduate, he can continue to provide the living expenses till the child gain employment. As for Mr Wealthy’s wife, he can allocate RM3,000 a month to continue support the family current lifestyle and running the household.

Second, many people purchase insurance to protect them from potential income loss. Example, Mr Lucky slips and falls down inside toilet. He then falls into coma. His insurance payout RM1,000,000 for his disability and credited this amount into his own personal account. My question is, can Mr Lucky withdraw the money for his own usage ? If cannot, does he authorized anyone to manage the money ?

Third, imagine this. If you won a lottery or you know you will inherit a huge lump sum of money at certain age, what will you do ? Naturally, we tend to spend some of the money 1st, right ? According to a survey conducted by the US-based National Endowment for Financial Education in year 2014, they found that up to 70% of individuals who come into sudden possession of money – whether from winning a lottery, insurance payout, inheritance or pension payout – will deplete the funds in a matter of years.

Setting up a Trust is vital for a family to continue paying their monthly expenses and current medical expenses. This steps is more important if the owner is a sole breadwinner. Besides, when a Trust is set up, the owner can ensure insurance payout is used for the intended purpose.

Trust is a financial tools used widely by Western countries to preserve their wealth inheritance so that the wealth can pass on to few generations. By setting up a Trust, one can ensure a steady flow of income to their surviving spouse and children for education, maintenance and medical expenses.

Is time for you to set up your own Trust. Provide certainty for your family members while they are in mourning state, so that the surviving parties do not need to worry about income.