Sonia, 35, considers herself to be in the prime of her life – doing well in her career, having climbed the corporate ladder to be a senior auditor in an auditing firm. She is also financially independent.
Being single, she should not have much to worry about such as children’s upbringing and family matters, but she has been having sleepless nights. Her insomnia, which has taken her toll on her health, has kept her mind on overdrive particularly on the welfare of her aged parents.
Pa is 65 years old and Ma is 62 years old. Their health has been failing, especially her mum who has been rather sickly of late. Worry. Worry. Worry. What if she passes on before them due to an accident or critical illness? Will her younger brother, Desmond, who has three small children of his own, be able to cope with their aged parents care?
Is she worrying too much? Desmond is a filial son. His wife is also a good daughter-in-law to the old folks. Sonia is providing for her parents financially and if she is no longer around, her parents be deprived of money for their living needs. Will Desmond then be financially stretched and burdened?
All these play on her mind repeatedly but she does not have the answers. And that worries her even more.
Why Set Up A Trust?
As we get older, our parents also get progressively older and weaker. This is a fact. What Sonia could do is to set up a trust fund with a licensed trust company, where the fund set aside could be used to earn income and provide financial maintenance for her parents until they pass on.
She could use her life insurance policy, unit trust or even monies from her bank account as assets for the trust fund. She can provide instructions to the trustee on the conditions, such as amount, frequency and method of payment for her parents’ maintenance. At the same time, if she is struck with some critical illnesses, she can also instruct the trustee to pay her medical and maintenance bills. She can even continue to direct the trustee on how the monies in the trust fund should be invested until her death, after which she could set conditions as to what and how to invest.
Sonia’s worries are not unjustified. Life is uncertain. It is wise to check on her brother’s financial and family situation. By setting up a trust fund with a licensed trust company for her parents, at least the financial burden will not be placed on her brother. Together with the professional estate planners who can provide personalized professional service to suit her busy schedule, Sonia can now plan effectively for her parents’ maintenance.
The advantage of appointing a licensed trust company as trustee instead of a natural person is that the trust company is impartial and is duty bound to follow the terms and conditions in the trust agreement whereas an individual may not be so compliant with regard to another person’s money. Also, there is continuity with a trust company as compared to a natural person since a natural person is liable to die, fall ill, meet with an accident and be incapacitated, become of unsound mind or go bankrupt. When an individual trustee passes away, his assets are frozen until the necessary legal estate administration processes are completed which means the insurance monies kept in his account are frozen too.
By appointing a trust company, therefore, Sonia will have a better sleep knowing her parents’ welfare is protected.
This article is contributed by Rockwills Trustee Berhad, a licensed Trust Company which specialises in Estate Planning. For more information, please go to www.rockwills.com.