I've broken down this seemingly daunting task into 7 steps
Step 1: Sign a Will
Let’s face it: We all know that a Will is important. You need one to ensure that your chosen heirs will get the assets that you want to leave to them. In your Will, you name an Executor who will have the power and responsibility to pay your debts and distribute the remainder of your estate according to your wishes. If you die without a Will, your property will pass to your survivors based on your asset holding’s laws of intestacy. In most countries, that means that your spouse and your children will split your legacy. If you are single, your assets will go to blood relatives even if you would have preferred a friend to inherit them.
Yet less than 40% of adults globally have a will, according the majority of surveys.
You can also use an irrevocable living trust to pass property to your heirs after your death.
Unlike Wills, living trusts avoid probate, the process by which a court determines that a will is valid. In some countries probate is costly and time-consuming – the UK will charge your estate GBP20,000 if your estate is worth GBP2,000,000 or above! But even if you create a living trust, a Will should still be the cornerstone of your estate plan if you have minor children, because you also use it to name a guardian for them. If you die without a Will, a judge will decide with whom your children will live after you’re gone.
You should also safeguard the assets that you leave minor children by creating a trust for their benefit in your will. In it you name trustee/s who will follow your instructions for managing the assets that you leave to your kids. The trustee can be a relative, friend, or professional such as a banker or lawyer.
If you fail to establish a trust in your will for your minor children, a court will name a guardian to oversee the property they inherit – effectively nominate a trustee for you.
Step 2: Name beneficiaries
It is important to understand that not all of your assets will pass to your survivors through your Will, because some types of property do not go through probate. For instance, if you own a house jointly and your spouse has the right of survivorship (a type of ownership that is spelled out in your house deed), he or she will get your share of the home when you die. Most retirement accounts (pensions) with the exception of MPF (this has to go through probate) and life-insurance policies will pass to beneficiaries you designate in those documents. Once the death certificate has been issued, the institute will pay out.
If you cannot nominate beneficiaries; bank account, MPF, stock-broking account, artwork etc, you need to create a list of your assets to be collected on your demise with each Will.
You need a Will for each jurisdiction you hold assets in as the probate rules are all different in each so assets held in Hong Kong should be kept with your Hong Kong Will, assets in USA should be with USA Will, UK for UK, Thailand for Thailand etc.
When needed, your Executor will send each Will to each relevant jurisdiction for collection of assets.
Step 3: Dodge estate taxes
Some countries impose a Death Tax on your estate such as UK – you have an allowance of GBP325,000 (nil rate band) and anything over this value is taxed at 40% to your heirs. If you are married to a fellow Brit, your estate can pass to your spouse tax-free but the next in line (usually children) would then get a bill of 40% over the value of GBP650,000. The value is on a global basis so anything you own, anywhere is valued (by your Executors and reported to HMRC.) The USA also has a Death Tax but their allowances (for US citizen) is huge at US$5,430,000 in most states (some have margins i.e. they tax smaller allowances that carry smaller levies) then impose 45%.
With the right documents and instructions in place, some or all of the levies can be removed for when you pass away.
The wealthier you get, the higher the risk of taxes so always better to plan and prepare your loved ones. Your estate could be worth a lot less than you think if the tax-man gets involved.
Step 4: Leave a letter
Sometimes everything you want to tell your survivors does not belong in your will. If you want to describe what type of funeral arrangements you desire, for example, you can do so in a separate letter. You can also use the letter to list items of sentimental value that you want certain heirs to inherit. Give the letter to a trusted relative, friend, or your attorney.
This is not a legal document, but your family members and other loved ones are likely to respect your wishes and understand your requirements.
The Letter of Wishes can be read by the Executor and actioned immediately, rather than wait for the probate courts – these can take months and years.
Step 5: Draw up an enduring power of attorney (Hong Kong)
Estate planning is not only about taking care of your survivors. A complete estate plan should also insure that your wishes regarding your money and your health care prevail even if you become too sick to make your own decisions. Create and enduring power of attorney (EPA) so someone can manage your money if you are ever too sick to do so. In this document, you name a trusted relative or friend to take charge of your finances when you cannot. Unlike an ordinary power of attorney, a EPA remains in effect after you can no longer manage your own affairs. If you do not have a EPA and become incapacitated, a relative or friend will have to ask a judge to appoint a conservator or guardian to manage your assets and pay your bills, which can take months!
Many countries have different names for these documents such as USA referred to as Durable Power of Attorney, UK call it Lasting Power of Attorney, in Canada the POA has different titles depending on what power. You should inquire for your own country of residence.
Step 6: Create an advance health care directive
To maintain control over the type of medical care you receive when you are near death, you should sign a living will and an EPA for health care. With a living will, you state the type of medical procedures that you do or do not want. In an EPA for health care, you name a health care agent or proxy who makes sure that doctors and other medical professionals carry out your wishes if you are too sick to speak for yourself.
You cannot instruct that your loved ones “turn off the machine” in Hong Kong as 2 medical professionals have to confirm that your life is not worth saving so the living will allows your loved ones the peace of mind to know what you require, apart from euthanasia.
Other countries have different rules so again, better for check for your residence.
Step 7: Organize your digital and paper files
Your executor will remember you more fondly if you organize your estate-planning paperwork and financial records; and store them in a safe yet accessible place. Keep the original documents safe, whether it be at home, in a bank safety deposit box or family lawyer. Be aware that if your spouse or someone else is not the co-owner of your safe-deposit box, your executor may have to file a petition with the court for permission to open it.
Pull together any of the documents your executor will need, such as the deed to your burial plot; insurance policies; statements from your bank, brokerage house, and mutual-fund accounts; and pension and other employee-benefit information. Maintain an up-to-date list of your assets, the names and telephone numbers of your legal and financial advisers, and an inventory of the items in your safe-deposit box. Store such documents at home in a locked, waterproof, and fireproof metal box, file cabinet, or safe.
Do not forget about your digital assets, such as an online stock-trading account. Keep a separate list of your accounts and passwords and put it in a safe-deposit box or a vault, or give it to a person you trust.
Millions of dollars remain in financial institutes as no one knows they were taken out! To claim them a) your Executor/s need to know about them and b) they need details of specifics such as policy numbers, stock-accounts, registration number or any other reference number that can link your ownership.
And finally, review your estate plan at least every five years. Make sure all of your documents still reflect your desires, and that your beneficiaries and financial and health care proxies are still willing and able to serve. In addition, you should revisit your estate plan if tax laws change in the jurisdiction that you hold assets in or whenever there is a major change in your life, such as a birth, death, marriage, or divorce.
A marriage revokes a Will BUT divorce does not, unless specifically addressed.
You are making it easier, financially for your loved ones when you pass away; by writing detailed instructions, everyone involved would know what you own and how to distribute your assets when needed.
You gain peace of mind as this document will hopefully get very dusty in long-term storage but at least when needed, your estate is prepared and made easier to give to the next AND right people!
Happy to help you consider your requirements and explain the probate process in more detail and relating to your own estate.
Feel free to call me +852 9160 7855 or send me an email firstname.lastname@example.org.