WG Legacy: Protect Your Family

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3 Reasons For a Retiree to Set Up a Living Trust in Malaysia

Let’s take Linnet as an example. 

Linnet is single and she is 58 years old. She is an ex financial controller working for a manufacturing company in Shah Alam. Presently, Linnet resides in a nice landed property with Linda, her sister. Linda, a widow has a 20-year old son who is now studying in Melbourne, Australia. His tuition fees are currently sponsored by Linnet. 

In addition to her property, Linnet has accumulated some financial assets from many years of working. They include savings, investment accounts, EPF monies, 

and a couple of life insurance policies. 

She has no other immediate family members. Hence, the question is, ‘Is having a will and life insurance policies enough to provide a solid financial safety net for herself, Linda and her nephew if she loses the ability to manage her financial affairs today?

To answer this, we first have to look at: 


Situations that May Cause Linnet to Lose Her Ability to Manage Her Financial Affairs 

To name a few, they include: 


a. Death 

b. Total Permanent Disability (TPD)

c. Critical Illness 

d. Comatosed

e. Mental Incapacitated. 


In this article, we shall be assessing the effectiveness of a will and life insurance policies in offering financial support to Linnet, her sister, and her nephew, if any of the five above occurs to Linnet. 

As such, let’s take a look at: 


#1: Linnet’s Will Document 

A Will is a legal document that states the distribution wishes to his or her intended beneficiaries. 

This document will come into effect only after Linnet’s death. Hence, it will not be useful if she is TPD, comatosed, mentally incapacitated or critically ill. This is because Linnet is still alive. Therefore, we would now look at: 


#2: Linnet’s Life Insurance Policies

Here are three possible scenarios: 


1. Death 

Linnet could nominate and assign her life insurance policies to Linda. If Linnet is to pass on in the future, Linda could freely use these sum assured. 


2. Critically Ill But Remains Mentally Sound

In this case, Linnet could fund her hospital bills and living expenses if Linnet has a medical card and life insurance policies that have critical illness coverages. So, the question is on the amount of medical and illness coverage she possesses. 


3. TPD, Comatosed, and Mentally Incapacitated 

Will Linnet be compensated by her life insurers? 

The answer is yes. Her life insurer may issue a cheque or place the sum assured into Linnet’s bank account. As a result, Linnet will have a lot more money inside her bank account. 

Next question, ‘Who can have access to the money apart from Linnet herself?’ 

Do Linda and her nephew have: 


a. Linnet’s username and password to her bank accounts? 

b. the authority to issue cheques on behalf of Linnet? 

c. Linnet’s pin number to her debit or credit card? 


If the answers are nope, Linnet’s money (cash and life insurance proceeds) shall be as good as frozen in her bank accounts. Linnet can have RM 1 million in cash and RM 2 million in EPF and they are of no help to anyone if Linnet cannot have access to them. 

Linnet will be a burden to Linda as she will depend on Linda to take care of her. 

It can be problematic if Linda does not have the financial means to do so. 


Overcoming Deficiencies Above with a Living Trust 

Before I go on, let me reiterate that a living trust is not better than writing a will and having life insurance policies. This is because a living trust is intended to be a much needed ‘team member’ that solidifies your estate plan. 

A living trust is able to address the shortcomings addressed above if Linnet only has a written will and some life insurance policies. But, before we look into how it could do so, let me explain how a living trust is set up. 

Imagine this. 

It starts with Linnet having a box. She places her assets and a ‘card’ into her box where the card is an instruction guide on how her assets will be distributed and managed, if she passes on or becomes TPD, critically ill, mentally incapacitated, or comatosed at a future date. Then, she gives her box to her Trustee. Thus, 

The box – living trust 

The card – is the trust deed


So, what if Linnet passes on? 

In this case, her Trustee shall distribute her assets (typically cash) to Linnet’s nominated beneficiaries (Linda and / or her nephew) as instructed in her ‘card’. Her beneficiaries will receive the money within 7 days after her passing.


What if Linnet is TPD, Comatosed, and Mentally Incapacitated? 

First, Linnet could name Linda, her sister to be her caretaker in her ‘card’. 

Hence, her Trustee could then distribute her assets to Linda, allowing her to use them to take care of Linnet and as well as both her son and herself if Linnet wishes to prepare her living trust in such a manner. Likewise, the assets (usually cash) shall be distributed to Linda within 7 days from any of the events above. 


But, What if Linnet remains Healthy and Alive? 

First, Linnet has agreed to allocate a sum of cash into her trust account which is managed by the Trustee. 

Typically, she can instruct and request her trustee to invest the money and earn profits (let’s say, 5% a year) from it so that the money remains productive. 


Conclusion: Why Set Up a Living Trust? 

This is despite Linnet already having a will and some life insurance policies. 

The answers are simple. 


a. Linnet’s beneficiaries can receive her assets (cash) in 7 days, which is fast. 

b. Linnet can benefit from her living trust as she has appointed Linda, her sister to be her caretaker if she is TPD, comatosed, and mentally incapacitated. 

c. Linnet can earn some profits for her money parked inside the trust account if she remains healthy and alive.  


So, should you set up a living trust? 

Well, the best is to find out if this is suitable for you through having coffee with a professional estate planner who specialises in trust related services. You may start by filling up the details below to book a 30-minute consultation session so that you can brainstorm ideas on if this is for you and how you could set yours up:

FREE 30-min Estate Planning Consultation (Worth RM500)

Over the years, after serving thousands of clients, I found that each family has its unique situation and challenges. I have helped many families to customize their insurance arrangement, will writing and trust establishment. And there are rarely repeated documents that fit most people.

Your circumstance is unique and I would love to extend another bonus to you. You can book a 30-minutes consultation session with me directly, which is worth RM500. There is no obligation to sign up or pay for any of my expertise during the session.

But here is my promise: I will help you clear your mind and give you constructive suggestions to build a financial fortress that best meets your family protection needs. We will discuss and find out if a proper Will & Trust arrangement coupled with your existing insurance policies will be meeting your needs.

Book Now

Jocelline Chee

As a Full-time Senior Professional Estate Planner, Jocelline seeks to understand every client’s unique asset holdings and legacy wishes, before recommending a suitable Will and/or Trust structure to meet their needs. She is well-equipped to point out various blindspots in Legacy Planning, that her clients may have. With Jocelline, you can be assured that your legacy planning journey will feel more like having an open-hearted coffee session with a trusted friend, as compared to a formal and awkward session with an equipped advisor.

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FREE 30-min Estate Planning Consultation (Worth RM500)

Over the years, after serving thousands of clients, I found that each family has its unique situation and challenges. I have helped many families to customize their insurance arrangement, will writing and trust establishment. And there are rarely repeated documents that fit most people.

Your circumstance is unique and I would love to extend another bonus to you. You can book a 30-minutes consultation session with me directly, which is worth RM500. There is no obligation to sign up or pay for any of my expertise during the session.

But here is my promise: I will help you clear your mind and give you constructive suggestions to build a financial fortress that best meets your family protection needs. We will discuss and find out if a proper Will & Trust arrangement coupled with your existing insurance policies will be meeting your needs.