The second story I wanted to tell was about the dual power of a living (what I call Family) trust and a will combined.
Peter* (not real name) was married to a lady from the Philippines Mary* and as Mary had 2 daughters from a previous marriage who Peter* had cared for since they were tiny-tots, was concerned about the continuance of financial support should something happen to him. He felt he was getting old.
Of course, he needed a will to allow comprehensive instructions to leave his assets to his wife and daughters. A Will defines to the courts and family members the wishes of how you want to distribute your assets when you die. He named Mary* as his executor – this is the person in charge of handling your financial affairs when you die. This person requests your death certificate, gets your list of assets (preferably within a schedule to include all assets), and your will to the court of probate to collect your assets to give them out, according to your wishes in your will.
Peter* also named Mary* as his primary beneficiary, having his 2 daughters as secondary (in case something happens to Mary*) with siblings as contingent beneficiaries (in case something happens to them all.)
However, due to the time frame that the courts take to read and approve your will, we realised that this would cause a financial problem in the meantime. Money cannot be given out until the courts release a Grant of Probate, which is a letter of approval. Even with life insurances in place, it takes time to receive the death certificate and this is needed to claim any assets.
We discussed and established a family trust – living, discretionary (you can change instructions), and off-shore (to HK.) We agreed that certain assets could sit in the trust now – this allowed the named beneficiaries to claim assets within the trust according to the priorities set out. Once this is created, it allows instant access and does not have any court interference. You already establish the rules, but these can be changed over time.
Peter* sadly died around 6 months after setting instructions in place. His death certificate took almost 6 months to be released by the coroner as his death was a surprise. On a death certificate states the cause of death and this could not be done as it had to be checked what he died from.
Mary* could not claim for any life insurances or present his will to the courts as she needed the death certificate. Even with the death certificate, the will could not be presented as the courts decided to question their marriage certificate – they got married in Samoa so the marriage certificate had to be sent to Beijing to be sent to Samoa then sent back to Beijing then back to HK – this took 6 months. There was also an issue with a credit card – your executor should tell the credit card company about your death to stop interest payments, but some companies attach a lean on your will – meaning that your will cannot give out anything without paying this first. Mary* had to complete a promissory note to pay them to release their lean on the will.
There were so many bits, that could not be anticipated, that caused a huge delay in settling Peter’s* assets from his will – it took 17 months to get the Grant of Probate.
Although Mary* had the constant bureaucratic communication with the probate court in HK, she had the trust proceeds to live off. We contacted the trustee immediately and money was sent from the trust to Mary* and the girls for maintenance. Mary* is a frugal person so did not want to take too much out. We were adding some of the proceeds of the will to the trust to ensure that a lifetime income could be achieved, thus relieving financial pressure on Mary*.
A will is a vital part of your estate planning to ensure that your assets go from your ownership to the right people BUT it takes time as it is handled by Government offices, and you are not the only one to have died so they have lots to deal with.
Financial efficiency planning is needed to ensure that any gaps in between the time you die and the time your loved ones can gain access to your assets is filled, somehow.
A living trust is a great way to provide immediate access to the right people at the right time.
As not everything can go into a trust – bank account, property (unless via company shares) MPF – these all have to be given via probate so you need a will to ensure what isn’t in the trust when you die, goes into the trust or given to the right people.
