Wealth management is a complex and extensive advisory service involving holistic approaches to accomplish long-term financial goals. One of its fundamental aspects is an extensive estate plan, among other things such as tax planning, financial investment advisory and philanthropic strategies
Estate planning is the component of wealth management in which a plan is developed to determine what happens to an individual’s wealth or assets after their death, ensuring the transfer is done seamlessly according to the desired arrangement.
Creating a comprehensive estate plan
A comprehensive estate plan involves accomplishing numerous legal documents. Depending on the individual, an estate plan can contain more or fewer documents but will generally compose of the following:
- Will – is a legal document that states who will receive an individual’s assets and property at their death. The assets and property specified in a will must go through probate via an executor before distribution.
If an individual passes without a will, they lose out on the opportunity to direct the distribution of their assets and designate an executor and guardians for minor children.
The fundamental steps involved in drafting a will are determining the executor, designating a guardian for minors, accounting and organising assets, naming the beneficiaries of each asset, signing in front of witnesses and storing it in a safe place. It is good practice to periodically update the will, especially in a significant life event.
- Trust – In comparison to a will, a living trust is a more complex legal document that goes into effect as soon as it is signed. In a trust, an appointed successor trustee will oversee the individual’s (i.e., trustor’s) assets when they pass or become incapacitated. Unlike a will, the distribution of assets does not require probate, effectively taking out the delay, cost and publicity of going to court. Moreover, the trustor can specify how and when the beneficiaries can receive the assets and properties.
Other advantages of trusts as opposed to wills are the (i) reduction of estate taxes, (ii) protection of assets from creditors and (iii) ability to set up trusts for specific purposes (e.g., charitable trusts, special needs trusts, etc.), to name a few.
An estate plan can include either a will or trust, or both.
- Living will – A living will, also known as medical power of attorney (“POA”) or a medical care directive, sets out an individual’s (i.e., principal’s) medical and end-of-life care instructions and identifies an appointed person (i.e., agent) who will make the health care decisions for the principal on their behalf should they become incapacitated.
- Durable financial power of attorney – A durable financial power of attorney authorises an agent to manage an individual’s financial affairs outside the living trust on their behalf should they be incapacitated.
The difference between a trustee and a POA agent, in general, is the scope of their control. A trustee has authority over the assets held only within a trustor’s trust following their death or incapacity. Meanwhile, depending on the type of POA, a POA agent only has the legal authority to make decisions on behalf of the principal on their finances and health care. An agent’s role ends with the death of the principal.
- Limited power of attorney – A limited power of attorney is produced for a limited purpose and within a limited period. For example, the agent is specifically authorised to sell a particular property or sign a legal document for a specific transaction.
An estate plan can include the following assets:
- Investment funds and stocks;
- Bank accounts;
- Real estate;
- Digital assets;
- Artwork, among other things.
Other considerations in estate planning
Effective estate planning minimises the tax implications imposed on the beneficiaries. However, numerous tax aspects must be considered as you plan your estate.
While several estate tax treaties exist between European Union (“EU”) Member States, the United States and other countries – estate taxes, as well as inheritance and gift taxes, are levied in varying approaches.
In Europe, the imposition of tax liability and decisions about succession is determined by several different factors, such as the residence, domicile or nationality of the deceased and/or the beneficiary, and/or the location of assets, among other factors. As such, double or multiple taxation of the same inheritance in different Member States may arise. Some Member States have adopted domestic rules and systems to yield relief from double taxation but have yet to produce complete solutions to avoid such problems. Moreover, some European countries (except Denmark, the United Kingdom and Ireland) agreed on EU rules to address international succession issues.
Below are examples of regulations to consider when creating an estate plan.
EU Succession Regulation (EU 650/2012)
The EU Succession Regulation facilitates cross-border successions within Member States (except for Denmark and Ireland). The regulation provides guidance on the following:
- which authority is to decide on succession;
- which law applies to the succession (whether that of the country they have last lived in or that of their nationality); and
- the recognition and enforcement of a court’s decision on successions in one EU country to other EU countries.
The EU Successions Regulation also provides for a European certificate of succession, which enables the estate’s heirs, executors and administrators to prove and exercise their rights in other Member States.
Trustees Act 1967
The Trustees Act 1967 provides the regulatory framework for the operation of trusts and trustees in Singapore.
For instance, the act stipulates the minimum standards a trustee must possess in carrying out any of their duties. Moreover, the act outlines the numerous powers of the trustee, including, but not limited to, the power to make investments, retain investments, sell all or any part of a property, raise money by sale, mortgage, or in any other manner, and so on.
The complex documents and procedures involved in estate planning should be accomplished with the guidance of experienced service providers. Professionals such as estate planning attorneys, trust specialists, tax compliance service providers and other private wealth specialists can offer legal advice, develop strategies that can be integrated into an individual’s portfolios and assist in setting up, documenting and fulfilling the estate plan.
Consequently, taking on the services of such professionals can minimise legal risks and ensure the sustainability of an individual’s estate and complete control over a client’s assets.
Our BGA Law private client team has been advising on the setup and other matters concerning private, commercial and charitable trusts and estate and succession planning. BGA Law provides a full range of legal services, specialising in the laws of the British Virgin Islands (“BVI”) and the Cayman Islands. Learn more about BGA Law here.
Bolder Group as your private wealth services provider
Whether establishing an estate plan or looking for a comprehensive wealth management service, working with an experienced service provider can pave the way to accomplishing your long-term goals.
Bolder Group provides bespoke private wealth services developed to “protect your wealth to preserve your legacy.” Our team works closely with our client’s tax and legal advisors, integrating a holistic approach to delivering their individual needs.
Contact the Bolder team now to start the process of protecting your wealth.