WRITING a will is an important but often overlooked matter as life can take an unexpected turn at anytime.
A ready and accessible will will definitely help resolve issues pertaining to estate inheritance much more quickly with less misunderstanding or fuss when the time for it comes. So, it is good to be prepared.
While writing a will is a fairly straightforward matter, founder and CEO of fee-only certified financial planning firm MyFP Services Sdn Bhd Robert Foo told StarBiz that there are some common mistakes that people tend to make when planning their estate.
“Many people think that it is a rather straightforward and simple task of writing their wills and most of them just give an equal proportion to every child, ” Foo said.
If a person has two children, he said that the person would usually tend to divide the inheritance 50:50 on an equal basis.
“Doing it this way may not be the right answer actually.
“Let’s say a family has five children who will inherit the estate and the parent would automatically tend to give 20% each, ” he said.
“But if it is done this way, and the estate also includes a business: who makes the decision in running the business following the person’s death?” Foo asked.
He said that dividing the estate equally in this sense could cause more confusion and misunderstanding following the person’s death.
“Let’s say the estate is a property development company.
“Soon following the person’s death, one of the brothers may say a development project is good while another may disagree, ” he said.
“If this happens, how are the five siblings going to resolve the deadlock?
“This is why ownership and control are different things.
“An equal proportion for each child may sound fair on the surface, but this is not an effective way, ” Foo added.
He said estate planning should be a task that the public should take more time to think about and in a more indepth manner since there are consequences to the decisions being made.
“There needs to be a distinguishing factor between the ownership and a person who actually has a controlling stake (in the business), ” he said.
He noted that there would be cases where the circumstances are unique and these things must be thought of seriously to ensure the future outlook of the business remains intact even after the passing of the original owners.
“Perhaps maybe the younger brother has a good university education and is a good fit to run the company in the absence of his father, while the older brother may be more operational and followed the father without a formal education, ” Foo explained.
“So the culture here would be for the elder brother to decide and lead the business (but being not fit to do so), and this is where issues will crop up.
“In many Asian families, this is the kind of problem they usually face, ” Foo added.
He said it would be good in this case to hire professionals to look into the matter, something which his company also does as it requires more thought.
According to a survey last year, it was estimated that only two million people, or about 28% of the total seven million people that make up the working population in Malaysia, had a will, according to MWD Wills Depository Sdn Bhd.
This figure is a far cry from countries such as the United States and the UK, where 40% and 41% of the adult population respectively have a will, StarBiz reported last year.
In Australia there is an even greater awareness of estate planning with about 55% of adult Australians having a will written.
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