Preparing Wills and Trusts: Why Is It Important?
As adults, we work hard almost all our lives in order to earn a decent living and support our family members. Throughout our lives, we would have accumulated some assets and wealth.
This can take different forms, such as savings in a bank, investment in stocks, property, gold, jewelry, business shares and the like.
As the owner of these assets, you want to ensure that they are inherited by the people you feel deserve them the most. There are many other benefits to preparing your will or trust which we will touch on in this article.
In Malaysia, non-Muslims above the age of 18 ( or 21 in Sabah and Sarawak) are permitted to make a Will or Trust. Before we go further, let us look at what Wills or Trusts mean.
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The Definition of a Will
A will is a document made by an individual of sound mind, to declare how they want their assets divided upon their death. The document is legally acceptable if it fulfills certain standards and formats and comes into effect once a person passes away.
Among the things a will must have is two witnesses and the appointment of an executor. The executor is a person who carried out the wishes of a deceased person according to their will.
The most important part of a person’s will is where they list their beneficiaries and the assets that each beneficiary will receive.
As the person writing the will ( called the testator in legal terms) you can also specify the terms and conditions that your beneficiaries will have to fulfill in order to receive their inheritance.
The Definition of a Trust
A Trust is also a declaration of how your assets should be divided. The main difference is that a Trust can come into effect immediately while you’re still alive, at your death, or after your death.
In a Trust, you will place your wealth or assets under the care of a person or an institution ( usually a bank or law firm) called a ‘Trustee’. The Trustee has legal rights to that asset until your beneficiary fulfills the conditions to inherit that asset.
The conditions set can include coming of age, getting married, finishing one’s studies or achieving a goal.
Why Should You Prepare a Will or a Trust?
There’s no better time to prepare a Will or Trust than the present. Even if you’re completely healthy in the present, you can never predict what might happen tomorrow or after that. Here are the other benefits of preparing a Will or Trust:
Providing for Your Children
A Will and Trust is the perfect way to ensure that your children are cared for financially after you’re gone. This is particularly important if your children are minors and are unable to work.
The assets you leave to your young children can be managed by a trustee or executor until they have finished their studies and are old enough to manage these assets on their own.
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You Decide Who Deserves Your Assets
A Will or Trust gives you full authority to decide who should get your assets and wealth after you’re gone. In some families, being related by blood doesn’t automatically mean that you are close.
Your Will is going to ensure that only the deserving members of your family inherit your assets. For example, if you run a business and have majority shares in it, you want your shares to be inherited by the most capable person to run your business after you.
The Process of Inheritance is Much Faster
When a deceased person does not leave a Will or Trust, then their assets are distributed according to the Distribution Act 1958. This can take up to 10 years to process, compared to only 2-5 years or less if there’s a Will or Trust.
The process of disbursing a deceased’s assets takes longer because there has to be a valuation of your belongings and liabilities first. This will require many legal services including tax consultants, accountants and lawyers which will need to be paid.
Specify How Your Liabilities Should Be Settled
When you draw up a Will, usually you will have a clause for how you want your debts to be settled. This clause will help your executor know where the money to settle your liabilities should come from, or who you designate as the person who should settle your debts. This makes it easier and clear cut so as to avoid misunderstanding among your loved ones.
How Does a Will Work When One Passes Away?
When preparing a will, there are certain important things you have to include in the document:
You have to state that you are of sound mind at the time of writing.
You have to appoint an executor who is responsible for carrying out all the instructions in your Will. This executor should be a trusted person, and can be one of your beneficiaries.
You should sign your Will in the presence of two witnesses, and they have to sign as witnesses as well.
Once you pass away, your family or associates will have to locate your Will and have it read. Many people choose to leave their Will in the safekeeping of their lawyers of the will writing agency.
The executor whom you have appointed will have to apply for a Grant of Probate from the courts. This is done through a lawyer and is a document that gives the executor authority to ‘move’ the deceased’s assets and wealth.
The executor is then responsible to disburse your assets according to the Will, such as changing the ownership of your property, shares, business and transferring money to your inheritor’s accounts.
What Happens If There’s No Will?
As mentioned before, if you pass away without a Will or Trust, your assets will be divided according to the Distribution Act 1958.
When your assets are divided according to this act, your assets will be divided according to a formula.
If you have children, half of your assets will go to your children, one quarter to your spouse and one quarter to your parents ( if they’re still living).
If you have no living parents, your spouse will get one third of your assets and your children two thirds.
If you have no children, your assets will be divided into two; half for your spouse and half to your parents.
If you have only children, or only a spouse or only your parents they will receive all your assets.
If you have only children and parents, your parents get one third and your children two thirds.
If you have no spouse, children or parents, your assets will go to your immediate relatives in equal portion, including siblings, grandparents, grandchildren, aunts and uncles in equal share.
If you have no immediate family left , your assets will belong to the government.
Make Your Will or Trust Today!
The process of making a Will or Trust isn’t complicated, especially if you have the right help from the right people.
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Speak to our expert consultants today about planning your assets and safeguarding your loved ones’ future with a Will or Trust. This is one of the best ways you can show your love to them, even after you’re gone.