Income+
A simple will for millennials
Lim Siew May 
When you’re young, it’s easy to feel invincible. Death is perhaps the furthest thing on your mind
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WHEN you’re young, it’s easy to feel invincible as death is the furthest thing on your mind. After all, the Department of Statistics Malaysia data reveal the life expectancy for males and females are 73 and 77 years respectively.

Another reason for dragging your feet to prepare a will is that you are so busy accumulating wealth in the early part of your career that estate planning seems inconsequential. This can seem even less important for those who have not amassed substantial wealth and do not have any dependants.

Starting estate planning early and writing a will is definitely worth the time and money for anyone, including millennials, says Ti

But for those who are more far-sighted, you’ll be able to see the importance of having a will. Jon Ti, a licensed financial planner from financial consultancy Ascendur Bistari Sdn Bhd, believes that starting estate planning early and writing a will is definitely worth the time and money for anyone, including millennials.

“Is it easier to try to take account and manage a large estate later in life, or start early and adjust according to life’s journey?” he questions.

He says writing a will also clearly states the person’s intentions, which include how to deal with their assets, how funeral arrangements are to be made, how any debts or unpaid taxes are to be paid. And how the balance of assets should be distributed to the intended beneficiaries.

“We also cannot foresee life’s uncertainties, but we can certainly put in some preparations so that our loved ones are better taken care of. Lastly, the idea of knowing what you leave behind will be treasured and put to good use with minimal conflicts is greatly appealing,” he adds.

Ti’s caveat is that his advice is applicable to non-Muslims, as Muslims are subject to Syariah Law in Malaysia and the distribution law of Faraid applies. “While there may be some similarities in planning, the tools for implementation are much different for Islamic estate planning,” he qualifies.

Pauline Yong, the author of I Love Financial Planning, points out that in Malaysia, anyone who has attained the legal age of 18 (except Sabah, which is 21) and of sound mind can make a will. Usually, millennials in their early 20s to mid-20s mostly own liquid assets such as cash, equities and unit trusts, she notes.

Like Ti, she emphasises the importance of writing a will. This is especially so for individuals who have dependent parents.

Under the Malaysia Distribution Act 1958, the net assets of the deceased who is single with surviving parents will be given to the parents, she says.

“However, the problem is not whether the parents will get the estate, it is the problem of delay in the process of distribution, which can be delayed up to seven years for the intestates [people who have passed on without a will]. Hence, anyone should start to write a will as soon as possible,” she explains.


Beyond EPF and insurance nominations

Most twenty-something adults probably have most of their money stashed in the Employees Provident Fund (EPF), and for those with life insurance policies, their nominees will receive a lump sum payout once they pass on.

When writing a will, consider whether the proceeds should be distributed all at one go, or on a staggered basis, says Fazrul

Fazrul Mohd Farouk, a licensed financial adviser at financial advisory firm I-Max Financial Sdn Bhd, says for those with nomination options in the EPF and insurance policies, a will may not be necessary. However, it pays to be aware that the proceeds through the EPF and insurance policy nominations would be paid in a lump sum to the nominees, he points out.

The problem? This may not be your ideal distribution arrangement. Let’s assume you prefer to have the proceeds distributed in a staggered manner.

For the purpose of preservation, such as having ageing parents or younger siblings who might be dependents to you, having a will would make sense wherein a testamentary trust can be created from, says Fazrul.

However, even for millennials who may not have dependents such as parents or younger siblings, having a will in place still has its advantages, he stresses. “Firstly, it acts as a safeguard in the event a nomination [or part of a nomination] under the EPF or insurance policy fails – this can happen especially if he/she wasn’t able to update the nomination after a particular nominee had pre-deceased him/her,” he explains.

Having a basic will in place definitely speeds up the time it takes to distribute the assets. He acknowledges that some may question whether a will is necessary if you have named your nominees for the EPF and insurance policies. “One also needs to consider the time and longer process, not to forget cost, for the beneficiaries to go through to claim [the remainder of] assets such as cash in bank and motor vehicles,” he adds.

Some beneficiaries who are too busy with their daily routines leave these unclaimed, which then end up under Unclaimed Monies,” says Fazrul.

Next, a basic will would have clear and established instructions as to how the estate is to be distributed, and who would be responsible for execution. “Safeguard measures such as substitute executors and beneficiaries named in the will ensure that the estate can be distributed in whatever circumstance the testator [person writing the will] dies,” he says.

To illustrate, assuming you have non-trust nominations such as your siblings or non-married partner as the intended beneficiary of your life insurance policy. According to Ti, only nominees of a trust policy will receive the insurance monies as beneficiaries, such as your parents (if the non-Muslim policyholder is unmarried), or spouse and children (for non-Muslim policyholder who is married).

“Otherwise, the stated nominee is merely an executor, and must distribute the monies received accordingly to a will or applicable law,” he says.


Distribution of assets

According to Ti, the distribution of assets depends on personal preferences, objectives and needs. Based on his observations, larger allocations are often given to loved ones who are most in need, or to entities which have contributed significantly to a person’s life.

He further notes that in cases where financial assets are scarce, there could be intentions to give specific possessions away to specific individuals. “These distributions are more symbolic in value rather than monetary, which could be intended to help grief over a passing or for remembrance. A will can also include terms of endearment to be given or read to loved ones just in case they were not able to tell them their last words,” says Ti.

