Bulletproof Your Estate

“If you pass away without a will, your next of kin will have to apply for a Letter of Administration, appoint an administrator and go through lengthy process of distributing your assets according to Distribution Act 1958. This will take you approximately 2 – 5 years! With a will, your executor will just need to obtain a Grant of Probate and execute the will within 3 months only.” [Source]

Estate planning is a subject that rarely surfaces in any of our daily life conversations as Malaysians tend to not prioritize it. We perceive that it is always not too late to do it in the later stage of life. However, estate planning is more than just drawing up your will as it is a process for making proper arrangements for the protection and provision of your total assets from being claimed by creditors or irresponsible beneficiaries.

Nominations for certain of your assets are vital as these nominations cannot be revoked by a will or by any other act, event or means. Failing to have your nomination done will result you in the same scenario of not having a will. You don’t want to be “rolling in the grave” when your family has to go through a lot of trouble to claim your estate.

In this article, we will be discussing on the important facts Malaysians should take note when it comes to nomination.

Statutory Law

One notable form of statutory trust occurs in life insurance policies whereby the transfer of asset is created by the operation of law. Nominations in insurance policy can be made revocable or non-revocable depending on the beneficiaries you named which then determine if the mode of transfer is creditor or non-creditor proof.

Besides that, EPF nominations are also considered transfer by statutory law and all EPF nominations are creditor-proof. However, do note that statutory trust can only be created for Non-Muslims only. Do ensure that you nominate according to the Financial Services Act 2013 , more will be explained as we go on.

Policy moneys and EPF payable under statutory law do not:

• Form part or policy owner estate
• Subjects to debts of policyowner

Employee Provident Fund (EPF)

As stated in the official website, you may nominate an individual to be the beneficiary or an approved institution as an administrator to 100% of your savings. It is advisable to nominate your spouse, children or parents as your beneficiaries.

In an unfortunate event that 1 of your nominee passes on before you do, make sure you revisit any of the EPF branch as soon as possible to do an update. There’s no need to produce the death certificate to change a nomination. Just fill in the form provided and submit to them. Failure to do so will render the portion that was bequeathed to the deceased nominee to be subjected to procedures under ‘EPF savings without nomination’ in which the first priority for the right to claim the member’s savings goes to the nearest next of kin or the appointed administrator of the deceased member’s estate. [Source]

“EPF nominations are also considered transfer by statutory law. All EPF nominations are creditor-proof.

However, for Muslims, do note that the names nominated are not your beneficiaries; they are only your nominees whose duty is to distribute your EPF funds according to the Al-Faraid Distribution laws.” [Source]

Insurance Policy

The nomination should be done altogether at the point of signing the application form, so that you or your agent won’t forget to do it later. Unless there’s a specific reason to it, best set a reminder for both yourself and your agent to get it done as soon as possible.

Here’s question that you might have about insurance nomination. If you have nominated 2 nominees and in an unfortunate event 1 of the nominee passed on before you, do you need to update the nomination like EPF to ensure the remaining nominee receives 100% of the insurance proceeds after your passing?

The answer is no! Insurers will automatically pay the policy money bequeathed to the deceased nominee to the remaining nominees in proportion to their respective shares. However, if you would like to add or change your nominee, then you will need to submit a form to the insurer on the changes. [Source]

Insurance policies are Nomination in Insurance Policy can be both trust nominee (creditor proof) and non-trust nominee (not creditor proof). Here’s a simple guide to ensure your nomination is creditor proof.

• If you’re married at the time of purchase, you should nominate your spouse, children or both as they are trust nominees.
• If you’re single at the time purchase, you should nominate your parents.

Here’s a picture guide to help you better understand the difference between trust and non-trust nomination:

On the other hand, apart from EPF and insurance, your nomination for any other assets are not creditor proof by default (even if you have a will). However, you can actually engage a lawyer or professional institution to put a trust on your assets to protect from any creditors, negligence and bankruptcy. We will discuss more on the topic of trust in the upcoming article.

Do take note that the above discussed matter is applicable to Non-Muslim. As for our Muslim readers, please refer to the Al-Faraid (Islamic Distribution laws). In conclusion, don’t delay your nomination and give yourself and your family a peace of mind. We can’t foretell what lies ahead, and it is always wise to prepare yourself before the storm comes.