Once upon a time, there lived a very loving couple named John and Amy. Having been married once when he was younger, John met Amy 15 years later and was smitten. Previously, Amy had been married and had two beautiful daughters, whom John soon adored.
In light of John’s age and concerns about his long-term health, he inquired about estate planning.
John 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. John was originally from Europe, so he also had a pension and bank account in Geneva. In Malaysia, Amy owned several properties and had a Hong Kong bank account.
The immediate resolution was to ensure that the beneficiaries were up-to-date on his investments, long-term savings, and pensions. As a result of this action, the proceeds will be paid out 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, and John was concerned because Amy and her daughters depended upon his income. Amy would receive his assets if he died, but how long would it take?
You write a will to get the Grant of Probate, which gives your executors permission to collect your assets and distribute them according to your instructions.
Without a will, “someone” will have to take control of your assets and distribute them, but the courts will appoint an administrator (under their supervision) to determine what you own. After that, the courts would determine who your potential beneficiaries would be – spouse, children, siblings, nieces, and nephews – because the courts follow descendants instead of ascendants. Accordingly, the courts would follow the rules of Intestacy.
As a result of the uncertainty of when his will would be read by the courts, 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 trust to be a primary beneficiary so they can still access the contents, but if there is a death of the main beneficiary, the next in line will be able to access the contents. In John’s case, he named himself as the main 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. The will looked after his bank account, company life insurance, and MPF.
So we completed the estate planning requirements as follows:-
- Nominated named beneficiaries for the trust and placed savings within the structure.
- Wrote a will for the easy distribution of his bank account, MPF and company life insurance
- Created a list of assets and liabilities – so that executors knew what to claim for and what to pay off
Amy was resistant to discussing and arranging the documents due to superstition beliefs but we managed to complete the process within a couple of months. Life carried on as normal for a couple of years.
John was scheduled for a simple hip investigation under general anesthetic as he was having difficulties walking properly and had a good medical health plan.
I received a phone call from a quite hysterical Amy saying that John had an unknown complication and died on the operating table. I was in shock as John seemed quite 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 money to worry about. John had catered for her and her daughters well. However, there was an issue with the will due to the way the marriage certificate was written – it came from a country not recognised in HK so had to go to the Beijing consulate then to the country that they got married in then back to Beijing and back to HK … this process took over 6 months. Then the courts had a problem with the executor as originally, Amy (who was nominated as the executor) was too upset to stand in so signed paperwork to appoint a lawyer – which was costing too much money. It took a further 4 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, the will took 17 months to issue the Grant of Probate. This 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. School fees continued to be paid, and the monthly rent and household bills were covered – Amy even bought a little plot of land back home to help her mum with a little farm.
Once the will proceeds, MPF and company life insurance were paid out, they were added to the trust so that Amy does not have to be concerned about who is looking after her money. It is set up on an auto-income process for her and she has taken a lump sum 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 for now.
The moral of the story is that Amy would have been financially stressed as well as grief-stricken had John not created an easy-to-follow structure. No one would have anticipated, even with a will, that the distribution would take 17 months so the benefit of the trust ensured that Amy and her girls could continue (financially) as normal as possible and perhaps recoup a little faster.
Have you considered how your assets get to your loved ones in the easiest manner?