Last month we discussed on the topic of incapacitated property owner and the legal difficulties surrounding the issue. This month, we will look into what the property owners and family members can do prior to and after the unfortunate event of incapacitation.
To recap, incapacitated person generally means person who has undergone unfortunate event that either caused them to lose sanity of mind, or physical impairment that ultimately resulted in limitations to make their own decision.
Normally, the assets will be maintained just as it were prior to the occurrence of the incapacitation. Our family member cannot simply think that they have inherited the rights or duty to help us to make conscious decision for us on how to manage our assets when one became incapacitated. Having said that, you cannot sign on behalf of your spouse who was incapacitated even though you have a medical officer certified on the condition. I have helped a client completed a permanent disability life insurance claim before, in doing that, we had to get the thumbprint of the incapacitated person in place of signature, the spouse could not help to sign on behalf despite the obvious close relationship.
Do the Right Thing Right
It is obvious and simple, but yet many people has failed to do this right, the first thing everyone who still healthy now can do is to do planning for insurance, especially have adequate coverage for critical illness and medical coverage. Looking at this topic that we are discussing now, hope that people will also aware that the total permanent disability coverage do carry certain significance as normally the TPD coverage is linked with death coverage, and most people have a blind spot thinking that because “I do not have family, I am alone, therefore I do not need to have life insurance coverage”.
You may not have to worry about leaving behind a chunk of money to your family should you pass away, but what happen when the dread event is only TPD, or critical illness? Since you have no family member to care, it also means you are likely to have no one to rely on during this rainy day. Hence it is only wise for us to have some funds prepared to carry us through financially through this sort of events, and insurance is the best tool to use for such planning.
Know Your Objective
Do not use insurance product with aim for investment, but merely for protection. Having done this right and properly, dependents and family will be better off while they are already emotionally drained and tasked with dealings of such misfortunate events, at least the financial burden side is not as heavy. Another advantage is that claimed proceed from life insurance is creditor proof.
Declaration of Trust
Secondly, when one is healthy, one should set up a declaration of trust. It means setting up of a trust when one is healthy, and become the trustee for the trust while appointing a trust company to be backup trustee when triggered event happen.
This trust is unique in the sense that prior to the triggered event, all the wealth and assets do not have to be transferred into the trust first, it allows the settlor (trust settler) to still retain control on how to manage the assets and wealth; when the triggered event (death, mental incapacity, TPD, critical illness), the backup (or substitute) trustee will step in and becomes the trustee and distribute the assets inside the trust according to the trust deed outlined by the settlor before the occurrence of the triggered event, ie. Distributing assets to named beneficiaries etc.
Now, what kind of assets can we use in a declaration of trust? Can we put into the trust assets that are still under encumbrance? The answer is yes, so, assets from real estate, money in bank account, shares, unit trust funds, etc can all be part of a declaration of trust. An alternative to a declaration of trust is living trust. A living trust can provide the benefits outlined earlier, but the settlor will have to transfer the asset into the trust at the point of time where the trust was being set up, which means losing out on the control of the assets. Therefore, a declaration of trust will be more suitable for this kind of planning.
What is a Durable Power of Attorney?
If you have a brain disease that gets worse over time (such as Parkinson’s disease or Alzheimer’s disease), you may wish to create and sign the DPOA (Durable Power of Attorney) papers early in the illness.Once you have signed a living will and DPOA, keep them in a safe place. Do not put them in a safe deposit box because others may not have access to them when the documents are needed. It is a good idea to discuss your wishes with your friends, family members, and your healthcare provider.
Give these people copies of your living will or DPOA-HC (Durable Power of Attorney for HealthCare). Then they will have easy access to the documents if they are needed.
I have written my Will, what else?
Many people will have a misconception that when it comes to estate planning, it means writing a will. Actually, writing a will is only a small part of estate planning, albeit it is a very important and critical part. But for a comprehensive estate plan to work, it may involve use of trust, sometimes, testamentary trust (setting up only after death), or living trust, or it may involve the use of power of attorney; of course, what solutions or how the estate plan design should be, it all boils down to the situation of the client and what are the intention of the clients is.
What can We Claim from SOCSO and EPF?
In addition, i can share more on what people can commonly look at here, under Employees Social Security Act 1969, when a member becomes invalidated, he or she can get payment of benefits introduced under Invalidity Pension Scheme provided their income does not exceed RM3,000 and are below 55 years old. One thing worth to pointed out here, it will be The Medical Board but not the Social Security Appellate Board who will determine the invalidity of employee.
Furthermore, an employee also entitled to get disablement benefits, which divided between permanent or temporary disabled. Also, invalidity means a serious disease or disablement of a permanent nature that is either incurable or not likely to be cured, as a result of which an employee is unable to earn at least 1/3 of what a normally able person could earn, and it also covers heart attack, kidney failure, cancer, mental illness, chronic asthma and other similar conditions are chronic ailments or diseases that could be considered for invalidity.
On another note, if conditions are fulfilled, one can also seek to claim incapacitation withdrawal from your KWSP account and in addition to that, you will receive an incapacitation benefit amounting to one-off payment of RM 5,000.
However, the conditions are not as lenient as one would expect it to be however, the applicant must be younger than 55 year old when KWSP receive the application, and must not be working, have savings in KWSP account, ability to provide evidence of medical record by Doctor, and also have to attend interview session prior to knowing if the application will be approved.
Regarding cases and numbers related to mental incapacitation are on the rise one part is that we are culturally lacking the awareness of consulting with psychologist or psychiatrist, be open to communicate on our personal stress and pressure with loved one, their supports could mean a world when we are facing mental stress, do not let it develop into serious issue.
Think Twice Before Being Adventurous
On physical impairment and critical illness, stay healthy and live a balanced lifestyle, sometimes it means think twice before we decided to do something that is exciting such as participating in extreme sports, or ensure we have done proper planning to deal with the consequences.
Who can i rely on for a comprehensive estate plan?
At VKA Wealth Planners, we will conduct our first line defense by conducting a comprehensive Financial Plan for our client. By doing such processes, we are able to identify areas of financial concerns and find ways to address them before it happens. It will limit or even address most of the financial concerns we talk about earlier.
As financial planners we always advocate preparation before such major disability occurs. Different scenarios have to be discussed to simulate possible financial stress to the family and assets. With a proper financial plan in place, client will be much prepared to face situations like these because the finances are not tied up but more money can be released to the family members to carry on their daily living.
The above was an interview on the topic responded by Kevin K. M. Neoh, a Licensed Financial Planner of VKA Wealth Planners to Property Insights Malaysia and published on March 2015 issue as a follow up story to the Feb 2015 issue (Click here to read it).