You may have heard that you need to make an "estate plan," but what does an estate plan cover and how do to make one? Here is a simple list of the most important estate planning issues to consider.
1.Make a Will
In a Will, you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent. There is a separate form for Hong Kong called the Appointment of Guardian which needs to be completed, signed by all parties and witnessed by 2 people.
2.Consider a Trust.
If you hold your property (assets) in a living trust, your survivors won't have to go through probate Court, a time-consuming and expensive process. The UK, for example, will charge GBP20,000 to read your Will if your estate is worth GBP2,000,000 or more.
3. Make health care directives.
Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration ("living will") and a power of attorney for health care, which gives someone you choose the power to make decisions if you can't. Different countries have different names for the types of powers and may combine them. For example, Hong Kong has an Enduring Power of Attorney whereas the UK has a Lasting Power of Attorney.
4. Make a financial power of attorney.
As mentioned above, some countries will separate Health directives from Financial ones so always best to check where these powers are likely to be needed.
5. Protect your children's property.
You should name an adult to manage any money and property your minor children may inherit from you. This can be the same person as the personal guardian you name in your Will. Again, a Trust should be considered the more assets that you own. If you leave your estate to your minor children, your Executor would have to set up a Trust in your absence anyway.
6. File beneficiary forms.
Naming a beneficiary for your life insurance and retirement plans makes the account automatically "payable on death" to your beneficiary and allows the funds to skip the probate process, after your Death Certificate is issued, which can save time and further expenses for distribution.
7. Consider life insurance.
If you have young children or own a house with a mortgage, or you may owe significant debts or estate tax when you die, life insurance may be a good idea to ensure that these are cleared.
8. Understand estate taxes.
Some countries such as Hong Kong do not charge death or transfer taxes but many do, even if you don’t reside in them. For example, UK charge 40% on any assets over GBP325,000 whereas the USA charge 45% on any assets over US$5,430,000. Others such as Canada and Australia impose transfer or capital gains taxes when your beneficiaries receive.
9. Cover funeral expenses.
Generally, funerals are done before Wills are read so if you prefer a certain type of service, you should state this in your Letter of Wishes (attached to your Will) for your Executor/s to handle and they can make a claim from your estate. Or you may wish to set some money aside specifically for this cost.
10. Make final arrangements.
Make your end-of-life wishes known regarding organ and body donation and disposition of your body; burial or cremation. If you are in Hong Kong when you die, you will be cremated due to the lack of space. If you want your body to be flown home, this can cost as much or more than a first-class fare so be mindful of how these expenses are to be paid.
11. Protect your business.
If you're the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a shareholders (buyout) agreement. You should also consider if this is your main/only source of income, how this will be replaced when you die.
12. Store your documents.
Your executor (the person you choose in your will to administer your property after you die) will need access to the following documents when you die.
Keeping your documents organized and listed will be a great help to your survivors. Millions of dollars are left in financial institutes as the owners have not told people nor left any information about what they have.
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