This article first appeared in Wealth, The Edge Malaysia Weekly on July 26, 2021 - August 1, 2021

Intergenerational wealth, more often than not, is passed down from one generation to the next. It is very rare to see it skip several generations, mainly because not many people live long enough to see their great-grandchildren.

Normally, the assets are passed down to the next generation through a will or a trust. Once in a while, however, we come across something different in our line of work.

One of my recent experiences has to do with handling the legacy of a great-grandfather who wanted to gift a sum of money to his great-grandchildren. The legacy is very meaningful and impactful as it would serve as an education fund for the great-grandchildren.

This man, let’s call him the late Mr T, was born in the 1930s and belonged to the silent generation of that era. The silent generation consists of children who lived during the Great Depression, whose parents faced great economic hardships and struggled to provide for their family.

Not only that, they also had to ride out World War II and many lost either one of their parents or their siblings due to the effects of the war. They are known as the silent generation because typically, they spoke less, kept their heads down and worked very hard. They were also not risk takers.

Mr T was a typical hardworking farmer who grew vegetables and maintained an animal farm. In return, he was given a place to live with his spouse and seven children. Life was extremely hard during that era, and the diet was mainly tapioca. The occasional plain rice with soya sauce and a fried egg was a real treat in those days.

Working hard was not an option but a must in those days. Mr T believed that education was the key to helping his children break the cycle of poverty and avoid having the same life as he did. So, even if there was not enough food on the table, he sent his children to school.

Therefore, he instilled in them the importance of education from a young age. Although his three sons and four daughters also helped around the farm, he ensured that they went to school and did their homework and monitored their progress diligently.

His sacrifices paid off. All his children had a good education, with some of them going overseas to further their studies. That was how he broke the cycle of poverty. His children are doing very well now and he was also blessed with six grandchildren and eight great-grandchildren.

His wish before he died was to set up an education trust fund for his great-grandchildren that could only be utilised when they turn 21. At first, his family members reacted negatively to this arrangement because of the cost of setting up the trust fund and the recurring fees involved in maintaining it.

Also, the amount of money to be distributed in today’s value was quite small and not enough to last the entire duration of their university studies. This inheritance was in the form of cash accumulated by the late Mr T from the angpows (red packets of money) he received during his lifetime for birthdays and festive seasons, as well as his hard-earned savings over the years.

One of his children asked me whether they (the siblings) should proceed to make their father’s wish come true or to distribute the money to the great-grandchildren. My advice was for them to set up the trust fund. Why? In my role, I am able to choose and match the best solutions available in the market to suit their needs. But it is important to research deeply to come up with the best solutions for such a mandate and to ensure that it is the most cost-effective way to set up.

As a financial adviser, I have to ensure that the value of the money does not go down due to inflation, but instead grow it into a significant amount to beat inflation.

From an investment point of view, we are confident of reasonably good returns, and this can be achieved by diversifying the invested amount into various asset classes. By doing proper inter- and intra-asset allocation, the invested risk is “controlled” and we can adjust the risk level accordingly. Like the saying goes: high risk, high return.

By checking out a few options and researching the market, we managed to find a good proposition to help Mr T’s children fulfil his last wish — by opening a joint investment account for the grandchildren (parents) and the great-grandchildren of the late Mr T. The main account holder would still be the parent (one or the other) of the great-grandchildren, and a nomination will be made for the great-grandchildren so that the proceeds of the investment will be made available to them when they reach 21.

In the event of the parent’s death, the doctrine of survivorship applies. This is to prevent the investment account from being frozen. Second, if the great-grandchildren are below 18, a trustee will be appointed to manage the trust account until the nominees turn 21.

The beauty of this proposition is that the cost of setting up the trust is just a mere RM110 for each great-grandchild and an annual maintenance fee of only RM200. The RM110 is a one-off fee while the maintenance fee is only chargeable if something untoward happens to the main account holder.

Vincent Cheong is senior practice director at UOB KayHian Wealth Advisors Sdn Bhd

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