ESTATE ADMINISTRATION PROCESS

Trust Misunderstood

Will Or Trust

There have always been controversial opinions in-the industry on which one is more important, Will or Trust?

The greatest challenge for qualified Financial planners in Malaysia is to first put Complete Financial Planning in it's proper pespective. This is because the market today is infested with self proclaimed "Complete Financial or Estate Planners" who are constantly bombarding the public by misleading and confusing them with their distorted version of complete financial planning by under palying the importance of Estate planning tools.

One important aspect of practice management of Estate Planning tools is to understand that every one needs a Will, but Trust is for individuals with special needs. If the difference between Will and Trust is to be illustrated, it will be as the follow:

A Will is liken with water, everyone need it. Trust is like the medicine, let's say for phuemonia. You can't cure this disease with water , you need appropriate medicine. Now, that does not mean a guy down with phuemonia doesn't need water.

What does this mean? Even if a person has a special need to set up a Trust , he still need to write his Will. If you advice a person with a special need to throw everything he has under a Trust , it is like advising this person with phuemonia to only take the medicine as long as he live without drinking water. On the other hand if you advice a person with special need to throw everything he has under the will, it is like giving the person with phuemonia water to heal his disease. In both this circumstances you know for sure the persons involved will surely die at a point in time.

The same scenario applies if you give a wrong estate planning solution to your customer. His financial planning objectives will fail miserably.

Who then are the people with special needs ? The list is not exhaustive

1.        People with Special Children / Adults who are completely dependant on 

           others

2.        Business people

3.        Individuals who profess the Islamic faith

To comprehend Wills and Trust ,it will be of great enlightenment if you view the both within the idea of objective driven financial planning whereby customers objective is of paramount importance. The Verdict is, no matter how much we are able to educate our customer on financial planning, if his objectives are not safeguarded through ensuring the functionality of the plan, we fail miserably as Financial Planners. Estate Planning tools are the solutions for financial planning effectiveness.

Situations Where Trust Is Set Up

No 1

Mr & Mrs John wanted the assurance that their mentally hadicapped son have enough money to carry on with life at the same time they do not trust any individual to hold the fund they have allocated for their son. They also do not trust any individual to be their Executor. Mr & Mrs John also has liabilities.

No 2

Mr. Foo feels that he is indebted to his brother so much because his brother brought him up after their parents died in a road accident. Furthermore his brother had to work at a young age to take care of his siblings as a result he did not get to complete his schooling. Mr Foo is now a graduate and has his own family. He has Willed away his 1 Million saving and 5 immovables to his wife & 4 children. He wants to do something for his brother. So he decided to buy a million dollar Insurance policy and set an Insurance Trust for his brother.

No 3

Madam Jane, a widow with a 9 year old son was dignosed to have breast cancer and she has only about year to live. She has a house worth RM 75,000 in which she is currently staying. She has RM 100,000 cash which she need as long as she lives. She has RM 300,000 life insurance. She does not trust her in-laws. She has appointed her sister as the Executor and guardian of her son but she does not want her sister to hold the insurance proceed for her son.

No 4

Mr William is a wealthy man. He has done his Will but he is still worried if his business liabilities will overtake his personal assets upon his demise and leave his family with nothing.

No 5

Ms. Nancy, a single business woman wants to set up a trust to benefit her Church. She also wants to continuously make contribution to the trust as long as she lives. She does not wish her siblings who are beneficiaries under her Will to know about her Trust.

No 6

Mr Woo wants to ensure that there is continuity in provision for his family during the probate period upon his demise.

No 7

Encik Ahmad has 3 sons and 1 daughter. However he wants to give his bungalow in Damansara which is currently being rented out solely to his daughter.

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