Mark Hauser, Managing Partner at Hauser Private Equity and experienced financial expert, highlights three common financial mistakes and offers potential strategic resolutions.
Developing good financial habits generally doesn’t happen on its own. Building an effective money management toolkit often begins with education from parents or other adults. Substantial reading and research, and perhaps guidance from a qualified financial professional, can provide the foundation for a lifetime of good financial decisions.
Equally importantly, a good financial education should include guidance on what NOT to do. Toward this end, private equity principal Mark Hauser discusses three financial mistakes no one should allow themselves to make. He also offers recommendations to help resolve each issue and choose a different path in the future.
Neglecting to Sufficiently Fund a Retirement Plan
A well-structured (and well-funded) retirement plan can position an individual for a comfortable lifestyle in their golden years. Whether they want to travel, pursue a favourite hobby, or spend time with family and friends, they’ll ideally have sufficient financial resources on hand.
Private equity principal Mark Hauser emphasizes the importance of prioritizing retirement savings contributions. Some individuals authorize automatic payroll deposits into an employer’s 401(k) plan. Others maintain their own Individual Retirement Account (or IRA), making contributions on a predetermined schedule. Traditional and Roth IRAs each offer distinctive advantages.
Either strategy can help produce the desired results ─ with one important caveat. The individual must maintain their commitment to consistently grow their retirement account balance. Instead of spending the funds on a vacation, or splurging on something they want, the retirement account contribution should come first.
For perspective, financial experts recommend that workers regularly send 15 per cent of their income to a retirement account. If that’s not currently feasible, Mark Hauser advises that they begin with a budget-friendly number. Each year, the worker should increase it by one or two percentage points.
Two Benefits of Regular Retirement Savings
Consistent retirement savers reap two important financial benefits. First, these individuals will ideally begin saving for retirement shortly after they enter the workforce. As each person adds funds to their retirement account, compound interest will apply to an ever-larger balance.
In addition, a regularly funded retirement account offers some protection against market volatility. Retirement plan contributions typically go into a 401(k) or IRA account, with the proceeds invested in the stock market.
By investing early and consistently, individuals will be better positioned to handle short-term stock market downturns. Younger investors may also be able to aggressively invest for potentially higher yields.
Effects of Retirement Account Disruptions
When individuals delay establishing their retirement account, they’ll accumulate less money even with compound interest. Workers who practice a “start and stop” funding strategy will likewise see reduced financial benefits. Perhaps most importantly, private equity expert Mark Hauser emphasizes that prematurely removing money from a retirement account can result in stiff financial penalties.
For perspective, the Internal Revenue Service (or IRS) notes that if an individual withdraws IRA funds before age 59½, that money will be treated as part of their gross income. In addition, they’ll receive a 10 per cent tax penalty for the withdrawal.
Limited exceptions apply, such as using IRA investments to cover a medical insurance premium following a job loss. However, few scenarios will qualify for an early retirement account withdrawal exemption.
Increasing Retirement Plan Contributions is Key
Once these retirement funds are depleted, cash-strapped individuals will find it difficult to fully replenish their account balances. To minimize the damage, private equity principal Mark Hauser recommends that workers increase their retirement account contributions to the maximum allowable amount.
Raiding a Targeted Emergency Fund
An adequate emergency fund can help prevent an unexpected event from becoming a financial disaster. In case of an accident, malfunctioning appliance, or car repair (among other events), an emergency fund can help pay for often-costly expenses. The individual or family can minimize (or perhaps avoid) resorting to credit card debt or savings account liquidation.
Private equity expert Mark Hauser emphasizes that an emergency fund should only be used for financial emergencies. The fund shouldn’t be used for groceries, everyday essentials, or shopping splurges. Likewise, the emergency fund shouldn’t function as a targeted savings plan or vacation account. Essentially, an emergency fund functions only as a much-needed safety net.
An emergency fund’s parameters will depend on the individual’s (or family’s) income, expenses, and number of dependents. A frugal family’s emergency fund will differ from one based on a higher-end lifestyle. Either way, Mark Hauser recommends that the fund include three to six months’ customary living expenses. Factors to be considered include an individual’s job stability and upcoming large expenses.
The emergency savings should be held in an easily accessible, interest-bearing account. A savings or money market account will both work. Equally importantly, the individual can withdraw the cash without worrying about penalties or taxes due. Private equity principal Mark Hauser warns against holding emergency fund dollars in vehicles that can fluctuate in value. Examples include stocks and mutual funds.
Effects of Improper Emergency Fund Use
In an emergency, using the emergency fund dollars is entirely appropriate. However, multiple unrelated withdrawals could soon deplete the fund, possibly leaving little or no cash for an actual emergency. Then, the individual or family could conclude that credit card or loan funds would be their only recourse. Mark Hauser stresses that neither option is the right choice.
Strategies for Rebuilding the Emergency Fund
After an individual or family makes an emergency fund withdrawal, they should quickly begin to rebuild the account. Three strategies will help accomplish this goal.
