The Importance Of Holistic Estate Planning

Elijah* (not his real name) had written his Will with Precepts. He passed away recently, leaving behind his wife and his special needs daughter. He had expressed that in the event of his demise, the care of his special needs daughter was paramount.

Elijah was a businessman, whose business generated good profit to provide for him and his family. Thinking that he had a sustainable source of income, he had not paid much attention to include life insurance in his estate planning. Unfortunately, his business was badly affected due to the Covid-19 pandemic. By force of circumstances, he had to downsize his business which took a toll on his health. This led him to fall ill eventually and he did not recover from it. Prior to his passing, he had resorted to using his savings and other means to keep his business afloat while providing for his family at the same time. A substantial part of his savings was depleted in the process.

With Precepts Trustee Ltd acting as the executor of his estate, we had the responsibility of collating his assets and to administer his business. As he was the sole shareholder and sole director running his business, his passing had left a void in the business. His wife or employees were not able to replace him.

The major concern was the lack of liquid assets to provide for the family and the employees of the business while waiting for the extraction of the grant of probate and calling-in of other assets in the estate. The estate also had some outstanding mortgage loans faced with inadequate liquid assets. Hence the likely scenario is that the executor will have no other options but to sell the property.

This brings us back to the importance of holistic estate planning and the routine review to cater for life changes. From the case of Elijah, the lessons learnt are:

a) The importance of keeping reserves for rainy days.

b) Having sufficient coverage on the life of the breadwinner of the family as part of estate planning.  In the event of premature demise, this would provide adequate liquidity to the estate and family members. 

c) Importance of reviewing your estate plan every 2 to 3 years or if you have experienced changes in life, such as addition of new family members, change of career, change of personal financial position, falling ill or losing an important family member. 

d) If you are a business owner, you need to have in place a successor or an exit plan for the business. This is to ensure the business continues to function in your absence. Depending on your objectives, setting up a trust may help to put the plan in place. 

Please approach our Estate and Succession Practitioner for advice if you have any concerns on your estate planning matters. 

*Facts and background of Elijah has been altered due to privacy reasons.

Leong Mun Kid

Head of Department, Trusts

Precepts Trustee Ltd

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