Good legacy planning is not just about passing wealth to the next generation but also making sound decisions that don’t end up causing disputes that will split up the family.
Going by the number of family disputes in court, it seems many well-off people make poor decisions when it comes to managing their own assets.
As a result, their poor legacy planning causes beneficiaries to end up in court.
Here are three court disputes that could have been avoided if you understand the rules and practical tips when dealing with your assets.
Some parents choose to pass on real estate through their wills because this saves their beneficiaries from paying any stamp duty for those properties. But if you are giving away cash, there is no reason to wait until you are gone.
In a recent case, the family patriarch wrote in his will that he wanted to give his four children $1 million each from his savings.
But he opened joint accounts with his then wife and a daughter only and transferred about $4 million to these accounts. After he died, the joint account owners kept the whole sum and this prompted the other three children to sue.
The Court of Appeal upheld his will that his four children would share the money equally and ruled that joint account owners had no automatic “right of survivorship” to inherit money in such accounts when the other joint owners died.
To avoid a similar dispute, if you want to give huge sums of money to your beneficiaries, you can consider opening joint accounts with each one of them, and state in your will that these co-account holders will inherit the money in those accounts.
Recently, the High Court heard a case involving an 87-year-old woman who apparently lived poorly on her own even though she had amassed assets worth over $17 million.
The woman had the means to live comfortably but did not hire a caregiver, preferring instead to frequently seek help from her condominium’s management employees for minor chores, such as looking for her misplaced mobile phone.
When her mental condition started to deteriorate from 2020 onwards, she began to show signs of being unable to take care of herself. Her home also became “unsanitary” and there were piles of rubbish that were infested with cockroaches and other pests.
Ironically, she was well-taken off only after she was hospitalised due to a fall. By then, her mental state had worsened to such a state that she could not even remember what she had, let alone know how to manage her finances.
It was unfortunate that she did not spend more on herself, such as hiring caregivers or nurses to take care of her daily needs and living conditions.
After all, her family is apparently blessed with longevity genes. Her mother died when she was 72 and after she lost her mental capacity, her elder brother, 91, could travel all the way from the United States to get her to sign away most of her assets to him and his son, 61.
In the end, the High Court ruled all the transfers as invalid and appointed the woman’s only son, 62, who lives in Australia, as her court-appointed representative to manage her assets.
An elderly woman’s wish in her will was to use her entire wealth to set up a trust fund that would promote religious activities. But she did not make any feasible plans and the tall order just landed on her elder brother, then 84, who had problems in carrying it out.
The brother, who lives overseas, could not even sell the sole asset – a $4 million apartment – because her will prohibited the sale of her home for three years after her death in 2023.
It was not known why she did this, especially when she had mounting debts of over $250,000 then, which will keep increasing due to compounded interest. The brother could not even rent out the unit as it was in a bad condition.
Although the apartment can be sold now, it is unclear how the brother can run a charitable trust at age 86 now.
So the lesson from all these cases is that you would have done your family a big favour if you can just manage your own affairs well.
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Learn how to plan and manage your assets better by signing up for the first financial literacy event – Retire With More Money – by Invest Editor Tan Ooi Boon.
