By Hanniz Lam

Family disputes in Malaysian inheritance is more common than you think.

In January we shared the Personal Finance Calendar and if you’ve been following it diligently, congrats! If not, it’s OK, it’s the weekend and you can use this time to catch up.

One of the things we recommended that you do this month is to review your estate plan.

REVIEW YOUR ESTATE PLAN

Many people seem to spend more time arranging a vacation, buying a car, or even picking a restaurant to eat dinner at than they do deciding who will inherit their possessions once they pass away. It may not be as exciting as planning a vacation or reading restaurant reviews, but without estate planning, you won’t be able to choose who inherits all you’ve worked so hard for.

The wealthy aren’t the only ones who benefit from estate planning. Even if you don’t have a pricey property, large EPF savings, or precious art to pass on, settling your affairs after you die could have a long-lasting—and costly—impact on your loved ones if you don’t have a plan in place.

Experts recommend revisiting your will and other estate-planning documents at least every few years unless there are reasons to do it more frequently — which is common.

That could include things like marriage, divorce, birth or adoption of a child, coming into a lot of money (i.e., inheritance, lottery win, etc.) or even moving to another state where estate laws differ from the one where your will was drawn up.

Factors such as family circumstances and health conditions may change with time and so may the perspective on how, what and who should benefit with these changes. It is not advisable to review wealth planning needs only when a crisis erupts in one’s life, be it Covid-19 or otherwise.

Today, many people own small businesses and have more than one property, but they do not have wills to bequeath these or any form of estate planning on how they intend to pass on their business to their family when they are no longer around.

International real estate holdings are popular among Asian high-net-worth individuals, which means a review of one’s succession plan may be necessary, seeing that many countries are offering extensions and relief measures pertaining to capital gains as well as inheritance and jurisdictional taxes.

In such circumstances, centralising control via wealth management structures that also allow for a succession plan may be advantageous and efficient such as a private foundation or trust.

Four main reasons to review your Estate Planning:

If you want to choose who will inherit what among your possessions and valuables, you need do some estate planning.
Estate planning allows you the ability to name your children’s guardian in the event of your premature death.
Reducing taxes on what you leave behind is a common estate-planning goal.
Estate planning minimizes the chances of family strife and ugly legal battles.

In addition to regular reviews, it’s a good idea to review and update your plan at life events like the following:

The birth or adoption of a new child or grandchild
When a child or grandchild becomes an adult
When a child or grandchild needs educational funding
Death or change in circumstances of the guardian named in your will for minor children
Changes in your number of dependents, such as the addition of caring for an adult
Change in your or your spouse’s financial or other goals
Marriage or divorce
Illness or disability of your spouse
Change in your life or long-term care insurance coverage
Purchasing a home or other large asset
Borrowing a large amount of money or taking on liability for any other reason
Large increases or decreases in the value of assets, such as investments
If you or your spouse receives a large inheritance or gift
Changes in federal or state laws covering taxes and investments
If any family member passes away, becomes ill, or becomes disabled
Death or change in circumstance of your executor or trustee
Career changes, such as a new job, promotion, or if you start or close a business

STEPS TO TAKE TO AVOID FAMILY DISPUTES WITH YOUR ESTATE

Create Estate Plan while you are still healthy
The first step towards avoiding family disputes is creating an estate plan while you are still healthy and have a sound mind.

If you delay the estate planning, you will either not create a plan or may get unable to communicate your wishes clearly to an attorney. An estate plan helps you to avoid confusion and as such prevents potential conflicts that could arise.

Use Irrevocable Living Trust
One way to avoiding future estate litigation and disputes is to avoid probate of the assets. The Estate planning with the help of a living trust attorney will usually keep your estate out of the probate court. This removes the possibility of your heirs and beneficiaries battling it out in the court for your estates in future.

Communicate the plan to your siblings and children
Though the law doesn’t require disclosing your estate plan to anyone, it will be helpful if you share the information beforehand with your beneficiaries. If comfortable, discuss the estate plan with your heirs and let them know about your wishes.

Explain different or unequal treatment of beneficiaries
When it comes to inheritance questions, make sure to explain to all stakeholders, the reason behind your decisions.

Choose Executor or Trustee wisely
While selecting an executor or trustee of an estate, consider what conflicts could arise out of your choice. Sometimes it is wise to go for an independent trustee if you know think there a possibility of a dispute over your choice.

Monitor and Update your estate plan
Estate Planning is a long term process, and not a one-time event. Estate plans need to be reviewed periodically and updated based on the changes in the law or important life events. It is also critical to change your beneficiary designations based on the changes in your life.

Estate planning for Muslims involves property and asset distribution through wasiat or hibah and faraid in compliance with Syariah Law and its principles.

It often involves the preparation of a wasiat with an understanding of faraid. A wasiat is a promise by a person on his/her property or to complete a benefit for charity or any other reason that is allowed by Syara’ (Islamic Law) which is to take effect upon his/her death. Faraid is a concept in Islamic Law, which determines the distribution of a deceased’s property to heirs in portions mentioned in Al-Quran.

Regularly reviewing your plan, in addition to key life events, will ensure that your financial and other legacy is passed on according to your preferences, and that your heirs receive their benefits without hassle and grudges.