EXECUTORS are vital to the successful effecting of a will.
Almost as important as the decision to write a will is the need to choose and appoint a suitable executor.
Just as crucial is to ensure this chosen person is willing and able.
An executor is the one appointed to carry out the terms and instructions in your will and administer your entire estate until all assets are distributed.
This onerous responsibility varies in terms of time, depending on the size and value of the estate, the beneficiary’s ages and the distribution process.
Sometimes, the executor might be required to also assume the trustee’s role if no other trustee has been appointed and if beneficiaries are not yet aged 18. The choice of an executor, is therefore, not an easy one. Up to four executors, can be chosen.
Each of these should ideally possess asset management skills and professionalism-especially if the assets are large. Honesty and reliability are necessary since valuables like jewellery, ornaments and antiques will be vested with them until finally distribution. An executor should also have time.
Spouses or friends holding full-time jobs may find it taxing to juggle their already full daily schedule with the additional task of administering your assets and business property especially if these need enhancing in terms of growth and value.
Although spouses are quite commonly named as executors, they may not be in a state of mind to deal with the demanding duties and complex procedures involved if still in grief.
Let us analyse a real life situation of an old friend of mine whose name has been changed to maintain the confidentiality.
Alex is a tax consultant, who advocates the necessity of having will but one thing he was set against was to appoint a trustee company as the executor of a will.
With such strong belief, he convinced his friend Tham to appoint him as executor to save on the estate administration fee that would otherwise be paid to a trustee company. Tham died suddenly in a car accident recently.
Upon Tham’s death, Alex went about to obtain the grant of probate. Little by little, he found out he had a load of administrative matters to handle.
These included identifying, locating and collecting all of Tham’s assets, obtaining data on all liabilities, dealing with creditors and banks, dealing with the income tax department on the past tax assessments ofthe deceased, filing of the estate’s own tax returns and applying for a letter of clearance before he could make any distribution of assets to Tham’s beneficiaries.
Alex had to make numerous calls, correspondences and even follow up with various parties-all very arduous and time-consuming tasks.
He had to comply with different procedures of each financial institution and was not able to obtain the relevant information through the phone or by mail alone.
It only dawned upon him then he got more than what he bargained for. He was not cut out for it. On top of that, it distracted him from focusing on his own business.
Snowed under, Alex had to eat humble pie and engage external professional firms to handle and expedite matters as a result of his inexperience — which caused unnecessary delays in the estate distribution. This had also put a strain on his relationship with Tham’s family.
With whatever little cash flow left for Tham’s family from savings and insurance proceeds in which Tham had set up a trust in his insurance policy worth a meagre sum of RM50,000 was fast running out.
To make matters worse, Tham’s three children were all minors below 16 and Mrs Tham is a housewife all her life.
They were all hoping for early clearance of their probate to access the fixed deposits savings of Tham plus their gold and jewellery whichwas all frozen in the bank.
Unfortunately, there was no insurance taken up to cover Tham’s housing loan. In the end, Tham’s family did not save on costs as Alex had first thought and neither was there saving grace in smooth and speedy estate distribution.
Alex turned out to be the not-so-smart alec. He did not have a good understanding of the tasks and challenges faced by an executor.
Ignorance often resulted in people taking the route of appointing a person whom they trust to be the executor. According to the recently launched Financial Services Act 2013, the insurance policy holder is not allowed to nominate himself as a trustee, the Government in a way encourages nomination of a public trustee, that is, Amanah Raya Berhad or corporate trustees that are governed by the Trustee Act.
The issues to consider in selection of an executor are:
·Complexity of task — estate administration work is not simple but requires detailed knowledge of legal tax, banking, accounting and administrative matters.
·There is no free lunch — avoiding costs of professional handling may mean higher costs eventually. Trying to get cheap or free service can lead to overlooked and costly mistake.
·Priority is forsaken — an individual executor has his own priorities perhaps in his job or own business and may not be able to handle or pay full attention to his role as an executor.
