Legacy
The topic that we are
going to discuss about this week is on Legacy. Legacy is defined as the
transmission or receive from and ancestor or predecessor.
Parents are undeniably
the breadwinners in a family. However, should an unfortunate event happen,
parents should prepare a contingency plan so that their children (if they are
not of age) would not have any financial problems. A reduction in quality of
living is inevitable but the degree of reduction should be modest in such a way
that it still enables the child to fulfill their basic needs. Problems would
still arise even if children are all grown. One of the most common disputes
among siblings is the dispute of the distribution of assets.
Through a thorough
research by BYIC’s research team, it has been estimated that the monthly cost
of leaving a non-working spouse and a child studying in UNMC is RM6000. If one
is only depending on the interest fixed deposit (which provides a 4% interest)
to cover their living costs, the deposit would have to amount to RM1.8 million!
Another low risk investment tool with a higher return rate would be the
insurance plan.
Planning for the distribution of inheritance
Planning how ones
inheritance would be distributed is crucial as not all children take care of
their parents well and the law may distribute ones inheritance in such a way
that the siblings might seize the assets.
(child A --> father --> child B)
Parents
|
Spouse
|
children
|
|
Situation 1
|
¼
|
¼
|
½
|
Situation 2
|
X
|
1/3
|
2/3
|
Situation 3
|
1/3
|
X
|
2/3
|
Situation 4
|
½
|
½
|
X
|
One of the most common
ways for us to plan out the distribution of assets is through will. Will is a
legal document with details about the distribution of inheritance. The
advantages of writing a will is that it is cheap with only a cost of under
RM300 and the procedures to write one are easy and simple. However, writing a
will means disclosing private information publicly in court. A will is usually
written when there is a change in family members who are eligible for
inheritance such as the coming of age of a child. Next, a significant change in
the amount of assets own would also result in the change of will.
The other alternative
for distributing assets would be preparing a living trust. Living trust is the
legal arrangement for the trustee to manage the assets on behalf of the
trustor. This way, private information will be kept secret and assets will be
managed by professionals. However trustors would have to pay a higher legal
fees.
credits to:
Kim Kim
Kim Pham
Lara Tan
Terence Then
credits to:
Kim Kim
Kim Pham
Lara Tan
Terence Then
