A SIMPLE GUIDE ON ESTATE PLANNING

There are many ways as to how one's wealth and assets be divided up on death.  Before listing out the various options, it is important to ascertain the overall intention and objective of the proposed arrangements as well as the business background, personal and family information of the client.  For instance, a married man giving all his wealth to his wife should consider whether his wife should also make a will in case she does not survive him and the possible claims from other dependants.

In appropriate case, it may be advisable for the client to consider making lifetime gifts in order to avoid dispute and complication.

When people consider estate planning, the first thing that comes to their mind is the making of a will.  It is, however, possible and very often advisable making a gift of property without a will and as mentioned above prior to death.

Will

There are numerous advantages for making a will.  The obvious one are the testator can appoint personal representative, trustees and testamentary guardian of his own choice.  The testator can also give powers to his personal representatives and trustees in addition to the powers made under the Will and Probate Ordinance.

The major advantage of making a will is that the testator can decide how his assets and properties are being distributed.  As such the provisions under the intestate rules (which is to distribute the assets to the deceased's next of kin in a particular manner) cannot apply.

Joint Tenancies

Joint tenancies are often used to transfer the ownership in real property to another without making a will.  This is so, as the surviving joint tenant will automatically take the property on the death of the other joint tenant.  However, it is possible for one of joint tenants to sever the joint tenancy during his life-time.

Insurance Polices

Where a person has taken out a life insurance policy, on his death, the insurer will pay the amount insured to the deceased's personal representatives.  It is possible to indicate in the policy who is the eventual beneficiary.  So that the money will be paid directly to the beneficiary on death without going through the estate of the deceased.

Discretionary Pension Schemes

Similar to insurance policies, some pension schemes allow the contributor to name the beneficiary to receive the benefits on death of the contributors.  However, such nomination is not necessary binding on the trustees of the pension fund.

Gifts

There is nothing to stop a person to give away his wealth, during his life-time.  The advantage is that the donee can enjoy the benefit of the gift immediately.  The disadvantage is that the donor will lose the benefit of the asset.  It is therefore important to consider whether or not the donor has any future need of that particular asset.

Donatio Mortis Causa

"Donatio Mortis Causa" is a life-time gift which is conditional on death.  The gift only becomes absolute on the death of the donor.  If the donor recovers from the contemplated cause of death, the gift will not take effect.

Albert Lam
September 2011