Estate planning tips for parents with young children

As a parents we have a huge responsibilities towards our family. Our children depends on us to guide them along different stages of life, give them support mentally and financially. Parents would like to seem their children grow, further study in university, get married and have children. Sometimes in reality, what we often hope and plan for do not always go according to our wishes due to unforeseen circumstances. Just like what we often saw in a newspaper that people get killed in an accident or had a cardiac attack and pass away in a sudden. How many of them do you think have an estate plan in place ? According to a survey, only around 10-15% of Malaysian have a Will, and a complete estate planning is more than just a Will.

My question now is how far have we plan for our family if we passed on unexpectedly ? Where should we start ? There are few questions we need to answer.

For parents who is the family breadwinner, below are the questions you need to settle.

  1. How much assets we have ? Who do you want to benefit ?
  2. How much debts we owe ? Funds used to settle the debts ?
  3. How much money my kids need for their study currently and in university ?
  4. How much is my family monthly expenses which is currently under my care?
  5. How much should I support my spouse financially ?

Besides knowing how much net worth you have, one should be aware of how’s the asset distribution upon death. How long will it takes for an assets to transfer to it’s beneficiary ?

And do you know that all assets being frozen upon death ? When assets were being frozen, where should our family get the funding for their living expenses, housing loan and monthly education fees ?

If a person only writes a Will, his next of kin need to wait at least a year for the assets to transfer to it’s beneficiary. Why ? Upon demise, family members were emotionally driven by the lost of a family member which make them delay in digging out the assets and liabilities the deceased own. A messy self keeping record on the list of assets and liabilities will make the process even harder. After finished compiling, one need to apply for a Grant of Probate to unfroze the assets. This process takes around 3 to 6 months. Then, the appointed executor need to arrange for debts settlements. Take note that communications with bank or government entity needs time. How long ? It really depends on how complicated are the debts and whether the debts can be settled easily with enough funding. Let’s assume it takes another 3-6 months. Finally, distribution starts!

Do you spot anything missing or is there anything not yet covered ? If everything is being frozen, what fund should be used to fund living expenses, monthly loans and education fees. These funds need immediate attention and it cannot wait till distribution starts. For those who have house loan, most probably bank will lelong the property due to non payment. Children in college or university would need to stop their study due to non payment in school fees. Wait! I have bought some insurance. Aren’t insurance pay out immediately without going through probate ? Yes, you are right. Question is, how can you assure that the payout is used according to plan ? Have you ever heard of inheritance fund being misused or cheated by relatives ?

What are the solution ? Set up a Trust. Spell out correctly how are the funds from insurance going to be used to pay for mortgages, children school fees and family monthly expenses. Pro long the insurance payout by giving to beneficiaries every month to keep them going.

A Will itself may not be the best solution for parents with young kids. There are more concern a parent need to mitigate in the event of sudden death. Have a conversation with us now or send us your concern.

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