By Peter Lee
When it comes to the distribution of their estate, couples with children often struggle with one fundamental question: are we being fair to our children? The answer is rarely straightforward, because fairness in estate planning is deeply influenced by the parents’ relationship with their children. This uncertainty is one of the main reasons many parents delay making decisions about their estate.
From my observation, love, affection and attention are usually distributed fairly evenly when children are still minors. However, relationships evolve as children grow older. Adult children develop distinct personalities, values and life choices, and this inevitably affects family dynamics. In some families, all children may be physically and mentally healthy, yet differ significantly in character. Some are obedient, others rebellious. Parents may naturally find it easier to communicate with the obedient child, while the relationship with the rebellious one becomes strained. When children marry, these dynamics may change again, depending on whom they marry. Since change is constant, it is unsurprising that parents’ intentions regarding estate distribution may also change over time.
Another common situation involves families with one or more children who are mentally or physically disabled. In the course of my work, I have observed that parents in such circumstances tend to devote more attention and care to their special child. They often hope that their other children will continue to care for that child after they are gone. This instinct is entirely natural and does not mean they love their other children any less. However, when parents decide to allocate a larger portion of their estate to the special child, this may not always be well received by the other children. In such cases, the question of fairness very much depends on one’s perspective.
There are also families formed through second marriages, where one or both spouses bring children from previous relationships. In some cases, the husband may be the sole breadwinner while the wife manages the household and cares for all the children. Tensions can arise easily. I recall a scenario where a wife called her husband at work and said, “Darling, I think you’d better come home your son and my son are beating our son.”In families facing such challenges, accusations of favouritism are almost inevitable. Estate planning in these circumstances requires particular care, because no matter how fair the parents try to be, there are always practical and emotional limitations to that fairness.
Couples without children face a different dilemma. Although it may appear simpler, I have seen many become deeply emotional over who should inherit their estate after both of them pass away. Disputes often arise over whether beneficiaries from the husband’s or wife’s family should receive a fair share. In one case, a husband’s intention to leave a small portion of his estate to his siblings led to a heated argument with his wife. She felt that since she intended to leave her entire estate to him, he should do the same. The disagreement then escalated into debates over how their estate should eventually be divided among parents, parents-in-law and siblings. In such situations, estate planners often find themselves acting as mediators, because only through careful mediation can an agreement be reached.
Single parents face yet another set of concerns. A divorced mother with custody of her children must be especially careful in appointing Executors or Trustees. Even if her estate is distributed fairly among her children, it may ultimately come under the control of her ex-husband, who would typically become the children’s legal guardian upon her death. Similarly, an unmarried person who adopts children must consider who can be trusted not only to care for the children, but also to administer and distribute the estate according to their wishes.
Each of these situations carries its own concerns, but all share a common theme: planning for family welfare in the face of life’s uncertainties. Merely worrying or discussing these concerns is not enough. One of the most important steps a person can take for their family is proper estate planning, particularly through instruments such as a Will. Unfortunately, many people find thinking about this subject more exhausting than physical labour, and so they procrastinate, assuming that tomorrow will be much like yesterday. This assumption can prove disastrous.
Preparing a Will is not complicated. The first crucial step is the appointment of Executors or Trustees. Their role is to apply for the Grant of Probate from the High Court, collect the assets of the estate, settle any outstanding debts, and distribute the estate according to the instructions in the Will.
Although Malaysian law permits the appointment of a sole Executor, it is generally advisable to appoint at least two. While the death of a sole Executor does not invalidate the Will, it renders the appointment ineffective. In such circumstances, the estate cannot be administered through a Grant of Probate, and the beneficiaries may need to apply for Letters of Administration with Will annexed, resulting in delays, additional costs and procedural complications.
A testator may appoint up to four Executors, preferably in order of priority rather than jointly. An individual Executor may be allowed commission of up to 5% of the value of the estate, subject to the court’s approval, pursuant to section 43 of the Probate and Administration Act 1959.
The choice of Executors and Trustees depends greatly on family circumstances, particularly where minor children are involved. Spouses often appoint each other as primary Executors. However, careful thought must be given to appointing substitute Executors who are at least 21 years old, in case both spouses pass away simultaneously. These individuals will be entrusted with managing and disbursing the estate for the benefit of minor children, potentially until they reach adulthood. Equally important is the appointment of guardians for minor children. These are individuals who are close to the children and willing to accept this responsibility, ideally with reasonable allowances provided.
Clear instructions on the distribution of the estate are essential. Many do it yourself Wills simply state that assets are left to the spouse, and thereafter to the children in equal shares. While this may work where children are adults, it is impractical where there are minor children or children with disabilities. In such cases, a Testamentary Trust should be established, specifying monthly provisions for living, medical and educational expenses, as well as the duration of the trust. For minor children, the trust may end when the youngest child reaches 21. For children who are mentally or physically disabled, the trust may need to continue indefinitely, making proper funding critical.
An estate generally consists of movable and immovable assets. Movable assets include cash, bank deposits, unit trusts, mutual funds, shares in listed companies and digital assets. Immovable assets include properties, business interests, shares in private companies, vehicles and safe deposit boxes. Many people assume that equal distribution is fair simply because it is easy. However, fairness requires deeper consideration of family needs and circumstances.
Before deciding on percentages, one must consider whether there are sufficient liquid assets, insurance proceeds or EPF savings to fund the needs of minor or disabled beneficiaries. If not, Executors may need to liquidate certain investments to provide adequate funding. Immovable assets may either be distributed or sold, depending on the family’s financial position.
There is no absolute right or wrong in how a person chooses to distribute their estate. Ultimately, a thoughtful conversation between the mind and the heart will determine whether an estate plan is truly fair or merely fairly unfair.