Year-End Estate Plan Review for HK Expats
The end of the year presents an excellent opportunity to look back at those significant life events in the past 12 months and assess their impact on your estate plan. This is also an ideal time to ensure your plan remains current and aligned with your primary goals.
When and why revisions might be needed
Here are some situations to consider when revisions might be necessary for your estate plan:
- Marriage, divorce, or remarriage
- Welcoming a new child, grandchild, or great-grandchild through birth or adoption
- Loss of a spouse or family member
- Dealing with the illness or disability of yourself, your spouse, or another family member
- Navigating through your child or grandchild reaching adulthood
- Experiencing significant changes in the value of your assets
- Buying or selling your primary residence or second home
- Reaching retirement age or the retirement of your spouse
- Receiving a substantial gift or inheritance
Remember, these are not exhaustive examples, but they should give you a good starting point for identifying when and why you might need to update your estate plan.
The essential steps you need to take before the end of the year for proper estate planning
Whether you’re a lifelong resident or an expat, there are several essential steps that you should take before the clock strikes midnight on December 31st.
- First and foremost, you should review and update your Will, ensuring that it accurately reflects your current wishes and assets. It’s also vital to ensure your beneficiaries are up-to-speed and know about your life insurance policies and retirement accounts.
- Consider establishing a trust to protect your assets from creditors and ensure they are distributed as intended.
- Finally, make sure you have a durable power of attorney and healthcare directive in place, allowing for someone you trust to make financial and medical decisions on your behalf should you become incapacitated.
These steps may seem daunting and even dramatic, but proper estate planning is necessary to provide peace of mind and security for you and your loved ones.
Life Insurance in Estate Planning
Regarding estate planning, life insurance plays a vital role in ensuring the financial security of our loved ones after we pass away. With numerous policy options available, choosing the most suitable one that caters to our unique needs can be overwhelming. Age, health, and financial objectives should all be considered when selecting a policy. It is also crucial to understand various types of life insurance, such as term life, whole life, and universal life, and their differences in cost and coverage. By dedicating time to choosing the right policy for your situation, you can have peace of mind knowing that you have safeguarded your family’s financial future.
Unsure how to start? Let us connect you to an insurance expert from our sister company, Lifestyle Insurance.
Steps to ensure that your beneficiaries are taken care of
First and foremost, it’s crucial to keep your estate plan up to date and review it regularly to ensure that it reflects any changes in your life circumstances. Consider other factors, other than death, such as disability, which may impact your ability to earn money and, thus, your family’s standard of living. While not strictly estate planning documents, critical illness and disability insurance protection should be considered if the good of your family is at stake.
Understanding taxes on inheritance and wealth transfer in Hong Kong
Hong Kong is one of the few developed countries worldwide that does not impose an inheritance tax on its citizens. However, it is essential to note that Hong Kong does have a policy for estate stamp duty, which is a tax on the transfer of deceased individuals’ estates.
Since 2006, the tax has been abolished for all cases except for estates that involve property located in Hong Kong. The regional government views this policy as a source of competitiveness by not deterring investment and entrepreneurial activity through excessive taxation. Nonetheless, for the heirs in these estates, the transfer will come at a cost.
The question of domicile
Even if you currently live and work in Hong Kong, from a UK perspective, you may still be considered domiciled in the UK. Once a Hong Kong person is deemed a UK-domiciled person, their worldwide assets will be caught by the net of UK inheritance tax at a rate of 40%, subject to any specific reliefs or exemptions.
It is also crucial to remember that even if you are not domiciled in the UK (or another country), Inheritance Taxes may apply differently in these jurisdictions. Planning to minimise the tax exposure ahead is the only and best way to secure your wealth for generations.
The experienced team at Soteria Trusts can help you review your current estate planning documents, advise if any changes are needed, and explain the latest developments and services available in the estate planning industry that can help you achieve your wealth transfer goals.