How to leave a legacy when you don’t have millions

We tend to place great emphasis on the financial needs of our family, often over and above our own. This is most often seen in legacy planning: it’s common for parents or grandparents to work hard their entire lives, so that their children get to enjoy the fruits of their labour. And as we can see from in a recent movie, like How to Make Millions Before Grandma Dies, our notions of inheritance are deeply intertwined with our family cultures. But what can we do, if we don’t have millions in cash for the next generation? Here’s some good news - there are still ways you can provide sufficiently for them:

1. Using life insurance to amplify your legacy
   Even if you don’t have millions in the bank, you can still leave a substantial sum through life insurance benefits. Life insurance provides a payout upon death or Total Permanent Disability (TPD), and you can name the specific beneficiaries. Note that these beneficiaries are not restricted to family members - you can also name institutions that are important to you, such as religious organisations, animal rights groups, or perhaps even leave something behind for your school.
   
   The amount of the benefits can be varied according to your legacy goals. If your children are doing well and need less financial support, for example, you can consider lower premiums and a lower payout. But if you have lifelong dependents or higher aims, such as paying for your grandchildren’s education, life insurance also provides you with a means to do this.
   
   Using life insurance is also a hassle-free way of providing for others, unlike a stock portfolio or other asset that you have to manage. Some life insurance policies are also extremely flexible, allowing you to change premium terms to keep them affordable (e.g., you can pay premiums for just 20 years, or choose to pay till your 55 or 65, to enjoy protection for the rest of your life afterward).
   
   
2. Have mortgage insurance, so you can be assured of leaving your property to your loved ones
   Mortgage insurance pays off your outstanding home loan, in the event of death or permanent disability. This type of insurance is mandatory for HDB flats, and is called the Home Protection Scheme. However, mortgage insurance is optional for private properties - so if you live in a condo or landed home, it is up to you to purchase this coverage.
   
   Without mortgage insurance, your co-owners, such as your spouse or children, are forced to foot the remaining bill for the home. If they cannot, there is a risk that the bank will foreclose on the property.
   
   Even with life insurance or critical illness payouts, there’s a risk that the outstanding mortgage may be much larger than the sum assured, or that it will take up so much of your life insurance benefits, the rest of your legacy planning is lost.
   
   Given the relatively low cost of mortgage insurance, it pays to have a policy that’s reliable and comprehensive. Some mortgage insurance policies also include home protection benefits: this is a bonus that covers certain liabilities, such as if a leak in your home affects a neighbour.
   
   
3. Use critical illness coverage so that when the worst happens, you’re not forced to liquidate assets
   Even if you have life insurance, certain major illnesses such as cancer, heart attack or strokes can put a strain on your finances for several years. These critical illnesses often incur costs outside of hospitalisation (e.g., continued physiotherapy), and may require you to hire additional help like a stay-in nurse.
   
   Planning for these costs will greatly help your legacy planning, allowing a greater peace of mind you and your beneficiaries.
   
   As such, it’s best to get critical illness policies that are comprehensive, and can kick in when needed. Some policies can grant you lump sum payouts at early, intermediate, or critical stages based on your choice - this way you can get help from the very start. There are also policies that can protect you if a critical illness re-occurs, such as a second heart attack, stroke, etc.
   
   
4. Appoint someone with lasting power of attorney, in case you’re not able to make decisions
   You can appoint someone to have lasting power of attorney, if you ever become unable to manage your legacy planning on your own. If your illness leaves you comatose, for instance, or your judgment is impaired by conditions such as Alzheimer’s, it may be best if your legacy planning is in the hands of someone you trust.
   
   Besides your spouse, siblings, or other family members, you can also appoint impartial third-party professionals, such as a law firm. As this is a complex legal procedure, it helps to get insight from a qualified financial representative or lawyer; and it’s best to do so now, while you’re still in good health.
   
   
5. Communicate with your family on your legacy plans
   It’s advisable to explain your decisions while you’re still around (if you’re not comfortable, consider conveying your wishes in a letter or video). This is partly to ensure your legacy planning decisions do not feel unfair to any beneficiaries, and ensure that your legacy plans are properly communicated.
   
   Another reason to do this is for more complex assets: if you own a business, a stock portfolio, a rental property, etc., then it’s best to explain how you want the asset to be used. You might, for instance, have plans to liquidate your portfolio only at a certain date, or for the business to be sold rather than continued on for financial reasons. If your beneficiaries misunderstand your intentions, they may not make the best use of the assets you leave them (or worse, turn them into liabilities, in the event the assets begin to underperform without your management).
   
   So besides having the right insurance coverage, and appointing your beneficiaries, the final layer of protection is good communication. In this way, you can leave a legacy that will benefit your family, even without millions in the bank.

Legacy planning is more than just a financial strategy; it's about securing your family's future and ensuring your values and wishes are honored. Take control today by creating a comprehensive legacy plan that reflects your life's work and aspirations and give yourself the peace of mind that comes with knowing your legacy is in good hands.

Click here to speak to a Great Eastern Financial Representative to learn more about how our legacy solutions can help.