Estate Planning: Don’t Postpone the Inevitable
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26 November 2019
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In 2018, Finance Minister YB Lim Guan Eng disclosed in Parliament that unclaimed monies amounting close to RM10billion from various entities had been submitted to the Accountant-General's Department. Yes, you read that correctly – almost RM10billion in cash sitting idly left unclaimed by Malaysians.

The figure underscores a pertinent issue surrounding the lack of awareness amongst Malaysians on proper estate planning practices as well as apathy and just plain ignorance on the basic steps in wealth & asset distribution.

Tan Ping Ying, CEO of Affin Hwang Trustee Berhad (AHTB) highlights that the actual value of unclaimed assets could be even higher than what was reported. “Unclaimed monies comprising of inactive bank accounts, unclaimed fixed deposits or insurance payouts is just one aspect of unclaimed assets. The value of unclaimed estates such as land, landed or non-landed properties, farms and estates are even more significant,” she states.

That is why investors should pay as much attention to the wealth distribution phase of the financial lifecycle to avoid having their assets trapped in bureaucratic limbo and regulatory red tape which puts their dependants at risk, says Tan.

In the financial lifecycle, investors tend to pay more attention to the wealth accumulation stage when they start to build their assets and later move on to the wealth preservation stage when they approach retirement. However, the wealth distribution component is often ignored because nobody wants to broach the subject on death and inheritance.

“Most people have a tendency to postpone estate planning and shy away from thinking about distribution plans. They would perceive estate planning as a complicated process and will only leave such planning to a later stage,” says Tan.

“But a complete and holistic estate plan encompasses more than just what happens after you pass on. Sufficient awareness should be built around the concept that you should start planning as soon as you have assets to pass down to your loved ones and to provide for yourself during your incapacity which is now, rather than hoping things will work out when the time comes.”

Whilst, no breakdown was provided for the amount of unclaimed monies amongst Muslims and non-Muslims in the report, it is believed that a large portion of the assets could be trapped under the country’s labyrinthine Islamic estate distribution laws.

“We still note that many Muslim clients underestimate the importance of Islamic estate planning due to a lack of awareness about laws and procedures. Despite the Faraid system being obligatory for Muslims, their legal heirs must still go through the civil procedures and formalities. For instance like having an executor (wasi) (with wasiat) or failing which an administrator (pentadbir) (without wasiat) to administer their estates.

‘Without proper estate planning, some of the legal heirs are hesitant of claiming their rights due to the high expenses incurred and a lack of understanding of the bureaucratic process which requires effort and time. Furthermore, not having a wasiat may complicate matters further if beneficiaries are not in agreement of any persons appointed as the pentadbir.”

Breaking the Taboo
Having a conversation about death and money is still considered taboo amongst most families in Asia. But by overcoming their own discomfort and confronting hard-truths head on, investors can spare their family members a lifetime of hardship especially over common estate transfer scenarios that are easily addressed.

“None of us like to think about our own mortality. And that is exactly why so many families are caught off guard and unprepared when death strikes. Failure to plan can lead to expensive and unintended consequences,” Tan shares.

“It is of paramount importance to choose someone that you can trust to take charge of your estate after you die. Think of what could happen to your loved ones, your business. Can your funds be accessed to ensure the livelihood of your children are taken care of? Will your business continue to operate as usual?”

Tan also highlights the importance of having sufficient liquidity in an estate plan as more investors are asset rich but cash poor.

“Previously, HNWIs tend to accumulate illiquid assets like property hoping that it will generate income for the families. However, it never crossed their minds if one day, there is a need for immediate liquidity, they can’t sell off the property. They would still have to go through the lengthy process of selling the house,” she says.

“These days, people are beginning to see the importance of having liquidity. As such, more people diversify their investments in various assets and geographical locations (onshore and offshore).”

Preserving Wealth and Legacies
To serve the full spectrum of investor’s needs for a comprehensive financial plan, Affin Hwang AM together with its sister company AHTB offers a range of wealth transfer and preservation solutions to safeguard and protect their wealth from unforeseen circumstances.

Affin Hwang AM’s Beneficiary Account enables investors to have a quick and hassle-free distribution arrangement as well as provide immediate liquidity to relieve dependants in need of funds for living expenses and urgent commitments.

The Beneficiary Account is a joint account with the investor as the primary account holder and AHTB as the secondary account holder. Upon the investor’s demise, AHTB shall receive the deceased investor’s monies by virtue of the right of survivorship and act to distribute the monies to the beneficiaries named by the deceased investor in a fast and efficient manner.

This can ease the death claim process and bypass the probate procedure that can be cumbersome.

