Why is there a need to create a Trust for your young children?

As a parents, do you ever thought of, if one day we unable to accompany and watch our kids grown up due to unforeseen circumstances, what are the plans we need to prepare for them?

Are these your concern?

  1. Who will take care of our children?
  2. Can our children grow up well taken care of?
  3. How to ensure the inheritance left behind is used for the correct purposes?

Most parents tend to buy life insurance as a protection for their family, which is a indeed a good solution, but have you consider these matter?

  1. Will they be getting too much too soon?
  2. What do you think they will do with the money?
  3. Is your nomination directly to your kids who is still below the age of 18 currently?

A person can only inherit /own an assets if he/she reached the age of 18, otherwise the insurance pay out will be hold under trust and manage by Amanah Raya until they reach the age of 18.

Let’s say the pay out is RM1,000,000. What will you think they will do with the money which is a sudden drop from the sky? First thing which may cross our mind is where should I spend to upgrade my current lifestyle. How many of us will thought of saving part of the money for further usage? If they do not know how to manage the money and use it all, they will have no place to ask for anymore because you are already not there to earn the money for them. 

What shall be the better solution?

Draft out your own estate planning. Estate planning should act as the last source of planning for your loved ones especially your child. Why? Because parents are the only one they rely on physically and financially.

A good estate planning shall be able to cushion the current and future needs of your family financially while they continue to be protected without your presence. So, what’s the 1st step a parent should do?

First steps, write a Will.

Appoint a guardian for your child, pass the ‘Right to Act’ to the most suitable and trustworthy executor and decide how and who do you want your estate to be distribute.

2nd steps, set up a trust.

Setting up a trust is like providing them a water tank which ensures financial continuity for your children.

Why? I believe you aware that upon death, all assets will be frozen. If you just write a Will, beneficiary need to go thru probate and distribution process which takes approximately 2-3years. What funds are they going used in order to maintain their current lifestyle and pay the daily expenses? If you blend in a trust, you can shorten the time frame on the financial disruptions and ensure a continuity support for them financially.

<A table of difference btw will & trust>

Besides, trust can takes effect not only upon death, but in the event of total permanent disability(TPD), Comatose or missing in action.

Thirdly, compile all your debts and make sure the debts are fully funded.

Upon death, before assets distribute, the executor have to pay all the debts 1st. In order not to reduce your total inheritance amount, make sure all the debts you have owe during lifetime is fully funded. Or else, the estate you left behind, part of it need use to pay off debts, left only half to beneficiaries.

What’s our children need?

  1. Monthly maintenance
  2. Education
  3. Housing
  4. Medical & health
  5. Guardian
  6. Gifts & rewards

How much they need ? Depends on…

  1. How long do you want to support them financially?
  2. How many children do you have?
  3. How much funding is required?

Example

Living expensesRM2,000x12x10=RM240,000
Education expensesRM200,000
Medical expensesRM100,000
TotalRM540,000

Estate planning is different for everyone because everyone of us do have a unique family members, pursue different family values and lifestyles and own different types of assets and liabilities. As such, our estate planning mapping will not be the same. In order to reduce hassle and ensure your beneficiaries having a smooth estate distribution, I urge you to look for professionals to work together the plan with you.

Life is unpredictable, please stop procrastinate. Act now for the benefits of your loved ones.

Contact us now for a free consultation.

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