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Demystifying Legacy Planning for High Net Worth Individuals

Term Life Insurance vs Whole Life Insurance

In a landscape of ever-increasing globalisation and the lifestyle changes that come with it, Malaysia’s high-net-worth-individuals (HNWIs) are under greater pressure than ever to ensure that they can leave a sustainable legacy for their future generations.

Nonetheless, even though the number of Malaysian millionaires has doubled in between 2006-2016¹ alone, most of them are more asset rich than they are cash rich. And within that, 35-45% of their total assets tend to be in assets such as land banks, businesses or property².

Assets may abound for Malaysia’s rich. But how liquid are they? And how sustainable would it be to last through the generations?

Here are common concerns among Malaysia’s HNWIs and how can a universal life insurance plan allay these.


1. Will I have enough money for myself once I distribute to my loved ones? 

A common misperception is that distributing your assets and cash fairly to your future generations will mean skimping on your personal coffers. It’s natural to think that if you have US$ 2 million in assets, the simpler thing to do would be to allocate 1 million as your retirement fund and the remainder to be divided equally between your children.

However, signing on to a universal life insurance plan can increase your total estate value through additional assurances like substantial death cover that will be paid out to your next of kin. With the resulting increase in your estate value, you’re able to distribute more to your family, while also having more to live your retirement. 


2. How can I ensure the continuity of my business when my key employee leaves? 

Many businesses suffer from a lack of good succession planning. A Deloitte study revealed that although leaders are cognisant of the importance of good succession planning, only 14% believe they do it well³.

Good succession planning is key to business continuity. But even if you have identified an immediate successor to take the reins when you retire, what happens when the said successor leaves the company or retires?

A universal life insurance plan can allay these concerns, with some of them offering unlimited changes to the life insured. What this means is, assurance of a seamless transferring of the policy even when each new successor enters the fold.

The payout from the policy can also help to compensate business owners for any financial loss that the company may suffer if a key employee dies as well as cover the cost of finding a suitable replacement for his business.


3.  How can I divide my estate equally without affecting assets?

As mentioned previously, given the asset-rich nature of Malaysia’s HNWIs, liquidity of these assets is a crucial consideration in paving a sustainable legacy for your future generations. A universal life insurance plan can give you the added assurance of potentially substantial death payouts which will serve as a valuable addition to your pool of assets to be distributed among your family.

As an example, let’s imagine you have a total of US$ 12 million in assets – a business worth US$ 5 million, another US$ 5 million in fixed assets, and US$ 2 million in cash. Paying a premium of US$ 2 million over five years, could give you a payout upon death of US$ 5 million to be paid to your next of kin. So if you have 3 children, each of them will get US$ 5 million – one inheriting the business, the other inheriting the fixed assets and the third receiving the death payout, all without affecting your assets.


4. How can I spread out my investment portfolio more effectively? 

Collectible art, shares, bonds, and property may be some of the usual form of asset in the investment portfolios of HNWIs. Interestingly, Malaysia’s HNWIs and UHNWIs (Ultra High Net-Worth Individuals) have the largest property portfolios in Asia Pacific with over 40% investing in properties overseas⁴. What does this tell us? The rich are becoming increasingly cognisant of the need to diversify their assets. And rightfully so, given the volatility of certain markets.

Signing on to a universal life insurance plan denominated in US Dollars can be a great option to spread one’s assets. Besides the US Dollar being a historically strong and stable currency, HNWIs who choose to spread their portfolio with a universal life insurance plan can enjoy the added benefits of sizeable payouts upon death as well as estate liquidity for a much more equitable distribution of wealth to their loved ones. Coupled with the right plan with guaranteed minimum crediting interest rate and other incentives, HNWIs can spend less time worrying about the potential risks of investment and more on the things that truly matter.



¹ https://www.straitstimes.com/asia/se-asia/malaysias-rich-drive-demand-for-high-life

² https://www.theedgemarkets.com/article/cover-story-planning-multigenerational-wealth-transfer

³ https://www2.deloitte.com/insights/us/en/topics/leadership/effective-leadership-succession-planning.html

⁴ https://www.freemalaysiatoday.com/category/nation/2018/04/06/malaysias-super-rich-top-global-average-in-property-investment-plans/

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