Where there's a will, there's a way
By EILEEN HEE
WE all know the importance of writing a will but it is one of those things that many of us never seem to get around to. In fact, it is estimated that 95% of people die without ever having made a will.
In Malaysia alone, less than 5% of the adult population have drawn up their wills.
If you do not have a will, it can lead to chaos and financial worry for your family or dependants after you are gone. For some, it could also cause a major family rift.
One thing for sure, without a will, you are not in control and you can’t be sure that your money and property will be passed on according to your wishes.
If you decide to write a will, there are options of either using a bank or will-writing firm, or doing it yourself by using a will pack. Since there is no fixed costs to writing a will, it is difficult to provide a cost comparison between the three but fees typically range from RM380 for a simple will to RM12,000 for a comprehensive one.
The fees charged by estate planning firm Rockwills International Group, which has signed up 10,000 wills as at November, are fixed according to a scale.
A do-it-yourself (DIY) will, of course, means there are no fees but could be risky as the will may not be drafted properly in compliance with the Wills Act, 1959.
What is the normal fee for a trustee and how much can a trustee charge to handle an estate after a death? And what are “reasonable” trustee fees?
A trustee is normally paid a small nominal appointment fee during the preparation of a will. There will not be any other charges until the testator passes on. The trustee will have to apply for a grant of probate through a lawyer and a fee will be paid to the lawyer for such services.
After the probate is obtained, the trustee will proceed with the estate administration process and the charges will depend on the assets and its value. If there are transfers of properties, then there will be the usual legal fees and stamp charges.
Normally, trustee fees range from 1% to 2% of the estate value. For an estate worth RM1mil, the fee could come up to RM10,000. Is it a fair price to pay?
Rockwills managing director Saw Leong Aun says is it a misconception that appointing a trust company will increase the administration costs and reduce the amount to be received by beneficiaries.
“Under the probate law, the fee allowed is up to 5%. Considering the difficulty and tedious nature of an executor’s role and functions, the trustee fees of 1% to 2% are very reasonable and competitive,” he tells StarBizWeek.
Singapore-based Estate Planning Practitioners Ltd (EPPL) director Bernard Lim also concurs the onerous responsibilities undertaken by a trustee justifies the 1% fee.
“You have to take into account the duty of care they have to perform to ensure that the interest of the beneficiaries are well taken care off. Also, the potential liabilities they carry are not something to be taken lightly,” he says.
“Fund or investment managers typically charge 1%-1.5% for managing the funds of their clients and often the financial planners themselves may impose 0.25% to 0.75% charge on asset under management as annual fees,” he says.
“With this in mind, I feel that a 1% charge is reasonable.”
Financial planner Chear Weng Khet says it is worthwhile to pay the fee if one has large assets “due to the complexities that could typically crop up”.
“The tendency for a will to be challenged is higher if one has a larger estate. It is better left to professionals as they know what to do,” he says, noting that time, effort and travelling costs should also be taken into account.
“Sometimes, professionals can be working on a case for one to two years. People who are in business would not mind paying the 1% fee to get it sorted for them,” he says.
Alternatively, one can get family members to be the executor. And it is always a good idea to nominate more than one executor in your will.
Financial planner Lawrence Tan says there should be a cap on the trustee fee.
“For an estate of RM1mil, the fee would usually be RM10,000 (1% of the estate value to be distributed). It is actually quite worthwhile because we are paying for a service whereby we can go on with our life. However, I personally feel there should be a cap on the fee,” he says.
“For people with assets of smaller value, especially below RM600,000, if they are not willing to pay the fee, then they can apply through Harta Pesaka Kecil. Of course, the process is shorter but you can run around yourself,” he says.
Lim of EPPL says there is a strong need for more qualified professionals in the specialised field of estate planning with the changing demographic and social trends in the country.
“Malaysia is at a stage where it is ready not to just take instructions on estate planning but have integrated solutions on it,” he says.
Lim says the Associate Estate Planning Practitioner (AEPP) designation is expected to raise the standards of the industry.
“Since its launch in Singapore in 2007, more than 600 practitioners from banks, insurance companies and independent financial advisors have completed the course. We expect 1000 people to be certified estate planners by next year,” he says.
Lim says financial planners are already providing products and services in the areas of wealth protection (insurance planning) and wealth accumulation (retirement planning) but do not provide much in wealth distribution (estate planning).
“I believe it is necessary to learn from the more developed countries on how wealth distribution can be incorporated into a financial planner’s practice to help their clients complete their wealth plan,” he says.
Here are some essential tips on will writing:
1. A will that is not properly signed and witnessed is invalid.
2. If you use a will writer, check what qualifications he has and by whom his firm is regulated. Also ask for evidence of indemnity insurance and for details about procedures should you or your beneficiaries have a problem with the will.
3. Don’t assume that if you use a solicitor or will writer, you will always get an expert – always ask for qualifications. If you need advice on inheritance tax, for instance, make sure that the person writing your will has additional tax qualifications.
4. If you use your bank to write your will, check how its will-writing service is regulated.
5. Don’t appoint a solicitor or bank as executor, as this can be expensive, but appoint a trusted friend or relative (or one of your children who is of above 18) instead. They can always pay for professional help if they need it later.
6. Should your circumstances change, for example if you get divorced or have children, don’t forget to update your will.
7. When not to DIY:
·Your circumstances are complicated or the way you wish to pass your assets on is very detailed.
·Someone who is unable to care for him or herself is financially dependent on you.
·You have been married before or have children from a previous marriage.
·You have property overseas.
·There is a business involved.
·You want to reduce or avoid inheritance tax.