He cautions that the naming of a beneficiary in the will has to be given careful thought. “The only complication is if there is a fallout in any relationship and a revision of the will is not done, it would lead to a distribution to an unintended person.

“As long as the person is stated as a beneficiary, an executor has the responsibility to distribute accordingly as beneficiaries have rights and can take legal action if they are not given their due distribution,” Ti explains.

Yong’s view is that no matter how much assets you have, you can decide how the assets are distributed and to whom you want to distribute. However, members and other dependents may challenge a will if they feel they have not received “reasonable provision” from the deceased, she cautions.

“For example, in the case of married individuals with children, if they will their assets to someone who is not related such as a good friend or a neighbour, then this might be contested by the beneficiaries such as the spouse or children of the deceased.

“In addition, once you are married, your last will made before marriage will no longer be valid,” Yong points out.

Meanwhile, Fazrul says if one doesn’t have any dependents nor extended family members or friends who might be in need, you can always consider charitable organisations.

He agrees that how much to distribute to your intended beneficiaries is really a personal choice that should be decided based on the needs of the dependents’ or family members/friends in need.


Beneficiaries

However, Fazrul believes that a more important consideration would be whether the proceeds should be distributed all at one go, or on a staggered basis. This, he says, is to address beneficiaries who may not be financially savvy, and to ensure that the amount passed on will last them for the intended amount of time.

“One may consider apportioning some assets to the person they are in a relationship with, especially those whom they are engaged to but not yet married – however, this should be made clear in the will [that the will is being drafted with a marriage being contemplated],” he says.

“Otherwise, a marriage would nullify the will. As for those who may not necessarily be engaged but are in a relationship, they may still consider apportioning part of their assets to their partner. However, urgency should be exercised in getting the will amended if there is change in the relationship status,” Fazrul adds.



Cost of preparing a will

LEST you think the cost of writing a basic will is prohibitive, take heart. The consensus FocusM gathered from our interviewees is that it would typically cost a few hundred ringgit, which isn’t too much for peace of mind.

According to Jon Ti, a licensed financial planner from Ascendur Bistari Sdn Bhd, a simple will is likely to cost between RM400 and RM600. “In general, having more assets will increase the cost of writing a will, as it will also likely entail more details on how they are to be managed,” says Ti.

In the case of properties for millennials, it could entail how the balance of debt is to be paid and from which resource, should the property be liquidated and when, or if it can be utilised for a family member’s stay, Ti explains.

Meanwhile, Fazrul Mohd Farouk, a licensed financial adviser at I-Max Financial Sdn Bhd, says that a decent quality basic will for young people, with proper planning and advice may range from RM300 to RM500. “However, if one has dependents and may need to consider professional executor appointment, it can extend up to RM1,500. All these are single, one-time upfront costs,” he says.


No matter how much assets you have, you can decide how the assets are distributed and to whom you want to distribute, says Yong

 

Will-writing services

Pauline Yong, the author of I Love Financial Planning, agrees that as long as you are single, the cost of writing a will is very minimal. Some local financial institutions offer online will-writing services for as low as RM298 for a basic will, she notes.

However, she observes that for individuals who are married with children, the cost of writing a will could be 25% higher than a basic will. “This is due to the ‘testamentary trust’ attached inside the will that specifies details such as who are the guardians for the children [if below 21 years old], and how should the estate be distributed,” she explains.

What happens if there is no testamentary trust? Depending on the number of additional clauses added to the will, the cost of a basic will should be around RM300 to RM500, says Yong.

“The number of additional clauses usually arise from the complexity of the will, such as more beneficiaries or more properties and assets for distribution, and the specific bequests. The simplest will that I have drafted so far is that the husband willed all his assets to his wife in a single clause, which was simple and cost-effective,” she says.

Dealing with intellectual property

These days, it’s not uncommon for millennials to produce online contents that generate passive income, such as videos, music, e-books and blogs. Would intellectual property complicate the will and cause its cost to soar?

Ti, who classifies this as part of business planning, says this would really depend on what they foresee in terms of revenue generation for the royalties. “It can range from complicated to simple disposal. For example, selling of the intellectual property within X number of years. This would simply take one to two clauses, and since the cost of the will is generally based on the number of clauses, it will not significantly affect the cost of the will,” he says.

However, he cautions that retaining the asset for the executor to manage may not be a good idea. This is because you are effectively instructing the executor to manage a business, keep accounts and pay taxes. The executor may have no expertise or may need to hire external management, which may not make economic sense.

“Inclusion of such asset management is not likely to increase the cost of the will significantly, what is more important is if such management makes sense or if it is simply easier to liquidate the business holdings,” Ti explains.

Yong points out that treatment of intangible assets is the same as other assets. “The details such as the serial number must be stated, it will be done in additional clause as per normal charges. If it is music or movie, it would be their song titles or movie titles. If it is a blog or website, it would be the name and the website address – as long as people can identify the assets to be given away in the will,” says Yong.

“If it’s a property, we have the property address and land titles; if it’s a bank account, it would be the account number; if it’s a car, it would be the car model and chassis number. If there are assets omitted from the will, it will be classified under ‘Residuary Estate’ to be distributed according to the clause there,” she adds.

This article first appeared in Focus Malaysia Issue 241.