How To Use Life Insurance as Part of Estate Planning Tools

How To Use Life Insurance as Part of Estate Planning Tools

Are you looking for ways to grow and expand your assets? Ever wondered how to use life insurance as part of estate planning tools?

A lot of Malaysians are looking into growing assets and wealth through wealth accumulation tools such as savings plans, unit trusts and even stock markets! However, there is one major part of financial tool that has been constantly overlooked – Life Insurance.

When someone passes away, the estates will be subjected to scrutiny by 3 main areas that might reduce the inheritance you wish to pass on to your loved ones, namely:

• Creditors (any inheritance would be subjected to deduction from creditors before distribution)
• Inland Revenue Board (All income would be crossed check and deduction would be done if there are discrepancies in income declared and possessed assets)
• Estate Duty (was abolished in 1991 but there were attempts of reintroduction by Government of Malaysia)

Just think about it, imagine you are someone in your 50s, and your wish is to leave behind something for your children, it can be for their future life, their wellbeing, or you just want them to be safe and happy, all your hard earn savings are reduced significantly by the 3 main areas. By using life insurance as part of your estate planning tools, you can essentially bypass the 3 main areas that might reduce your inheritance to your loved ones.

Imagine this, if a father of two has cash of RM1 million and wishes to pass this on to his two children, he would usually place the RM1 million in low-risk instruments such as Fixed Deposit, and upon his passing, each of his children would inherit RM 500k each (assuming no issues from IRB and creditors) and the father himself would not be able to enjoy any of that money in his current lifetime.

Given the same scenario, by incorporating life insurance as part of estate planning tools, the father would purchase life insurance with a sum insured of RM1.5million using RM500k cash. This would result in the sons getting RM750K (50% extra) each, and the father would be able to enjoy RM500K cash on his own in this lifetime itself! By using life insurance, the father is essentially ‘freeing’ up his own money for his own consumption, and at the same time leaving 50% more inheritance to his children, it is a win-win!

If there is any further questions you would like to ask, send your details below and our financial portfolio advisor will provide free consultation on financial planning and estate planning.

This post is written by our guest author, Brian Fam.

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