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Do You Know That Your Insurance Is Not A Full Proof Way In Wealth And Estate Protection Even With Its Nomination Made?

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There are many different types of insurance protection like life insurance, critical illness protection, personal accident plan, etc, that protects you in the best way possible.

In this article, we’ll focus on life insurance as the same concept can also be applied to other insurance plans that involved beneficiaries.

You may ask me what life insurance is in a laymen term. Life insurance is a protection where the insurance company will pay a lump sum of payout to the beneficiary in the event of the policyholder’s death or total permanent disability. The payout sum can range from RM200,000 to a few million and is dependent on how much the premium paid by the policyholder.

Let us use this illustration as an example. John, a Sales Manager for a multinational company, have a life insurance protection of RM1 Million and name her wife, Wendy and his only son, Henry, aged 20, as the recipient beneficiary with the equal share. One of the John main goals of buying life insurance is to ensure both of them have continuous financial support even if he passes away suddenly. He hopes Henry could continue his postgraduate studies and her wife to look after their elder parents; even he is not around anymore.

During one of his outstation trip, John is in critical condition after accidentally hitting a road lamp while trying to avoid a dog. Unfortunately, due to serious brain injuries, John pass away that night in the hospital. The insurance company will then pay the name beneficiary, Wendy and Henry each RM500,000 as the insurance compensation.

They are both very frugal in their spending at first. However, things start to change when both of them feel so rich. All their relatives and friends were suggesting them to invest into lucrative investment schemes. After a serious thought, Wendy follows one of her friend advice on getting high and attractive potential return. She invested over RM250,000 in a get rich quick scheme that promised a high return of 120% a month. For the first few months, she did get the promised return and went for a shopping spree. Wendy even top up another RM200,000 into the scheme for maximum leverage. On the sixth month, the company go bust as the company was raided by Bank Negara Malaysia due to some complaints on illegal deposit taking scheme. The whole company asset was frozen and at the end, Wendy lost all her RM450,000 investment. She regretted it so much and facing a serious financial difficulty in taking care of their parents.

His son, Henry, just got a new girlfriend. He hopes able to impress her by buying a BMW 3 series on cash, in order to date her out. Every week, without fail, Henry spends a lot of money on dating and eating out at expensive restaurants. They enjoy life to the fullest and were so madly in love. They even have travelled to all the popular tourist attraction in overseas. Good times do not last forever. In just less than a year, Henry left with RM10,000 in his bank account and her girlfriend left him due to unknown reasons. Now he is very sad and disappointed for not having enough funds to continue his postgraduate education.

The above issue can be easily avoided if John setup an Insurance Trust. An Insurance Trust is basically created for the people who you don’t trust with money(Wendy and Henry) but you loved.

An Insurance Trust is an arrangement in writing in which the estate(RM1 million insurance payout) is managed by a Trustee company, for the benefit of an individual(Wendy and Henry). John will have a full control on how the estate to be distributed. He will transfer the ownership and interest of the Life insurance to the Trustee company. The Trust Deed governs the terms of the Trust while the Trustee is obligated to act according to the Trust Deed under the Malaysian Trustee Act.

A trustee is the people who you can trust to handle the money. Upon John demise, the proceed of RM1 million insurance payout shall be pay to the Trustee company and through a prior arrangement between John and the Trustee company via Trust Deed, the proceed will be for the benefit of Wendy and Henry. Both Wendy and Henry cannot spend the RM1 Million proceeds because it’s not park under their personal name.

An Insurance Trust help in providing much flexibility and protection in the form of estate management that is not available under any conventional insurance policy. It provides the ability to customise the terms to suit the needs and concerns of policyholders.

John has the ability to set in the Trust Deed to gave both Wendy and Henry, a monthly allowance of RM5,000 instead of a lump sum of RM500,000. This can avoid the above unfavourable scenario where both of them lost all the money, from happening.

Do keep in mind that Insurance Trust is NOT only meant for the wealthy people as the middle-income and the average household can benefit from the proper management and advice of a trustee. This is because one of the country’s top estate planning companies, Rockwills Trustee, have made the retail insurance trust so affordable with an set – up fee from RM1000, while the annual fee for trust management ranges from as low as 0.25% depending on the amount subject to a minimum of RM2000.

Rockwills Trustee, has experienced estate planners that specializes in Insurance Trust and estate planning who can help guide you through the steps required to establish trust. For a FREE Consultation, call 03-77811993 or visit http://www.rockwills.com