Question:
Hi, my name is Ed. I’m happily married to Pei Pei, my wife and together, we’ve been blessed with two daughters namely, Cindy and Mandy aged 5 and 3. As I write, we reside together with my mother in a bungalow located in Penang.
The property has been a family home since my childhood and its ownership was bequeathed to me by my late father who passed away three years ago. Presently, the bungalow has been fully paid off and is valued at RM2 mil.
If I pass on prematurely, I wish to bequeath this property equally to my wife and two daughters via a will. But, I have the following questions and concerns:
a. Will my mother be allowed to continue to live in the bungalow?
b. What will happen if my wife and two children wish to sell off the bungalow?
c. Is it possible to only bequeath the title deed when my daughters attain the age of 25?
Answer:
Lets say, you have a simple will written for the purpose stated above.
If you pass on, the title deed to your bungalow shall be transferred to your wife and two children by your appointed executor. If Pei Pei is the executor, she then shall hold onto your daughters’ stake in the property until they turn 18, the age when they are legally entitled to inherit and hold onto assets.
This means, if your children are minors, Pei Pei shall have full autonomy to hold onto and manage the bungalow as she sees fit upon your passing.
Your wife has the authority to decide who shall reside in the property, apply for loan facilities by offering the property as a collateral and to dispose of the bungalow to a new prospective buyer based on her agreeable price.
Sadly, this could also mean that Pei Pei:
- Has the authority to ask your mother to vacate the bungalow.
- Can sell the bungalow, let’s say at RM3 mil, and pocket the full proceeds into her bank account without needing to share her gains with your mother and… your two children.
- Can obtain a loan facility from the bank via refinancing for the purpose of setting up a new business. The venture may fail which could cause Pei Pei to lose her ability to repay the mortgage and thus, leading to a possibility that the bungalow could be auctioned off by the bank.
- Can remarry and enjoy her new life with her husband, your two daughters and maybe, her children with her new husband in the bungalow bequeathed to her. Your bungalow or a portion of it could be bequeathed to the new husband and their children via Pei Pei’s written will. OMG!
But My Wife Is Not That Bad…
Of course, your wife is of noble and virtuous character. How could it be possible for your wife to do any of the above mentioned?
I understand. Here, the purpose is to highlight the various possibilities open to your wife legally after having received the title deed to the property if you pass on prematurely and especially if your daughters are still minors.
Thus, bequeathing the bungalow to your wife and two daughters does not offer an ironclad guarantee of your mother’s livelihood upon your passing. This could potentially lead to conflict, strife and bitterness to your loved ones namely your mother, wife, and two children.
So, What Can Ed Do About It?
The answer is simple. Ed could include a testamentary trust in his written will in order to have a say in how the bungalow is to be managed upon his passing.
A testamentary trust is a trust that kicks in effectively only upon Ed’s passing for the trust is embedded within Ed’s written will. Here is how it works:
- Ed could set up a testamentary trust where he would engage a licensed trustee firm to be his trustee and name Pei Pei, Cindy and Mandy as his beneficiaries of the testamentary trust.
- Ed could decide when is best for Cindy and Mandy to inherit their stake in the bungalow. Here, let’s say, Ed wishes for his two daughters to only receive their stake when Mandy, his younger daughter, reaches the age of 25.
- Ed could name his mother to be the living tenant of the bungalow. This means his mother is entitled to reside in the property for as long as she lives. The property could not be sold to a buyer as its title deed shall be held by the trustee.
- Upon Ed’s passing, the bungalow’s title deed will first be transferred to the testamentary trust. The trustee shall hold onto it for Pei Pei, Cindy, and Mandy.
- The property’s title deed shall only be bequeathed to Pei Pei, Cindy and Mandy after fulfillment of two conditions in the Testamentary Trust:
a. Ed’s mother has passed on.
b. Mandy is 25 years old.
Conclusion
Ed could protect the interest of his mother, wife and two daughters by having a testamentary trust included in his will and appointing a licensed trustee firm to administer his estate upon his passing.
His mother is guaranteed a place to stay and thus, securing her livelihood in her golden years. His wife and children shall be guaranteed of inheriting their stakes in Ed’s bungalow for as long as they live past Ed’s mother. This helps to maintain harmony among Ed’s family members.
About the Author
Jocelline Chee is the founder of WG Legacy, a leading professional estate planning firm. You can download a Strategy Report at wglegacy.com/report to find out how she preserved her family’s financial future via a combination of insurance, will and trust and how you can do the same for your loved ones too.