Professional will-writers and will-writing companies therefore recommend the appointment of a professional person other than your spouse to be your executor, or a substitute executor in addition to your spouse.
Why not consider a corporate trustee to be either an executor or a substitute executor?
Such institutions understand fully the intricacies of a will and possess the time and ability to manage, distribute and enhance your estate efficiently. Being instructions, they are also impartial (non-based to particular persons) and have continuity.
They are thus excellent alternatives to individual executors. They also possess the necessary knowledge and experience with the courts to deal with matters pertaining to a Grant of Probate to ensure the smooth distribution of your estate.
Nonetheless, whether you ultimately appoint an individual or a corporate trustee as the executor, professional will-writers recommend you discuss this with the appointee first to get their consent.
Especially with individuals, this will ensure that they not only understand the magnitude of the task, but are ready and willing to assume it. This will avoid problems of the executor renouncing the role later on.
Family members should be furnished with the name, address and contact number of the executor so that the person can be contacted immediately when required. This is especially important if the will contains funeral instructions or matters requiring urgent attention.
Executors are the ones who will ensure whether all your final wishes come true. Therefore, choose them wisely. Let the experts visit you and tell you more. An popular estate planner Lim Yuen Siong used to quote, “Either way you will have an estate plan: The law or your own.”
Questions and answers from recent enquiries from our readers.
Beneficiary of life policy
Q: I have bought a life insurance policy and nominated my wife as beneficiary. Do I still need tomention it in my will?
A: No. By virtue of Section 23 of the Civil Law Act 1956 or Section 166 of the Insurance Act 1996, if the insured has nominated the spouse and/or children as beneficiary or beneficiaries a trust will be created.
The sum assured no longer forms part of the assured’s estate. As such, the assured cannot will it away.
The advantage of putting the sum assured and trust is that creditors can have no claim against it. However can fail if both spouse were to pass away together, thenomination is considered failed. There is no substitute nominee unless it is mentioned in your will. Nomination also fails if nominees are minors because the children do not receive the insurance proceeds and it will transferred to the public trustee till there right age 18.
Nominees of insurance policy
Q: I have nominated my sister in my life insurance policy but was told that my wife and children are the true beneficiaries. Is this true? If yes, how do I ensure she gets the money?
A: Yes, it is true if you do not have a will as the Insurance Act 1996 states that any person other than a spouse, children and parent (if single) will only receive the money in the capacity of an executor and must pass the moneyback to the deceased estate (or beneficiaries — i.e. wife and children in this case)
If your parents are alive, they are entitled to a quarter of the money.
Therefore, if you want her to receive this money, you can either assign the policy to her or write a will which you name her as the beneficiary to this particular policy.
Willing away a share in a house
Q: I am the joint owner of a house. Can I will it away to whoever I wish?
A: Yes, you can will away your share in the house.
Employees Provident Fund (EPF) nominees to remain
Q: If I have nominated my parents as the beneficiaries of my EPF, can I subsequently will it away to my spouse? Can my will revoke the nomination I made earlier?
A: No. Under the EPF regulations, a will cannot revoke an earlier nomination. To revoke the earlier nomination, you have to use the prescribed form provided by the EPF board.
As similar to insurance nominations, EPF nominations will still fail if nominees die together with the contributor and same issue happens to minors who will be unable received the payout immediately. I will recommend you to set up a simple trust if you want to your children who are minors to receive the payout immediately.
Purchase of unit trust with EPF
Q: Recently, I purchased unit trust through my EPF and wish to know what happen to these investment if I were to pass on? Will my EPF nominees inherit these investments as well?
A: In this case, the investment will be lumped into your estate and does not go back into your EPF account.
As such, it will be distributed according to the Distribution Act 1958 (as amended in 1997) if there is no will or follow your will if you have made a will. Therefore to ensure the rightful nominees receive these investments, a will must be written.
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