Posts Tagged ‘Estate Planning’
Case Study – Universal Life for Estate Preservation.
In event of a death of a wealthy patriarch, his estate has to be carefully administered. 80% of the time the time a passing of a patriarch is not anticipated and his/her assets not in the ideal state to facilitate either a transfer into an estate or division among beneficiaries.
Let us take a simple example of wealth of a deceased male HNWI, Mr Seah, of age 56 as such: $4.5 million worth net investments in 4 different businesses, 2 restaurants, a trading firm and a logistics company. 2 properties worth $3 million, one of which is residence of the family, and $0.5 million in cash equivalent. However, at the time of passing, Mr Seah is actively involved in the running of 3 of these 4 companies. He had taken out a personal guarantee on $3 million dollars on capital loans, trade and credit lines in total. The banks will require either a repayment of the loans or another guarantee on the original loans. The children, 2 sons are just 22 and 25 years old and fresh out of college. Though they are fully independent, neither of them are involved in the businesses as they started working in big corporations gaining experiences and exposure. As such, it is likely that the banks will not find the personal guarantees of them sufficient. Either that or sell their residence and the other property. If no alternative is found, the estate will have to sell of parts or full of the businesses for repayment of the loan. That will be a pity, as the restaurant and the logistics company is just about to take off after running for 3 and 5 years respectively.
Case Study – Universal Life Insurance for Estate Distribution
Universal Life Insurance can be used for dividing your estate equally as was done in this case. The same solutions apply for situations where other single major asset, such as property, forms the major part of your estate.
Mr Tan is approaching 65 and wishes to do some estate planning. His estate consisted of a business, valued at $8 million, a landed property worth $2.5 million and $2 million in cash. Mr Tan has a wife, two sons and a daughter. He is semi-retired from the business and handing the business over to the eldest son, who is the only one interested in running the business.
He is not worried about the wife, should he pass away, as she is close to the children and has ample savings. However, he is worried about how he can distribute the estate equally. The main worry is the business. Should he hand major ownership of the business to the eldest son, it will not be fair. Should he distribute the business equally, the two youngest children will be more interested to sell the business. This will dilute the ownership of the business and disrupt expansion plans the eldest son has. Secondly, it will be difficult to split the inheritance of the landed property.
Case Study – Universal Life Insurance for Estate Creation
The following is a real life case study.
Mdm Hayashi is 60 years old. She was the second wife of her deceased husband, late Mr Cheong, who was also her second husband. She married Mr Cheong when she was in her late forties and Mr Cheong in his early fifties. She has 2 adult children still in Japan from her first marriage and Mr Cheong has 2 adult children from his first marriage living and working in Singapore.
When Mr Cheong passed away 3 years ago, he left in his Will 55% of his assets to Mdm Hayashi and the rest to his 2 children. Mdm Hayashi’s current networth of $5 million is almost fully from this inheritance. Mr Cheong’s 2 children are both doing really well financially. However, it is Mdm Hayashi’s wish and the step children’s expectation that upon Mdm Hayashi’s passing, most of the wealth from Mr Cheong should be inherited by the step children instead of Mdm Hayashi’s Japanese biological children.
