How would you feel if everything you owned went to someone else’s children? Or if your loved ones couldn’t inherit the family home? Estate planning is a complicated area, especially for expats who may have family members living in different parts of the globe. Every country has different tax laws and processes, and sometimes these can be conflicting. This can mean a costly and time-consuming settlement – up to two years, in some instances.
Proper estate planning is therefore of great importance. Here, Andrew Talbot of Expat Financial Planning, part of Globaleye Group, looks at six of the essential tools that can be used to protect and control your assets.
If you have children, or property or other assets, you should have a valid, up-to-date will telling everyone what you want to happen in the event of death. A will allows you to nominate your executors and guardians for young children, make gifts to loved ones and ensure that your wishes regarding the distribution of your estate are known. You can even begin to protect your property, mitigate inheritance tax and protect vulnerable or young beneficiaries using will trusts. Wills should be reviewed regularly to make sure they are still up to date.
A person who dies without having made a will is said to have died intestate (“bona vacantia”) and their estates are distributed according to the laws of intestacy. Without a will, you leave behind an unnecessary (and costly) mess, and the law dictates how your estate is distributed. You have no say.
#2 Lasting Power of Attorney
An unfortunate result of us all living longer than ever before is that we’re more likely to lose the ability to manage our own affairs at some stage, whether because of accident, illness or old age. A Lasting Power of Attorney (LPA) allows you to choose who you would want to manage your affairs. Without an LPA, there can be severe delays, substantial costs and quite often a loss of control to a person you don’t know; furthermore, your assets are frozen and your loved ones must use their own funds to make the application.
Most countries under a common law system allow parents to sign a “Temporary Guardianship Form”, a document that provides authorities with your wishes regarding who will take care of your children until the permanent guardian can arrive in the country where you reside – for example, until a Singapore-based expat’s parents arrive here.
In Singapore, a temporary guardian can be a trusted adult family friend, national or foreigner who resides here. A temporary guardian cannot be a domestic helper, nanny or household employee. The permanent guardian is to be nominated in your will, and is usually a family member related to either parent – although this can vary depending on your country of residence.
#4 Will Substitutes
A will substitute is a technique that is easy to apply and that allows you to transfer property at your death to a beneficiary outside the process known as probate (official recognition that a will is legally valid). This expedites the distribution process and allows you to avoid any costs associated with probate. Examples can include joint tenancy on property; so, if a husband owns a property, the wife can be added if he passes on; another area is the nomination of beneficiaries to bank accounts.
Trusts have been used for hundreds of years to protect family wealth to ensure that it remains within your family “bloodline” for many generations to come. While they can be complex – not all countries recognise certain trusts – they’re very useful in certain circumstances. There’s a huge range of different trusts – express trusts, implied trusts, resulting trusts, bare or absolute trusts, discretionary trusts, just to mention a few – and everyone’s situation is different, so be sure to seek personal advice on them.
An individual with a dependent family may need provision against the loss of earnings caused by death. For example, a dependent spouse or partner may not be able to earn enough to support themselves and any dependent children. Insurance may therefore be needed to cover things like maintenance and education. (The latter would apply if private education is in place or envisaged for the future, or alternatively where there is a desire to help fund university costs.) Protection needs may last until the youngest child is financially independent, say 18 to 21 years of age, but it could last longer if, for example, a child is disabled.
There may also be a protection need in cases where there is a dependent spouse or partner, or an elderly relative to look after. For a couple who are married or in a civil partnership or long-term relationship and where both partners’ earnings are necessary, there is a protection need for each against the death of the other.
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