Monica loves to play with her Barbie dolls. She loves to sing and dance by herself. She also loves to draw with her crayons. She likes to have fun like a child, even though she is no longer one at 30 years old today.

Some 15 years ago, Monica was in love with a senior in her school who broke her heart. It hurt her so much that she suffered from depression and had to be hospitalised. Until today, she takes regular medication for her illness. She is able to take care of herself, but cannot hold a regular job. She is blessed with a loving family — her parents Billy and Joan and her younger sisters May and Maici.

Like many working parents, Billy and Joan were very busy with work and their children were left in the care of a maid. It was a wake-up call for her parents when Monica fell ill due to the failed love relationship. Joan resigned from her job and stayed at home with her children. With her presence, constant care and unconditional love, Monica was able to heal.

When I met Billy, he told me his biggest priority was Monica. As May has started working and Maici will be graduating next year, he is not worried about them anymore. He wanted to provide financial assistance for Monica for the rest of her life. Being a responsible father, he felt he should do that for Monica while her sisters help monitor her welfare.

Billy, 61, is still working and is likely to work for another year. He is a loyal employee and knows the details of the company better than anyone else. As such, his boss would want him to extend his tenure. However Billy has scaled down his work because he had a transient heart attack about six months ago. He has since led a healthier and less stressful lifestyle.

Monica will be his top priority, followed by his retirement plan. From his conversation with me, I understood that the family’s medical expenses are fully covered by his company’s insurance. Billy and Joan only have RM100,000 life insurance coverage each. He informed me that once he resigns from his company, the medical benefits will longer be available to him.

As he only intends to work for another year, I suggested that he purchase medical insurance for his family so that it will not eat into his savings in the event of hospitalisation. I also suggested that he allocate RM100,000 in savings for his medical expenses in case he cannot secure medical insurance due to his heart condition. As Maici’s education fund has been provided for, we do not need to allocate any funds for her.

Billy told me that as long as he and Joan are around, they will be responsible for Monica’s finances and welfare. At today’s value, he intends to allocate RM36,000 annually for Monica expenses. He will provide financial assistance for her until she is 85 and we agreed on the amount of RM3 million. A testamentary trust will be set up for Monica with a corporate trustee. We will also appoint a caretaker to protect her interests.

Billy’s family is living in a fully paid-up home worth about RM1.5 million. He also has two fully paid-up condominiums worth RM1.1 million. Upon the demise of one parent (Billy or Joan), the present home will be liquidated. The surviving parent and Monica will then move into one of the condos. The liquidated amount will be put aside for Monica. Upon the surviving parent’s demise, another condo will be liquidated and the money will go into Monica’s RM3 million trust. Some RM100,000 will be put into a private purpose trust for Monica to use during the probate period.

Financial goals

Billy has eight financial goals with an effective cost of RM4,913,324 today. This is the amount he would need today to fund all of his objectives. The table lists his individual goals, when each is expected to start and stop, and whether the outlays are to be indexed (cost increases each year). The amount per year is the cost of the goal if he were to begin paying for it this year.

From the table and chart, we can see that:

Billy’s net worth is RM5,454,774, with a car loan and new property purchased two years ago as his liabilities;

He has about RM2 million in his mandatory savings account, which he can withdraw anytime to settle his liabilities if there is a need to do so; and

He has done very well for himself and his family as he is able to fulfil all of his financial goals, including a comfortable retirement and

Monica’s financial needs.

Looking at his net worth, I recommended that he take up a family medical insurance plan and set up a will as well as have a testamentary trust in place, which will clearly indicate Monica’s benefits. A private purpose trust will also be set up for Monica’s needs during the probate period.

Another finding was that Billy’s investments were confined to the Malaysian market, and mostly in cash and bonds. Based on his risk profile, he needs to diversify his portfolio to allow him to potentially gain better returns on his assets over the long term. Billy’s tax bracket is rather high, so I suggested that he consider an investment that offers him tax relief.

Billy is satisfied with the recommendations put forth as he no longer has to worry about Monica’s financial well-being. He is glad that there will be sufficient funds for him to travel yearly. If the returns on his assets are better in the future, he will enjoy a greater allocation for retirement and travel. He can also rest assured that there is a medical fund in place should there be any unexpected medical conditions.

We will meet up regularly to discuss and review the plan. I am happy that I can help Billy plan his finances so that his family is well taken care of. Monica is lucky to have such a caring father.

Irene Lee is a licensed financial planner with CWA

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