Insurance – The Secret Tool To A Successful Estate Plan – Drawing upon his in-depth expertise and diverse experiences in this aspect of Financial Planning, the Go-To Consultant unveils the eight most well-kept secrets!
“We want to make sure that the wealth created during our lifetime will be passed down to our loved ones upon our demise.
Did you know that insurance is one of the most powerful tools that the wealthy and rich can utilise in their Estate Plan?”
– Stephen Chew, Principal Consultant of Summit Planners Group –
SECRET NO. 1 – IMMEDIATE EXPENSES
When we pass on, our assets are frozen until we receive the Grant of Probate. In the meantime, there will be a number of expenses to bear:
- Our loved ones require money to support their daily needs.
- Last expenses such as medical fees and funeral expenses have to be repaid.
- Outstanding mortgage loans and credit cards have to be paid.
- Legal fees and many others miscellaneous costs are also payable.
Insurance provides the liquidity to pay for such expenses while we await the Grant of Probate.
SECRET NO. 2 – REPAYMENT OF DEBTS
Debts must be repaid – it is either when we are alive or when we die. If you owe $10 million, the executors will have to pay $10 million from your estate to settle the debts, resulting in the reduction of estate of $10m.
Insurance provides the funds to pay off the debts and in turn preserving the value of the estate. In fact, the cost of insurance tends to be only a small fraction of the actual debt.
SECRET NO. 3 – WEALTH ENHANCEMENT AND EQUALISATION
“I only have one property but I have more than one person to take care of. I want to be fair to my loved ones, yet I am advised not to gift property to more than one beneficiary.
Perhaps, I should sell the property and divide the sales proceed. But, I would prefer not to sell as this is a family home. Do I have any other options?”
Insurance can be used to make sure you can distribute your wealth to your loved ones equally. In the above scenario, one beneficiary can inherit the house, while the rest can receive a similar amount in cash that is created through insurance.
SECRET NO. 4 – RICE FOR LOVED ONES
Insurance is often used to provide your loved ones with regular allowance on a monthly basis. This ensures that your loved ones have the financial means to support their living expenses – in short you are continuing to “Put Rice on the Table” for them.
Insurance can also be structured to provide you with a regular monthly allowance upon retirement and then to your loved ones when you are not around.
SECRET NO. 5 – FUND SALES AND PURCHASE OF SHARES
Are you a business owner? Then here’s a secret you must take note of!
Insurance can be used to fund the purchase of shares owned by the deceased shareholders. This eliminates the conflict among the surviving shareholders and the family of the deceased.
SECRET NO. 6 – CREDIT PROTECTION
Rich people often act as guarantor, either for their family members or for their business. As a guarantor, there is always a possibility that the bank may file a claim against the estate.
Insurance is often used to pay the bank to ensure that there is no delay in the settlement of the estate and to preserve the value of the estate. It thereby discharges the responsibility of the guarantor.
SECRET NO. 7 – BYPASS PROBATE PROCESS
Insurance with nomination and when it is held under a trust structure can bypass the probate process.
This will eliminate the necessity to disclose the beneficiaries in the Will. This is quite often used when you want to provide for beneficiaries other than your immediate family.
SECRET NO. 8 – CHARITABLE GIVING
Finally, the last and lesser-known secret of all – Charitable Giving!
With changing times and expectations, it is more common nowadays that a charity organisation is named as a beneficiary in the Will.
Instead of just giving $1 million cash to the charity, the donor can use the $1 million to purchase insurance so that the amount to be donated to the charity will be more than $1 million. Quite often, the sum donated is a multiple of the $1 million. With this, you have learnt the incredible secrets behind using Insurance in Estate Planning. To know more, speak to your consultant today.
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