People don’t care how much you know until they know how much you care. Leaving behind a legacy is one way of letting your loved ones know that you care because you took the time and effort to plan ahead for the impact of your absence in their lives. What better way to show your love for your family than to think of their future?
These days, we’re all too aware of our own mortality, especially with the current pandemic. The good news is, planning what happens to your wealth after you’re no longer around to enjoy it is something you only need to do once. It’s a simple process that will eliminate all doubts.
There is a subtle difference between the legacy and estate planning.
Estate plans are often very uniform and don’t establish any impact beyond what’s to be done to the financial assets. They don’t consider the “softer” side of matters – caring sentiments and personal expressions that can provide comfort in grief. Imagine how loved ones would feel knowing you’ve established funds in their names to enable them to live their dreams.
An estate plan would perhaps include incapacity, medical aid and retirement planning, but legacy planning takes this one step further.
Legacy planning guides inherited assets, shifting the focus from money, material items and legal documents to establishing a long-term family narrative, creating roots, and determining how one would like to positively impact and influence the future generations in ways that extend beyond monetary wealth. You are creating a comprehensive legacy plan that incorporates your ideals and beliefs.
With a proper legacy plan, it’s almost as if you are there to guide your loved ones to ensure their continued happiness and quality of life. Without one, you will not have control over who receives your assets as it will be left to the law to decide. The law doesn’t take into consideration your loved ones’ personalities and interests. You may decide to set up a specific plan for a child with health issues or a fund with a steady payout for another who might be a little careless with money. Without a clear plan, there may be squabbles and increasing costs surrounding the inheritance of your estate.
Here’s a possible scenario of a family dispute caused by a lack of legacy planning:
Daniel’s mother passed away in 2012 aged 75, leaving behind assets including the family home, a fruit orchard and RM30,000 in cash from her retirement savings. She did not prepare a legacy plan. Daniel and his three siblings went to court as they could not agree on how to divide their late mother’s assets. His eldest brother eventually gained control of both the family home and orchard, which he then sold, using the proceeds to repay a large business debt. Daniel and his other siblings took their eldest brother to court to divide the remaining proceeds, but there wasn’t much left after deducting legal fees.
This unpleasant situation could have been avoided if there was a legacy plan clearly stating how the assets would be divided among the siblings. Daniel’s mother could have also stated how she wanted her home and orchard to be managed if she wished for those assets to remain in the family for future generations.
There’s a common misconception that legacy planning is only for the rich. The word “legacy” itself can sound quite intimidating, but it actually just means “anything handed down from the past”.
In Malaysia, anyone above the age of 18 years is eligible for legacy planning. That’s when they are legally an adult and can start accumulating assets such as a savings account, car, or even a collection of valued items kept as a hobby.
As important as it is, awareness of legacy planning is still rather low, resulting in an increase in unclaimed estates. A survey conducted by Rockwills International Group revealed that only 37% of 571 respondents had undertaken any form of legacy planning such as will writing or setting up a trust fund. Just 10% of RHB customers above the age of 18 surveyed have planned their legacy. On a national level, as at 2020, there is RM70 billion worth of unclaimed estates, an increase of 16.7% from RM60 billion in 2016. This can be addressed with simple legacy planning.
When asked “What memories would you like to leave your children and grandchildren?”, most people will think of the big things – a trip to Europe, a down payment for a home, or an expensive gift. While these are great ideas, leaving behind a sustainable legacy is a gift that will last well beyond one lifetime.
It’s in our culture to work hard in this life so the next generation will benefit, but there’s a Chinese proverb, “Wealth never lasts for three generations”. A study carried out by Nasdaq shows that 70% of wealthy families will lose their wealth by the second generation and 90% will lose it by the third.
Some reasons behind this overwhelming figure are the lack of knowledge of legacy planning, a shortage of expertise in the field, and a lack of knowledge and discipline from the younger generations in wealth management. The cost of living will only get higher, so the money you leave, without a proper investment plan, will not be worth as much in terms of purchasing power.
Legacy planning will ensure everything you worked hard for will continue to benefit the following generations. Plant the tree now, so your descendants can enjoy its fruits.
Our forefathers used to store money under mattresses or stash it away in secret hiding places. Thankfully, we’ve come a long way from that and today there are structured financial products and plans to help you pass on your wealth and assets safely and effectively.
There are plenty of tools out there in the market for legacy planning, but the lack of awareness means these services are underutilised. RHB aims to address the gap in utilisation by making it as easy as signing up for a life insurance plan, which is a great place to start.
Life insurance can clearly outline how much each beneficiary will receive, and with no set-up fees, is an affordable start. The peace of mind it will bring to you and your loved ones is priceless.
RHB Treasure 100 offers benefits up to age 100, with just a short premium payment commitment period of five, or ten, years. What’s even better is there is Guaranteed Acceptance with no medical examination required for a basic plan. The policy holder will get a lifelong Guaranteed Cash Payment (GCP) beginning from the end of the first policy year, until age 100, which is roughly three generations. With the increasing cost of living, this goes a long way in ensuring that your loved ones continue to live comfortably and sustainably. On top of that, there is protection in the form of a payout in the event of death or total and permanent disability (TPD).
Here’s an example of how you can use RHB Treasure 100 to create a multi-generational legacy:
Talk to your Relationship Manager on how to go about it,
or click here for more info.