When it comes to personal financial and estate planning, there is one crucial area that many financial advisors often overlook. This area pertains to a situation that can befall anyone, irrespective of their will. Imagine finding yourself in a situation where your mental capacity is gradually slipping away. Making sound decisions becomes increasingly challenging, and managing your financial and business affairs seems nearly impossible. You’re gripped by frustration and depression, and eventually, you lose control over everything.
The ability to make prudent personal financial and business decisions is what sets you apart as a successful business owner or a competent professional. Now, picture a scenario in which you lose this defining trait, the cornerstone of your self-image and business success.
As your mental capacity wanes or deteriorates, the dire consequences unfold. You begin to lose control over both your personal financial and business matters. When you reach a point where a significant part of your mental faculties has eroded, you lose control over everything. You find yourself in a distressing situation where your own wellbeing and personal welfare are no longer within your grasp but in the hands of others.
In the eyes of the law, as outlined in Section 52 of the Mental Health Act 2001, when you can no longer manage your personal affairs due to mental incapacity, your decision-making power is wrested from you and given to a committee appointed by the court.
ONLY UPON DEATH
Wills and nominations, typically, only take effect upon death. For example, a written will only become relevant upon your demise. All the nominations you’ve made in your EPF and life insurance policies come into play only after you pass away. Moreover, your life insurance policy’s death benefit remains unclaimed until a death certificate is submitted.
Whether you’ll receive the total and permanent disability (TPD) cover benefit from your life policy depends on whether your state of incapacity aligns with the policy’s definition and terms and conditions. Most TPD benefits are disbursed six months after the insured individual becomes completely unable to engage in income generating work, with a waiting period of six months from the date of disability.
It’s crucial to note that any testamentary trust established through your will instrument will not take effect in the event of incapacity. This trust, embedded in your will, can only be activated upon your death.
DEMENTIA
Dementia is a pressing concern. According to the World Health Organization, around 8.5% of older adults in Malaysia, roughly 260,000 people, are grappling with dementia. It’s a condition characterized by a loss of cognitive functioning, impacting thinking, memory, and reasoning to an extent that hinders daily life and activities.
Dementia is not a sudden occurrence; it’s a progressive disease. Over time, individuals afflicted with dementia often require support in managing their affairs and daily activities. What’s worth noting is that dementia is not an inevitable consequence of aging; it’s a syndrome marked by cognitive function deterioration, memory loss, and behavioural changes. While it’s predominantly associated with older individuals, it can also affect younger people, and there’s currently no cure.
In recent times, the media has reported prominent cases of individuals being subjected to court inquiries to determine their mental capacity and the potential appointment of a committee to oversee their personal, legal, and financial affairs.
A TRUE STORY
In December 2019, the son of the late Tun S. Samy Vellu filed a summons in the Kuala Lumpur High Court to ascertain his father’s mental capacity under Section 52 of the Mental Health Act 2001. He sought to determine if his father was mentally disordered, as his father had been unable to access his bank accounts due to his condition, prompting the legal action.
There was another case involving the son of a 92-yearold millionaire businessman who filed a suit to evaluate his father’s mental health. He claimed that his father’s mental faculties had been declining over the past few years, leading to communication difficulties and memory loss. He applied for a court order to determine his father’s mental capacity to instruct lawyers on his behalf and to appoint a committee to manage his father’s affairs and estate if he was found mentally incapable.
In conclusion, business owners and professionals who take pride in their ability to maintain full control over their personal and business lives are strongly advised to plan for the unexpected event of incapacity. Losing everything in such a situation can be avoided with proper planning.
About the Author
Lee Khee Chuan is a Securities Commissionlicensed financial planner representative. He is passionate about advising business owners and professionals on the importance of a comprehensive approach to estate planning. You can reach him at: leekheechuan@gmail.com
