10 questions to consider when planning a legacy to preserve, grow and distribute your wealth the way you want.
Having achieved much in life, you are now thinking of setting up a legacy that can secure the future for you, your family and beyond. As you start planning, here are 10 questions for you to consider.
Making a will ensures that your assets are passed on in the way that you wish. Without a will, the distribution of your assets will be subject to intestacy provisions and may be distributed contrary to your wishes. Different rules may apply when assets are situated overseas.
The probate process for an executor to distribute assets under your will can take 6 months or more during which accounts may be frozen. After this, the will may be available for public scrutiny. To avoid probate delays and publicity, a simple trust may be used instead.
A trust is a legal agreement under which the legal ownership of assets is transferred to a ‘Trustee’ (often a bank trust company) by the ‘Settlor’ (the original owner of the assets). The trust agreement instructs the trustees to hold the assets for the exclusive benefit of certain persons (the ‘beneficiaries’). Various conditions can be stipulated in the trust agreement, such as who will have power over the trust investments, at what age the beneficiaries may receive distributions, how much, etc.
Using a trust to hold your assets ensures that you avoid the need for a will. Trusts can avoid probate delays, freezing of accounts, publicity, and can also reach out to future generations if you wish to benefit minor children or grandchildren. Usually, it will be necessary to have assets of about SGD 2 million for a trust to be cost-effective.
Another use of a trust could be to put assets aside for a specific purpose such as the making of charitable distributions. Such a trust could be named after a loved one, or be in the family name.
Wealth Planning should consider the time in your life when you may be elderly and physically or mentally incapacitated. A trust may be useful in this regard as a trustee can hold your assets and make payments for appropriate care and medical needs as required.
Foreign countries have legal and tax systems that may be very different from your main country of residence. Estate taxes may apply and distribution rules after lifetime can be different. Without proper planning, your wealth can be tied up for years by legal process, or greatly diminished by foreign taxes.
Proper legacy planning involving life insurance can help grow your estate and provide greater liquidity during your retirement years without compromising your current lifestyle. Life insurance is a great estate equalisation tool that helps allocate your wealth fairly to those that are dearest to you and those who need it the most.
If you have decided to set aside some funds for legacy planning, it is often a good idea to explore if those funds could be used to invest in a life insurance policy and possibly greatly enhance that legacy.
One of the challenges many Asian families face is how the family business will survive to future generations. For the initial Patriarch, ownership and management often go together. For successive generations, however, the ownership may become dissipated to family members not involved in the business. This is an important aspect for families to consider and take advice from a trusted wealth manager.
If something happens to you and your wife, consider whether your children will be old enough, and responsible enough, to receive your wealth. Perhaps you would prefer to safeguard their future by disbursing part of your wealth for their living expenses now and making part of your assets accessible to them only at a later age. Trusts can help with such arrangements.
Some families like to ensure that funds will be available for the education of family members for many future generations. There are trusts that can be designed for this purpose.
You may wish to pass assets to your children, but are concerned that any assets in their hands could be subject to a future divorce settlement. You may prefer to leave assets in the legal ownership of a trustee, but with your children named as beneficiaries so that they can receive distributions as necessary, whilst keeping the capital safe from litigation.
If you would like to find out more about how to enhance the value of your legacy and develop a tailored solution that meets your needs, simply make an appointment with us or contact your DBS Treasures Private Client Relationship Manager.
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