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WeDigest > Succession > Planning a Legacy for your Estate

Planning a Legacy for your Estate

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“Estate planning” has long been a buzzword in financial planning, which is the process of organising one’s assets and preparing a smooth transfer to loved ones, in the event of incapacitation or death. Nowadays, one may also come across the term “legacy planning” which can encompass even more abstract concepts, such as crafting a family narrative beyond physical assets or establishing philanthropic causes. While the former evokes death as a trigger point, the latter can be put in place as early as possible to create a legacy even when one is alive.

 

Wealth transition has been well-established for decades in Europe, but this demand is especially acute in Asia where we are seeing a massive wave of wealth transfer in the next two decades as first-generation wealth creators look to hand over the reins to the next. According to 2020 New Fortune Magazine’s 500 Richest List, ~60% of the wealthy are in the 50+ age bracket, which means that they will be undergoing some form of family succession in the next 10-20 years. Their success is often built on entrepreneurship, and thus they may lack the knowledge or familiarity of wealth management services, leading to the risk of inadequate family estate planning. 

Reasons for planning legacy

  • To express specific wishes, and be aware of applicable inheritance laws
  • Avoid probate – a legal process to review the assets of a deceased person, to determine inheritors and distribute to the rightful beneficiaries, as supervised by a probate judge
    • This could be a lengthy and expensive process that may extend to years in case of contest. Fees are payable out of estate, which would mean less money for the heirs
    • Liquidity is locked up at a time when it’s most needed, which could lead to destituteness of the deceased’s loved ones, which is certainly not an ideal scenario. For example, a wealthy individual who passes away without a will, i.e. died intestate, his assets will be frozen at financial institutions until clear legal instruction is provided on its distribution. Imagine his widow and young children, in addition to the grief, would have to struggle with lack of accessible funds for daily expenses or even working capital for his business o
    • Keeps family matters and financial information private – as probate is a public proceeding, records of assets, liabilities, beneficiaries a