PARENTS who are divorced with young children need to think through his or her will and estate planning due to additional challenges. An immediate review of the present documents and instruments is absolutely highly recommended and professional advice is needed to ensure that your children’s welfare is not compromised.
If the person has an existing will, it is time to check through if the existing appointed executor is still appropriate. If not, it is time to rewrite your will. On top of that, who will be your appointed guardian for your young children? You can also update the appointment in the new will.
There will be a long list of questions to think through in your estate planning if you pre-deceases your minor children. One of the most important question to ask is who will hold your liquid assets like you cash in bank, unit trust investments, your CDS account which hold your public-listed shares and even your bank accounts outside Malaysia. A trustworthy trustee is absolutely vital in this area of your estate planning.
Another question that crops up is who will be entrusted and be responsible to dispense the money every month the daily living expenses and medical expenses of the children. If the children are below the age of 18, they can’t operate a bank account on their own. How about the college and university tuition fee after they finish their high school?
While they are studying in primary or secondary school, who will send them for tuition after school and fetch them home? Who will own your car and who will ferry the children?
To compound the situation further, where will your children stay in the unfortunate event that you predecease your young children? Can you count on your ex-spouse to take care of all the above?
Who will hold the ownership of your present house while none of your children is above age 18? At what age do you think is appropriate to transfer the ownership of your house to your children?
When you have other types of assets such as investment funds and shares of public listed companies, who will hold the ownership of these movable assets and who will be entrusted to manage them? As you know, the volatility of the market can diminish the value of your investment fund portfolio in a bear market if it is not managed and monitored on a periodical basis.
At the same time, who will hold on trust and manage the other investment properties under your name? Who will help looking for the tenants of these investment properties and sign the tenancy agreements on your behalf? Who will be responsible for the monthly mundane tasks of collecting the rental income? What will happen if you have tenants who don’t pay on time? On top of that, who can you trust to take care of your properties so that the investment value of your prized properties is maintained?
Implication in EPF nomination
After your divorce, have you reviewed the nomination of your EPF money? Now who will you nominate if place of your ex-spouse? If you intend the money to benefit your young children, is it appropriate to nominate their names while they are below of the age of 18? Even if you have an elder child above the age of 18, what if you don’t feel comfortable that they inherit the big chunk of your EPF money in a lump sum and may spend all in a short period of time?
Implication in life insurance nomination
Generally, people purchase their life insurance policies with the intention of benefitting their children if something were to happen to them, like what insurance agents have sold them.
After your divorce proceedings, have you been properly advised on the implications of your divorce on your existing nomination in all your life insurance policies? How about the universal life policy you were sold and placed outside Malaysia? If you want to remove the name of your ex-spouse from the nomination, who can you trust to hold your chunk of life insurance death benefits?
Naturally as a parent, you will want your life insurance monies to benefit your young children. But the question you have to ask yourself here is: can you nominate your under-aged children as nominees in a fresh nomination form?
I observed a common practice among life insurance agents in the market now that they usually advise their clients to leave the trustee appointment section blank when signing up a new life policy.
Have you been advised appropriately its implication now that you have divorced from your ex-spouse? And what is the unwarranted legal implication if you just take out the name of your ex-spouse and nominate your under-aged children in the new nomination form? What will happen to your life insurance death benefit if all your nominees are under the age of 18? And what’s the implication if one of your children is above the age of 18 at your time of death?
Take note that your life insurance nomination is now governed by the new Financial Services Act 2013 Schedule 10, paragraph 5.
Divorce is a major life crisis event. Innocent children are usually caught in between. Hoping that things will somehow turn out well without proper and effective planning is just wishful thinking.
For your will and business estate planning appointment, please contact Lee Khee Chuan ChFC, CLU, FLMI, B.A.(NUS) at 016-888 0138 (please whatsapp). Lee is a licensed financial adviser representative (CMSRL license holder) with Areca Capital, a senior franchisee of Rockwills and Islamic estate planner with As-Salihin Trustee Bhd.