Legacy Planning

Legacy_PlanningLegacy and estate planning is a comprehensive multi-dimensional type of wealth planning that includes medical, retirement, charitable, business succession and gift planning. It is not just for the wealthy and/or high net worth individuals alone, and does not deal merely with the transfer of financial wealth. It deals with much more than that.

Suppose you are a parent with two young children. Now, it is reasonable to conclude that the probability of both you and your spouse dying at the same time or at an early age is low. However, should this happen, what could possibly happen to your children or, if you are an only child, what about your parents?

In this modern era, many individuals have failed to engage in proper legacy planning. As a result, their immediate beloved ones are made to suffer unnecessary emotional and financial hardship which could have been prevented effectively with proper legacy planning.

On the other hand, some individuals have engaged in proper legacy planning but fail to acknowledge that without the presence of proper care and maintenance, their legacy plan will not be able to fulfil the objectives that they desire to achieve.

Let’s look at the following case study so as to acquire a deeper understanding of the importance of legacy and estate planning.

Six years ago, two relatives of a friend of mine were killed in a tragic road accident in one of our neighbouring countries. Overnight, their two children, age 10 and 8 became orphans. However, the children are fortunate that their deceased parents had left them a fortune. Immediately, a proposition that may arise from this incident is that the two children’s parents were very well-off.

But what will happen if the planners are not wealthy? Well, there are measures that one can consider to adopt if they are not rich. In general, if you are not relatively well-off but would like to allocate a substantial amount of money for your young children in the unlikely event of any mishaps or deaths, then a general rule of thumb will be to adhere, implement and execute the necessary instruments to achieve the goal. For instance, one example could be the purchase of term insurance.

In other words, one of the important considerations in life is whether you and your spouse have set aside sufficient monetary resources for your dependents' living and/or education expenditures should you and your spouse be unable to be there to provide for them in the future.

As mentioned earlier in the case study, the parents left the children a fortune through a will. However, the will contained many ambiguous instructions with regard to the usage of the funds as well as the appointment of a guardian for their children. Eventually, the executor/trustee appointed – another relative of my friend – ended up the official guardian for the two children. The guardian did not discharge her role effectively and diligently. As a result, the two children could not receive the best possible care and guidance under the ideal environment. Eventually, problems began to surface a few months later and a monetary tussle between the guardian and a few of their relatives occurred.

An important takeaway from the case study is that in the process of drawing up a will, you should be as specific and detailed as possible, especially with the usage of funds and the ideal guardian candidates for your children. In other words, choose wisely, think smartly and execute carefully!

Another rule of thumb in legacy planning will be to plan, consider, discuss and pen down both your spouse’s and your thoughts with regard to your dependents' education (which school to attend) and their ideal lifestyle (living environment) among others. State these clearly and specifically in the will as these information and/or instructions will serve as valuable and helpful guidelines to the guardian especially.

The last point to note is in relation to the appointment of the executor and trustee. You need to choose the executor/trustee wisely. Usually, the executor/trustee tends to be our spouse. However, an important consideration in this case would be the appointment of an alternative executor/trustee. As seen in the case study, an executor/trustee will play a vital and important role in the welfare and upbringing of your children in event of any mishaps and/or death.

The alternative executor/trustee shall ideally be someone who is willing to assume the long term responsibility of ensuring that the monies will be wisely and carefully spent and that your children will be well taken care of until they reach adulthood.

Here, a rule of thumb will be to consider differentiating the functions of the executors/trustees and the guardianship of the children. The primary rationale is to implement the necessary safeguards in place to prevent against any potential fraudulent and abuse acts from taking place.

In summary, start young and plan early. Spending time to engage in proper legacy and estate planning by drawing up a will as the first step may just possibly be one of the best investments that you will ever make as your children’s lives. Their future are in your hands!

About the Author: Officially accredited as the youngest wealth coach and trainer in Asia, Sam is founder and executive wealth coach at Wisdom Capital. He has been featured in major newspapers, magazines and TV talk-shows in Singapore which include Lianhe Zaobao, The Sunday Times, The Straits Times, The Business Times, NTUC Lifestyle magazine, Money Smart and more. As a regular guest & accomplished speaker at conferences and corporations, Sam has been invited to speak at financial institutions, corporate organizations, education institutions in Singapore that include Securities Investors Association of Singapore (SIAS), CIMB Securities, Professional Investment Advisory Services (PIAS), Singapore Management University, Mindef and HDB among others.

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