Are you financially ready for death?
It's not a nice thought planning for death but if you're going to make any arrangements in life; you won't be sorry you made these.
By Caitlyn Ng
Death is a difficult topic to deal with. But within the morbidity of the subject lies the core of reality: we all must die eventually. And when you do get your cue to meet the maker; you want to know that your home is going to your children and not your greedy ex-wife; that the car will be taken care of and your Elvis records will NOT be sold at the flea market but left in your attic just like you want it. If you want details like these taken care of well; and you want your bequests to your loved ones done without a scratchy court battle and bitter family feuds; then what you want is a proper wealth plan.
Your wealth plan will cover what happens to your possessions, who’s going to pay off your liabilities and what decisions will be made during your funeral (like a gilded coffin or to be buried with your lucky suit) or for minor children. It’s not a nice thought planning for death but if you’re going to make any arrangements in life; you won’t be sorry you made these.
It’s not just about making sure all your valuables are dealt with but also in leaving your kin enough of an inheritance to make sure your funeral expenses are covered and all probate costs are dealt with. Just a few days ago we covered the cost of arranging a funeral according to the differing cultural customs in Malaysia and this led to some very startling numbers: a funeral is expensive and not everyone may be able to afford the send-off they deserve. You may or may not care but that buffet spread, rock star send-off complete with bronze mausoleum you envisioned for yourself could end up a small do of sirap limau ais at your home and a plywood casket. Again, it’s not the most important thing but you don’t want the people you love scrounging into their food budgets to pay for your funeral.
Beyond cost, some loved ones may not be emotionally equipped to handle all the preparations in a time of grief so having a plan and an executor is the best parting gift you can give them.
Preparing for death
This is why, for the peace of mind of bereaving relatives, many are opting for proper wealth planning. Wealth planning basically means, preparing your ‘wealth’ (all the things you own, owe and are required to manage) for the time when you are no longer around. This includes three types of property: personal property, real property (homes, buildings) and intellectual property (trade marks, patents and trade names).
It means making sure someone is crossing all your t’s and dotting all your i’s.
It’s making sure your children and loved ones are provided for and aren’t in a bind when the state comes to haul up your assets as unclaimed monies.
It’s ensuring the well-being of your family if your demise is unpredictably early or sudden.
It’s making sure those well-loved Italian leather shoes go to the right person.
When planning your estate and preparing for death; nothing is too small. It’s making sure that what matters to you gets done.
How to get started with a plan?
The first thing you’ll want to do is decide whether you will be undertaking the task of planning by yourself or enlisting the help of a wealth planner. Depending on the size of your wealth; a planner may be necessary but for everyday people; this is not so. You will still need a lawyer or a firm to legalise all estate documentation but we’ll get to that later.
Here is a quick step process to begin your estate plan on your own.
Determine the size and the extent of your estate. Make a list of all your assets, liabilities, property and responsibilities. Once you know this you can start planning.
Create a plan complete with action steps and who you want to execute these steps upon your death. It should be able to tell everyone who’s involved what they need to do, when and how. It should also be as clear as possible what you want. There’s no room for ambiguity!
Consult a lawyer or a firm specialises at estate planning to determine the kind of tools necessary to properly document your wishes and enable easy execution. The tools for estate planning will be discussed later.
Inform loved ones of the roles they play including executors and beneficiaries so everyone knows what they need to when the inevitable happens. They also need to know, for example, if they’re only getting the silverware and not any part of your RM1 million EPF savings. It’s just important that everyone knows where they stand and can attempt to bicker with you when you’re still alive and not bully your infant child with lawsuits in the event of your untimely demise.
Keep your documents in a safe place and ensure you update these every time a major life change (marriage, divorce, birth of a child, change in beneficiary or executor) take place or if your estate either grows or decreases.
Tools in wealth planning
The following are some of the tools and documents frequently used in estate planning. Depending on the needs of your plan, you will need either one or a combination of these. Wills are the most commonly used and should be a part of everyone’s plan but you will probably require some of the others as well.
The power of attorney
A “power of attorney” is a written authorisation to allow someone you trust implicitly to act on your behalf for important matters such as “private affairs, business proceedings, or other legal matters”, sometimes acting against the wishes of the other important people in your life. The person chosen to act will be known as the “agent” and will be tasked to handle as many of your previous duties as need be when you no longer have the mental capacity to do so (due to factors such as an injury or a condition).
Decide on who your trusted confidant will be; the one who is strong enough (both mentally and emotionally) to call the shots for you when you are no longer able to, and execute all of your written instructions in an efficient and reliable manner.
The medical power of attorney
In addition, there is also the medical power of attorney to be taken into consideration. This is somewhat similar to the aforementioned power of attorney, but only in the sense of medical decisions. It is akin to a surrogate medical decision-maker, “the person who will make medical decisions for you should you become unable to make them for yourself”. In the event that a person becomes mentally incapacitated, he or she would need to have already elected someone they can fully trust to make decisions such as whether life support is necessary or not.
There are also other legal medical orders that the agent is able to decide on your behalf, such as DNR (Do Not Resuscitate), DNI (Do Not Intubate) and DNH (Do Not Hospitalize). Don’t let yourself be a part of any heated legal argument, as in the highly publicised and long drawn-out case of Terri Schiavo. She entered into a “persistent vegetative state (PVS)” and there was a battle between her husband and her parents regarding the right to continue artificial life support. Spare your loved ones from the anguish of having to make any agonizing decisions.
