In today’s fast-paced world, the concept of legacy planning often takes a backseat to more immediate concerns. However, understanding and implementing a comprehensive legacy plan can have profound implications for both individuals and their loved ones. Legacy planning goes beyond the traditional scope of estate planning, encompassing a broader vision of what one leaves behind.
There is often confusion about the difference between Estate Planning and Legacy Planning. Although both processes are designed for future preparation, they have different focuses and purposes.
Estate Planning primarily revolves around the financial aspects of one’s assets and their efficient distribution. It involves creating legal documents, such as wills and trusts, to ensure properties, investments, and other assets are transferred to intended beneficiaries. Legacy Planning, on the other hand, takes a more holistic approach. It focuses on creating a lasting impact that goes beyond financial considerations.
The Concept of Lasting Legacy
Legacy planning is about more than just distributing assets after one’s passing. It is about creating a lasting impact that reflects one’s values, beliefs, and life experiences. A well-thought-out legacy plan ensures that an individual’s life story continues to inspire and benefit future generations. This holistic approach to planning considers not only financial assets but also personal values, life lessons, and cherished memories.
The Four Pillars of A Complete Legacy
Financial Legacy: This pillar focuses on the distribution of financial assets. It involves creating a will, setting up trusts, and ensuring that beneficiaries are clearly designated. Proper financial planning can help minimize taxes and legal complications, ensuring that loved ones receive their intended inheritance without unnecessary stress.
Personal Legacy: Personal legacy encompasses the values, beliefs, and life lessons that an individual wishes to pass on. This can be achieved through written memoirs, recorded messages, or even a family mission statement. Sharing personal stories and experiences can provide guidance and inspiration to future generations.
Charitable Legacy: Many individuals choose to leave a portion of their estate to charitable organizations or causes they are passionate about. This pillar of legacy planning allows individuals to make a positive impact on society and support causes that align with their values. Establishing a charitable foundation or endowment can ensure that one’s philanthropic efforts continue long after they are gone.
Digital Legacy: In the digital age, managing one’s online presence has become an essential aspect of legacy planning. This includes ensuring that digital assets, such as social media accounts, online banking, and digital photos, are properly managed and transferred. Creating a digital estate plan can help loved ones navigate the complexities of the digital world and preserve important memories.
Legacy Planning in Malaysia
Legacy planning is increasingly being recognized in Malaysia for its role in managing and distributing assets according to individuals’ wishes. Once considered relevant primarily for the wealthy, legacy planning is now understood to offer benefits for a wider population. More Malaysians are turning to professional will writing services to secure their estates and protect their families.
According to Danny Wong, CEO and Executive Director of Areca Capital Sdn Bhd, a private wealth management company in fund management and wealth advisory in Malaysia, a Private Trust is created for individuals with customized distribution for specified beneficiaries, which may include their loved ones or even charitable organization during or after their lifetime. Established in 2006, Areca Capital Sdn Bhd is a private wealth management company licensed by the Securities Commission Malaysia to manage and distribute private mandate portfolios and unit trust funds.
Contrasting a private trust to a Will, the latter is a basic estate planning tool that has simple and direct distribution methods, valid only upon demise of a person. Furthermore, distribution via a will requires the appointed executor to go through the process of applying a grant of probate which may take up to months or even years.
“A Trust is where individuals transfer their legal ownership of an asset to the Trustees for the Trustees to hold and manage, therefore, it does not fall under estate of the individuals. The access, management and distribution of Trust will not be affected in the event the individual (Settlor) is physically or mentally incapacitated,” said Wong.
A good example of a private trust arrangement will be a retired businessman in his 60s creating a distribution plan to manage the welfare of his wife upon his disability or demise, his children’s living expenses and inheritance and also to cover the education and living expenses of his minor grandchildren in the future.
He explained that Private Trust works well in situations where the Settlor is the sole breadwinner or the one usually in charge of the financial decisions. “The trust provides a layer of safeguard in case something untoward happens and the beneficiaries may not be as financially competent in handling the decision-making. Or in cases where the beneficiaries are spendthrift or at risk of being scammed,” said Wong.
Why Legacy Planning Matters
Legacy planning is not just for the wealthy or elderly; it is a crucial process for anyone who wishes to leave a meaningful impact. By taking the time to plan, individuals can ensure that their wishes are honoured, and their loved ones are provided for. Moreover, a comprehensive legacy plan can reduce the burden on family members during an already difficult time, providing clarity and peace of mind.
The biggest misconception Malaysians is that Trust planning is only reserved for the ultra-high-net-worth individuals but we have been helping our clients set up family trusts with assets from RM1 million onwards,” said Wong.
Legacy planning is a vital aspect of preparing for the future. Setting up a private trust is a key to legacy planning. A private trust also offers benefits such as reducing inheritance tax, avoiding probate, and providing for loved ones in a controlled and structured manner.
By considering the four pillars of a complete legacy, individuals can create a lasting impact that reflects their values and life experiences. Whether through financial planning, personal storytelling, charitable giving, or digital management, legacy planning ensures that one’s life story continues to inspire and benefit future generations.
This is the first article in a 3-part series