Part II: Each Generation Will Reap What The Former Generation Has Sown.
Dave Loh 羅進韡
Malaysian's Preferred Financial Planner in Singapore | Leading A Dynamic Team of Multi-national Advisors from Diverse Backgrounds, from Fresh Graduates to Seasoned Professionals
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PART II: GENERATIONS FOR GENERATIONS
Written by Dave Loh
INSURANCE COMPONENT OF LEGACY PLANNING
Let us now look at the case of Mr Liu, a 50-year-old non-smoker and CEO of a thriving local enterprise.
He is the father of two and has four grandchildren. He wants to add value to his assets which are as follows:
Mr Liu plans to keep half of what he owns for himself and Mrs Liu to use in their old age, while the remainder will be bequeathed to their children and grandchildren. Suppose Mr Liu wants to add value to his assets. In that case, he can take up a life insurance policy of $2.5 million with a payout of $10 million or more which can then be distributed to his beneficiaries as a legacy.
Alternatively, if he wishes to have a payout of $2.5 million to be used as a legacy for his beneficiaries, he only needs to take up a $625,000 life plan. This is if he wants to keep more of the assets for his use.
It should be pointed out that nowadays, some banks also provide the service of financing, which means that customers only need to put up 30% of the amount to be paid. For example, suppose Mr Liu takes up a $10 million policy and uses his bank's financial servicing. In that case, he will only need to pay $750,000, and the remaining amount will be provided as a loan.
ADVANTAGES OF USING INSURANCE FOR LEGACY PLANNING
We possess different investment portfolio values at other times in our lives, and each portfolio's value will depend on the prevailing market conditions. For example, the value of a property will change from when we acquire it to when it goes to our beneficiaries. Some investments, such as shares, will also see their values change over time. It is, therefore, helpful to separate our legacy through insurance to avoid any misunderstandings among our beneficiaries.
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Most legacy checking should be approved by legal means, which can be prolonged depending on the intricacies involved. One of the advantages of incorporating insurance in legacy planning is that what is being bequeathed can be passed on directly without court approval, hence saving time and hassle.
Suppose the intention of 'giving back to society' comes to mind. In that case, the beneficiary can always donate what is bequeathed via legacy planning to charitable causes, which, in turn, can be used for a tax deduction.
NEVER TOO EARLY TO START
Legacy planning can be a complex process and requires much care and consideration as each individual's situation, and circumstances are different. The aim is to fulfil each person's legacy planning needs and requirements based on assets and any financial servicing rendered.
However, it is never too early to start one's legacy planning, as it is safer to add in what is accumulated along the way rather than inadvertently leave out something that had been acquired earlier due to oversight.
Have you started your legacy planning? If not, what's holding you back? Share your thoughts in the comment below.
See you on another topic next Tuesday. I hope that you enjoyed Dave's Thought Show and hope it's helpful to you!
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