Appointing a guardian
Finally, we have the all-important duty of finding that reliable someone to look after any surviving children. A “keeper of the kids”, if you will!
Appointing a guardian applies not only for couples who already have children but also those who have plans to conceive one. It’s never too late to start planning, yes? This is a step where one will need to select a trusted family member, relative or close friend to look after your child till he or she turns of age, in the unfortunate event that something were to happen. Not only will you have extra peace of mind, knowing that your precious little ones will be in good hands no matter what, you will also be having their support while raising your children.
Another important matter to take note of is that, if one were to fail to appoint a legal guardian for the children and they are orphaned before they turn 18 years of age, the courts will then appoint the guardian instead. In this matter, how will one know if the appointed person is suitably appropriate? By taking the right measures, one then ensures that the children are looked after by the right people that are chosen as the best for the job.
Wills
Another important aspect which many people tend to overlook is the writing of a will or a living trust. What are the differences between the two? While they both allow an individual to to transfer assets, they each have unique uses and features. The main difference though, is that a will only takes effect once the individual has passed away whereas a living trust is able to take effect as soon as one creates it.
There is a common misconception that a will is written only when a person is elderly and there’s a higher risk of death, usually not when one is younger. This is the wrong way to handle the situation as you will never know what will happen tomorrow. The process can be as simple as typing out how you would like your assets to be distributed to whom, although it is recommended that a legal advisor is present to assist and provide counsel for proper comprehension of the estate dispositions process and rules. Wills are able to cover any property that is in one’s name only (does not include properties that are held in joint tenancy or in a trust), when one passes away.
Trusts
Trusts on the other hand, are sometimes referred to as the “living trust” as well, due to their nature where they can take effect even while the person is still alive. It is true that a trust can sometime involve more work than that of a will, because a living trust requires that you take the additional step of ensuring that your assets are transferred to the trust in order to “fund” it. How can one go about making it? It’s a process that’s as simple as making a will, all you need to do is draft it out with the proper legal terms and add in the relevant information.
It’s unfortunate though that there are many people believing that estate planning is only for the well-to-do. Your estate is comprised of everything you have ever owned, no matter how opulent or how modest: vehicle, furniture, home, personal belongings and investments, to name but a few. Everyone also has something in common with each other regarding these estate – you can’t take it with you when you die.
Do take note that if a person were to pass away without a will written out, the local law will then decide on the person’s behalf of who gets what, according to the Distribution Act 1958.
Insurance
The word “insurance” is enough to bring to mind expensive premiums and sometimes sketchy information on the paperwork. However, when done correctly, one’s life insurance will prove to give some quick and welcome financial relief to one’s beneficiaries. When a loved one dies, it is a good idea to find out (if not already known) how to collect on the life insurance that one is entitled to. What is an insurance policy anyway? It is “a contract between the company that sold it and the person who bought it”, thereby meaning that the executor of the estate is not able to deal with the insurance company and collect the benefits on behalf of the beneficiaries.
Some of the insurance also have an extra policy called the accidental death and dismemberment (AD&D), which is where the beneficiaries will receive additional payment in addition to any life insurance from the insurer. This is only if the cause of death turns out to be an accident, and the money received will be only up to a set amount total, regardless of whether the person holds any other insurance by the same insurer.
It is also a good idea to remember that each individual of working age is qualified for the Employees Provident Fund (EPF), which is a social security institution that “provides retirement benefits for members through management of their savings in an efficient and reliable manner”. The nominee of the deceased member’s EPF savings will be able to apply to withdraw the money; even without a nomination, one is still able to reply if one is “the Administrator / next-of-kin for the deceased member’s savings”. You are not eligible to receive the incapacitation or death benefits and make nomination EXCEPT:
(i) You are a Malaysian citizen; OR
(i) You are not a Malaysian citizen but have obtained the Permanent Resident (PR) status; OR
(ii) You are not a Malaysian citizen who contributed before 1 August 1998
Funeral planning
Now this may sound morbid, but more and more people are deciding to plan out their funeral long before they’re actually lying on their deathbeds. This could be due to how complicated a funeral service can turn out to be, therefore taking up more of the family and friends’ time, adding to the emotional drain. There is actually a whole range of preparations to think about: the type of service, location it will be held at, the order of the services, selecting the right funeral notices, content to be delivered at the service, music, floral tributes, catering options, choosing between a coffin or a casket and finally, whether there will be a burial or a cremation.
It does sound remarkably complicated and confusion will definitely ensue. That is why some families resort to hiring certain specialised people known as “Funeral Directors”. These people are well-trained in the entire service, from start till finish and they can alleviate the burden for the family by providing a range of services, allowing one to choose an appropriate funeral that will be conducted professionally and with dignity. The role of the Funeral Director is to assist in every way possible to ensure the wishes of the family and the deceased are fulfilled.
In addition, there will be some people who go further in their planning preparations by ensuring that there are provisions stated in their will or insurance for covering their funeral expenses. No matter how big or small the ceremony is, it is always best to have enough funds set aside for it so that there isn’t a problem of paying for all the expenditures when the time has come.
Planning and preparing for our death reinforces the feeling of mortality that nobody likes but think about why you are doing it; mostly to make life easier for those you love who will be left behind. If there is one thing that lives on even in death – in complete immortality – it’s love.
Caitlyn Ng is an Investigative Journalist of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
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