Table 1 offers a quick comparison between the different estate planning tools available and services offered by Affin Hwang AM and AHTB.
Table 1: Estate Planning Tools and Services Offered
COMPARISON
WILL/ WASIAT WRITING
BENEFICIARY ACCOUNT (jointly offered by AHAM & AHTB)
TAILOR-MADE TRUST (offered by AHTB)
Purpose/ Objective
Common and traditional way of wealth distribution
Quick and hassle-free distribution to nominated beneficiaries
Customized and comprehensive structure to address client’s concerns and unique needs/ objectives on wealth preservation & distribution
Effective date
Upon client’s demise
Upon client’s demise
Upon the Trust setup
Assets covered
All kinds of assets
Only AHAM UTF Account – Cash Plan
All kinds of assets
Implication on assets upon demise
Subject to court probate process
Bypass court probate process
Bypass court probate process
Assets protected from creditors
No
No
Yes. Subject to Insolvency Act 1967
Ownership of assets in AHAM Account
Client
Client as primary account holder, AHTB as secondary account holder
AHTB will be the account holder upon the Trust setup
Payment of medical expenses during disability
No
Client as primary account holder, AHTB as secondary account holder
AHTB will be the account holder upon the Trust setup
Delay in assets distribution to beneficiaries
Generally no UNLESS there is a testamentary trust in Will
No
Yes
Payment of living, education and medical expenses for young children upon demise
Generally no UNLESS there is a testamentary trust in Will
No. Immediate distribution to nominated beneficiaries within 14 working days
Yes
Overcoming force-heirship rules for Muslims
No
No
Yes
Estimated fees*
In the market, will-writing fees range widely. The charges largely depends on the service provider and according to the testator’s requirements.

AHTB only offers will-writing to selective clients via promotional campaigns.
Setup fee: RM100*

Admin fee: 0.75% or RM500 whichever higher (chargeable upon investor’s demise)
Setup fee: from RM8,000

Admin fee: 0.15% ~ 0.25% of total trust asset value (chargeable upon Trust setup)
*Special Promotion
Setup fee of RM 100 will be waived from now until 30 June 2020. Reach out to your sales representative for more information. Terms and conditions apply.

Click here to learn more.
Disclaimer
This article has been prepared by Affin Hwang Asset Management Berhad (hereinafter referred to as “Affin Hwang AM”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to Affin Hwang AM and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of Affin Hwang AM.

The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as “Opinions”). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, Affin Hwang AM makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions.

As with any forms of financial products, the financial product mentioned herein (if any) carries with it various risks. Although attempts have been made to disclose all possible risks involved, the financial product may still be subject to inherent risk that may arise beyond our reasonable contemplation. The financial product may be wholly unsuited for you, if you are adverse to the risk arising out of and/or in connection with the financial product.

Affin Hwang AM is not acting as an advisor or agent to any person to whom this presentation is directed. Such persons must make their own independent assessments of the contents of this presentation, should not treat such content as advice relating to legal, accounting, taxation or investment matters and should consult their own advisers.

Affin Hwang AM and its affiliates may act as a principal and agent in any transaction contemplated by this presentation, or any other transaction connected with any such transaction, and may as a result earn brokerage, commission or other income. Nothing in this presentation is intended to be, or should be construed as an offer to buy or sell, or invitation to subscribe for, any securities.

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TENG CHEE WAI

Managing Director
Teng Chee Wai is the founder of Affin Hwang Asset Management Berhad (Affin Hwang AM). Over the past decade, he has built the Company to be the fastest growing and only independent investment management house in Malaysia’s top three, with an excess of RM47 billion in assets under management as at 31 December 2018.​

​In his capacity as Managing Director / Executive Director, Teng manages the overall business and strategic direction as well as the management of the investment team. His hands-on approach sees him actively involved in investments, product development and marketing. Teng’s critical leadership and regular participation in reviewing and assessing strategies and performance has been pivotal in allowing the Company to successfully navigate the economically turbulent decade.

Teng’s investment management experience spans more than 20 years, and his key area of expertise is in managing absolute return mandates for insurance assets and investment-linked funds in both Singapore and Malaysia. Prior to his current appointments, he was the Assistant General Manager (Investment) of Overseas Assurance Corporation (OAC) and was responsible for the investment function of the Group Overseas Assurance Corporation Ltd.​

​Teng began his career in the financial industry as an Investment Manager with NTUC Income, Singapore. He is a Bachelor of Science graduate from the National University of Singapore and has a Post-Graduate Diploma in Actuarial Studies from City University in London.
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