A Tale of a Trust
Tale of a Trust. A loving couple named John and Amy lived. John met Amy 15 years later and fell in love. Previously, Amy had been married and had two daughters.
In light of John’s age and concerns about his long-term health, he inquired about estate planning.
He already had some retirement savings, life insurance, and investments with me. John also had some company life insurance and a pension with the company, as well as a Hong Kong bank account. He was originally from Europe, so he had a pension and bank account in Geneva. Amy owned several properties in Malaysia and had a Hong Kong bank account.
The immediate resolution was to ensure that the beneficiaries were up-to-date on their investments, long-term savings, and pensions. As a result of this action, the proceeds received upon the production of John’s death certificate – there will be no need for court proceedings.
Our next step was to analyze and transfer assets previously owned by a deceased person for distribution by probate. It is typical for someone’s bank account, MPF HK, company life insurance (you are part of a group scheme, so the proceeds must go through the estate), stock brokerage, and property to have to wait for the Grant of Probate. John’s company life insurance, MPF, and bank account were affected.
It can take weeks, months, or even years to issue a Grant of Probate, even with a will. John was concerned because Amy and her daughters depended upon his income. Amy would receive his assets if he died.
How long would it take?
You write a will to get the Grant of Probate. It allows your executors to collect your assets and distribute them according to your instructions.
You must take control of your assets and distribute them without a will. The courts will appoint an administrator to determine what you own. After that, the courts would decide who your potential beneficiaries would be spouses, children, siblings, nieces, nephews, and nieces. The courts follow descendants.
As a result of the uncertainty of when the courts would read his will, John devised a living trust as well. A trustee owns the assets legally but distributes them equitably to beneficiaries. It is possible for the person who sets up the documents to be a primary beneficiary so they can still access the contents. However, if the primary beneficiary dies, the next in line can access the contents. In John’s case, he named himself the primary beneficiary, followed by Amy. The contingents would be Amy’s daughters.
John placed most of his savings into the trust, nominated beneficiaries for his long-term savings, and wrote a will for anything else that could not go into the trust. They will look after his bank account, company life insurance, and MPF.
We completed the estate planning requirements as follows:-
- Nominated named beneficiaries for the trust and placed savings within the structure.
- Wrote a will to efficiently distribute his bank account, MPF, and company life insurance
- We created a list of assets and liabilities. The executors would then know what to claim for and what to pay off.
Amy was resistant to discussing and arranging the documents due to superstition beliefs, but we completed the process within a couple of months. Life carried on as typical for a couple of years.
He was scheduled for a simple hip investigation under general anesthetic as he had difficulty walking correctly and had an excellent medical health plan.
I received a phone call from a hysterical Amy, saying that John had an unknown complication and died on the operating table. I was in shock as John seemed relatively healthy and looked after himself and the family well, but the fickle finger of fate comes to town often and stuns us all.
Financially…
Amy did not have to worry about money. John had catered for her and her daughters well. However, the country where the marriage had taken place was not recognized by HK; there was an issue with the will. The will had to go to the Beijing consulate and then to the country they got married in, then back to Beijing and back to HK … this process took over six months.
Initially, Amy was the executor; however, she was too upset to stand in. This led the courts to a problem with the executor. Instead, she signed the paperwork to appoint a lawyer, costing too much money. It took a further four months to reappoint Amy as the executor. Then the credit card companies took a lean on the estate, so Amy had to sign documentation to promise to pay off John’s debts from the settlement of the estate.
All in all, it will take 17 months to issue the Grant of Probate. It caused a 3-month delay in settling the MPF and company life insurance.
Amy and her daughters were fortunate enough to receive the trust distribution. Amy even repurchased a little plot of land home to help her mum with a little farm. She received the will proceeds, MPF and company life insurance, etc.; these were added to the trust, so that is no longer any concern with who is looking after the money.
The trust is to create an auto-income process. Amy can take lump sums out for her eldest daughter to start university in Europe. Flexible instructions are in place for Amy to use the money as needed, but being a frugal lady, she is happy with the income.
The moral of the story…
Amy would have been financially stressed and grief-stricken if John had not created an easy-to-follow structure. No one would have anticipated, even with a will, that the distribution would take 17 months. Hence, the benefit of the trust ensured that Amy and her girls could continue (financially) as usual as possible and perhaps recoup a little faster.
Have you considered how your assets get to your loved ones in the most accessible manner?
