• Wealth planning
  • 11 March 2021

Estate planning during the pandemic – never too late to start

The ongoing Covid-19 pandemic has prompted many to confront their own mortality and the age-old taboos of incapacitation and death. 

While estate planning is important for everyone, it is especially so for the wealthy who have other considerations such as protecting the inheritance for heirs, minimising estate taxes, avoiding the probate, ensuring liquidity and management and control of assets.

What is estate planning all about?

Estate planning is a holistic exercise typically involving your accountant, private banker, wealth planner and lawyer. They will help you create an estate plan which is a collection of legal documents that provides clear instruction on how you want your assets such as money, property or businesses, preserved, managed and distributed when you pass away. It also dictates how you want people to handle health and financial decisions if you are unable to do so for yourself during your lifetime.

Estate planning can be a lengthy process and it is easy to get overwhelmed, but don’t let that deter you. Here is what you need to take note of when you are starting out.

1. Be prepared to have intensely personal conversations with your wealth advisor

In Asia, it is not typical to speak about private matters, even with family members. And in a socially distanced Covid-19 world, some conversations about estate planning may first be conducted virtually. Do not let this prevent you from having frank, open conversations with your wealth  advisor.  

Be prepared for in-depth questions as your wealth advisor needs to know about you, and your intentions and priorities. Only then can they dispense accurate advice aligned with your goals.

Topics that you may not have articulated to another person, but need to speak to your wealth advisor about, may include:

  • Your family situation: Family setup directs a whole portion of the estate planning process. Are you married? Do you have children? If so, how old are they? Do they stay in different countries? Be honest with your planner about your past such as an ex-spouse, so they can also help you with contingencies, should an outside party emerge and try to stake a claim.

  • Your level of assets: You will need to draw up a list of assets and estimate their value. This includes tangible assets such as property and art collections, and intangible assets such as bonds and stocks. This will help toward deciding what assets are worthwhile passing on and minimising estate taxes that may deplete what your family will inherit. This is especially relevant in today’s Covid-19 environment where asset values were depressed due to the impact of the pandemic. A potential increase in value could expose your beneficiaries to capital gain taxes.

  • Your beneficiaries: Of course, you get to choose who inherits your assets, so make sure you choose wisely and specify which assets go to whom and how you want them to handle your assets in the future.

  • Your legacy: Do you have philanthropic goals and wish to incorporate them into your estate plan? You will need to think which cause or set of causes is meaningful to you and your family. For example, what issues in your community concern you? How do you wish to be remembered? Your wealth planner can then help select a charity or charities that are meaningful to you, and guide you through the technicalities. These include what assets to donate, if you have assets to donate year after year, and what vehicles (such as cash or stock donations) you prefer to use to gift your assets while minimizing transfer taxes.

2. Speak to your loved ones, and assign them roles in your estate plan

You will have to share intentions and decisions with those you hold dear, especially if they are to help execute your estate plan. Speak to the people you want to name for each role. This will help reduce any later uncertainty about what to do and what your priorities have been, should they be called upon to make decisions on your behalf.

  • Personal Representative: This is the first person you need to think about – the executor (or administrator in case of intestacy) of your estate. This person will administer the probate, collect all the assets by taking whatever steps are required to ensure that they are under their power and control and to prepare for the distribution of assets.

  • Guardian: Next, there must be a guardian named for young children, and any persons such as aged parents or those with special needs in your charge, who cannot care for themselves.

  • Financial and medical power of attorney: This refers to the people who will take charge of the financial and legal affairs, and medical directives. They will act on your behalf if you are unable to communicate your wishes after an accident or during a medical emergency.

3. Estate planning is a journey

Be prepared to review your plan on a yearly basis, especially whenever a major life change occurs, such as a new birth or marriage. We know from our 2020 experience that circumstances can change in the blink of an eye. Many wealthy individuals may face uncertainties in areas of investments or business growth – now is the time to talk to a wealth advisor and discuss what solutions can come into play to preserve wealth.

The Bottom Line

Pandemic or no, there is one takeaway that I can offer when it comes to estate planning: Do not delay. While none of us likes to think about dying, improper or no planning can lead to family disputes, assets getting into the wrong hands, long court litigation, and excess money paid in estate taxes. An experienced team will work with you to create a plan customised to your needs, family situation and wealth planning goals.

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Version: July 2020