In my last article I focussed on the importance of ensuring
that adequate provision is made for dependents so that their
standard of living can be maintained in the event of the sudden
loss of the breadwinner. Most people seriously underestimate
how much their families would need to survive if their regular
income were to cease. Few people sit down and work out how
much would be needed to support a spouse for life and provide
for children’s education etc. Yet a relatively young
breadwinner could provide half a million dollars of life cover
for his family for little more than the cost of a weekly evening
meal out.
The money is there, but where will it go?
Enough said. Let’s assume that the responsible breadwinner
has made adequate provision for his or her family. Possibly
the breadwinner has built up wealth and holds various assets
such as property, investment portfolios etc. It should not
be assumed however that these will pass automatically to the
intended recipients. Without proper planning it may be some
time before a family can access the assets and it may also
prove a costly process.
Where there’s a will there’s a way!
A will is a basically simple document and it does not cost
an arm and a leg to write one. One can be registered in Bali
for example for a little over a million Rupiah. This would
only be appropriate however for assets held in Indonesia.
If you are an expatriate and have assets outside the country
then those assets should be covered by a will written and
registered in your home country. Both wills should be cross-referenced
so that there is no ambiguity.
Use of Trusts
If you have considerable assets outside the country then you
may wish to consider a trust. This is a vehicle through which
you transfer legal ownership, but not beneficial ownership,
of your assets to the trust. Trusts have often been used as
a means of avoiding or reducing tax but perhaps their most
important benefit is that in the event of the death of the
‘Settlor’ the assets can pass immediately, or
otherwise as the case may be, in accordance with his or her
wishes. This is also a way to avoid Probate, the process that
must be followed upon death in every jurisdiction in which
a person holds assets, even if a will is in place.
Joint names and beneficiaries
There is an even simpler way to ensure that assets are immediately
transferred to a spouse, partner or family member. A bank
account, investment portfolio or savings plan in a person’s
sole name only cannot be accessed by that person’s spouse
or anyone else in the event of death until the process of
Probate has been completed. If the account or policy is converted
from single to joint names however, it will continue in the
name of the surviving person or persons. Another way to ensure
assets pass directly is to nominate beneficiaries. This facility
is generally available to holders of offshore policies and
it enables the owner of the policy (which could be life insurance,
a savings / pension plan or portfolio) to retain sole ownership
but also the smooth transfer of assets in accordance with
his or her instructions. Such transfer will normally take
place as requested but is not guaranteed as it could be challenged
through the courts. A Trust would provide a more certain means
of achieving the objective, as would having holdings in joint
names but this may not always be desired.
The miseries of Probate
If you have assets in a number of jurisdictions they would
not pass to your estate until Probate has been granted in
each jurisdiction unless you have taken measures as suggested
above. Granting of Probate can take from six months to a couple
of years! I have recently been helping a client in Bali with
the process and it took 15 months, many hours of work and
several thousand dollars in costs before the late spouse’s
assets were released. The costs included the buying of an
insurance bond to protect the lawyers handling the case against
another claimant popping out of the woodwork later on! All
this could have been avoided if one of the simple courses
of action outlined above had been taken.
Peace of mind is priceless
It is not a subject that people want to embrace, neither is
it an issue that people believe should be accorded priority.
But that does not mean people are unaware of it. In fact,
the answer I most frequently get when I ask prospective clients
if they have a will is that they do not, but they have been
thinking about it! It is always one of those jobs that can
be ‘put off until tomorrow.’ Having inadequate
life insurance is also a common failing.
Putting all these things right will require a little effort,
but not a lot. The cost involved will buy security for the
family and something which is priceless – peace of mind!
Colin Bloodworth is a senior financial adviser with Financial
Partners International. The views expressed are his own. If
you have any questions relating to personal finance you may
contact him at 021 520 8099 or colin.bloodworth@financial-partners.biz
