What Happens To Your Investments After You Die?

It is not something most of us would think of, especially when we are still young and accumulating our wealth. Soon-to-be retirees who have amassed a sizable retirement fund would find it their best interest to think beyond retirement and how their assets would be managed after they pass on.

Here, I would like to introduce estate planning to everyone. Writing a will is a very important part of estate planning, but it is certainly not enough—as we have to ensure that it is executed according to your intentions. There are many factors that can complicate estate planning, and one of the common factors is deciding who gets what. For example, willing it to your spouse would result in complications if they choose to remarry or if they are poor in managing finances. Willing it directly to your kids is another example of poor estate management, because they will not be able to inherit any estate if they are below 21 years. There may also be a possibility for them to squander it away on poor financial decisions if they are not yet mature enough.

Estate planning is an entire topic on its own. The good news is I'm sparing you from that topic today.

For today, we are focusing on just investments alone. Most of us have not thought about what would happen to our investments after we are gone. A quick search on Google would only mention that 'all your assets will be frozen'. It doesn't say if your investments continue to fluctuate according to market prices and when it will be liquidated.

Let's find out what happens!

Upon death, all your assets will form your estate. Your estate will then have the obligation to pay off any debts that you may owe (property, credit card, bank loans etc). In this sense, having sufficient 'estate liquidity' is important such that your assets will not be forcefully sold at unfavorable prices. Estate liquidity refers to how much cash or cash equivalent assets you have under your estate.

At the point of death, all accounts and assets will be frozen. Only with the necessary documents, can the executor or administrator gain access and administer according to the will. As the priority is in distributing assets according to the will, investments will be liquidated at the earliest convenience to facilitate the distribution.

Through this exercise, the beneficiaries may receive substantially less if it happens to be a 'bad year', such as a recession, pandemic or a bad economy. If we look at 2020, our portfolios can make losses up to -60%! If given a choice, we would definitely choose not to sell our investments during that time. However, in the event of distribution, assets will be sold at the earliest convenience regardless of market performance. This is one of the main reasons why most retirees shift their investments towards less volatile investments as their time horizon gets shorter.

Regardless of whether our investments are going to our children, or to a charitable cause that we believe in, we always want them to receive the maximum value. Here's some food for thought - how can we ensure that our investments are liquidated at the best value, especially when we are no longer around to manage it? If we assign someone to manage it for us, how do we ensure that the maximum value goes towards our intended purpose?

Setting up a trust may be a good solution. However, setting up trusts involve certain complications and not everyone wants to go through the hassle if their wealth is not substantial enough. A trust usually takes effect while we are still living and it will be encumbered to its beneficiaries. This suggests that the legal title of the assets has been transferred to the trustee and we will not have full control over them. We will be restricted from using the assets in the trust to sustain ourselves if we outlive our retirement funds.

Seems like we are stuck between a rock and a hard place right?

Today, with the innovation of creative financial solutions, we have just launched a 'first-in-market' feature to solve this problem for efficient legacy planning. It allows us to continue enjoying potential high returns while we are alive and pass down the maximum portfolio value in the event of death. Many of my clients welcome this new addition because this problem has been plaguing them for the longest time! Finally, we have a solution that enables us to sell investments at the maximum value. Reach me directly if you wish to understand how this works.

But wait, this is not all! The second most important benefit is the ability to pass this money in the form of nominations! Nomination is a feature that is exclusive to insurance policies which is the fastest way for your beneficiaries to receive your money. Stay tuned for my next article where I'll be sharing about nominations, grant of probate and letter of administration! I’ll be posting it next Thursday. ??

PS. The 3 things mentioned above determine how soon and how smoothly your beneficiaries can receive their money!