Get the Basics Right in Estate Planning!
Get the Basics Right in Estate Planning!
Get the Basics Right in Estate Planning!
Perhaps it is only the saints who, in this life, are indifferent to protecting their wealth. The rest of mankind needs some form of estate planning. For many, the irreducible minimum is to make a will, to take some life insurance cover to protect one's dependants from the consequences of one's death and to write those insurance policies in trust so that the proceeds will be available to one's personal representatives before probate is granted.
In addition, joint owners of property need to consider whether that property should be held as joint tenants or as tenants in common and members of pension schemes should ensure that the scheme trustees have been informed of their wishes for the application of death benefits. My readers are, however, likely to have, or to advise clients who have, estates far more complex than that which require tax planning which is similarly more complex than this bare minimum.
Estate planning is essential to anyone who owns significant assets, from the moderately prosperous to the very rich, although not all estate planning techniques will be appropriate to every level of wealth. We attempt to cover estate planning as it is relevant to every level of wealth, however one describes holders of such wealth.
The basic principles of all estate planning, however, are simple.
First, one must determine one's objectives. In order to do so one needs to explore the nature of their wealth, their relationships with their family, their expectations for the future and their attitudes towards financial risk and the devolution of wealth.
Secondly, as most estate planning involves making gifts of some sort, one should determine whether they currently have, or expect to have, a surplus of wealth over required expenditure. I deliberately express it in that way because often one of the greatest barriers to estate planning is an over-emphasis by clients on the need to preserve capital and to spend only income.
A man of eighty with an annual expenditure of only 40,000 may yet have a portfolio of 1m. Whatever view one takes of his life expectancy he does not need to hold on to all of his capital in order to be quite secure that he will be able to continue to maintain his expenditure for the rest of his life.
Holding on to wealth too long is far commoner than giving away too much too early.
Thirdly, in making gifts one must determine the appropriate assets to be given away. For example, it may be useful to give assets which have the prospect of substantial future capital growth to younger family members. One must also determine the appropriate form of the gift; should it be absolute or in trust? In coming to these decisions one must avoid creating unnecessary administrative difficulties but be careful to consider the effect of the gift on the recipient. It is usually unwise, for example, to give absolute control of a family company to a child who is just eighteen.
Fourthly, although most estate planning will be directed towards avoiding particular tax charges, it is important to keep in mind the whole range of taxes which can apply to family wealth.
Fifthly, one should aim for the greatest possible flexibility so that one can adapt the chosen strategy to changes in circumstances and expectations.
Finally, whatever plan is adopted, one needs to review it formally at regular intervals to determine changes in the client's intentions and expectations for the future and to adapt the plan to those changes.
In concluding under current financial circumstances and the reasonable growth in assets within the business community and especially Asian community there is urgent need to protect assets and re-evaluate wealth portfolio for generations to come and hence an early plan put in place now will only provide peace of mind and protect your family.
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