- Define a Monthly Deposit Target: The individual or family should establish a monthly savings target. This manageable amount should be integrated into the monthly budget. Automatic deposits will remove the temptation to use the money for another purpose.
- Generate Additional Household Income: Bringing in more income, and targeting that money to the emergency fund, is a workable strategy. Adding a part-time job, or selling unnecessary possessions, are good tactics. Naturally, the individual or family should consider the tax implications of adding another income source.
- Allocate Lump Sums to the Emergency Fund: An employment bonus, tax refund, or inheritance would be a welcome boost to the emergency fund. Although it’s tempting to use the money for something fun, an extra fund deposit would put the individual or family in a better financial position.
Racking Up Excessive “Bad Debt” Obligations
The concept of debt may automatically conjure up visions of piled-up, unpaid bills, and high credit card balances. It’s true that “bad debt” can cause an individual to become financially overwhelmed. This unfortunate situation can often negatively impact other aspects of their lives.
In contrast, “good debt” can play a positive role in an individual’s current and future financial health. Private equity expert Mark Hauser highlights the difference between the three forms of debt.
“Good Debt” Defined
“Good debt” refers to debt with a low, fixed interest rate. In addition, the loan is designed to purchase an item that appreciates. To illustrate, a 3 per cent mortgage on a personal residence is “good debt.” The borrower can also deduct the mortgage interest from their taxes.
A low-interest loan for a growing small business would also qualify as “good debt.” Here, the loan interest is deductible from the business’ tax liability. However, the business owner cannot deduct the loan principal from their taxes.
“Bad Debt” Defined
“Bad debt” finances a purchase that won’t enhance an individual’s net worth or income potential. The purchased item may also depreciate over time. This debt typically carries a high-interest rate or a variable interest rate that could potentially increase. For perspective, this means the buyer will pay an often-exorbitant amount of money for an item that’s often worth less than its purchase price.
Credit card debt is “bad debt” personified. Many consumers prefer to pull out their credit cards rather than hand over cash for a purchase. Although perhaps less painful at the time, running up high-interest credit card debt can often set the stage for financial disaster.
To illustrate, some credit card annual percentage rates (or APRs) are over 20 per cent. With these cards often used to buy consumables, the purchaser has little to show for their financial indiscretion.
“Toxic Debt” Defined
However, Mark Hauser stresses that “toxic debt” is even worse. These payday loans and no-credit-check loans carry APRs that typically exceed 36 per cent. Over time, the borrower pays more than the item is worth. Loans requiring valuable collateral, such as an individual’s car, are another type of toxic debt.
Strategies for Eliminating “Bad Debt” or “Toxic Debt”
This “bad debt” will never magically disappear. However, private equity expert Mark Hauser recommends that borrowers adopt one of three strategies designed to get the debt under control. With this as a foundation, individuals can take steps to make more constructive financial decisions.
Adopt a Debt Reduction Plan
In some situations, reducing “bad debt” could be the best choice. Here, borrowers list their debts and their respective balances, interest rates, and minimum payments. Equipped with this information, individuals design a budget-friendly debt repayment plan. They often begin by focusing on credit cards, a common type of high-interest debt.
With the “snowball method,” the borrower applies extra funds to the smallest credit card balance. They make the minimum payments on other existing debts. When the smallest card is zeroed out, the borrower repeats the strategy with the next smallest balance. Alternatively, the borrower may first target the balances with the heftiest interest rates.
Implement a Debt Consolidation Plan
Borrowers with credit card debt (and other steep-interest revolving debt) may consider a debt consolidation loan. Here, the borrower obtains a new loan offering a lower interest rate and often a lower monthly payment. The borrower applies these funds to pay off their high-interest balances. Taking a similar tack, the borrower may consider refinancing term-based loans such as mortgages, student loans, and car loans.
Partner with a Credit Counselor
Some borrowers may feel so overwhelmed by debt they feel powerless to do anything. To move forward, private equity principal Mark Hauser suggests they consider a credit counselling agency.
A reputable, accredited credit counsellor will help their clients develop a plan for financial recovery. They should also offer financial education as part of their services. The National Foundation for Credit Counseling and the Financial Counseling Association of America have resources available.
Consumers Should Exercise Their Due Diligence
As with other financial services providers, due diligence is key to finding the right credit counsellor or agency for an individual’s needs. The federal Consumer Financial Protection Bureau offers tips on selecting this certified financial professional.
Finally, the agency explains how a credit counselling agency differs from a debt management (or debt relief) company. The two latter entities are for-profit businesses that often have a checkered consumer services track record. Private equity expert Mark Hauser strongly recommends that consumers thoroughly investigate these companies before deciding whether to partner with them.
This ensures that everything you own doesn't end up with unintended beneficiaries, secures your loved one's way of life, reduces taxes for the heirs, eliminates family disputes, and gives you peace of mind.
An ideal estate plan should have guardianship designations, a will, medical power of attorney, a durable power of attorney, beneficiary designations, and a personal intent letter detailing your wishes in case you become incapacitated or die. Here are five tips for successful estate planning.
1. Plan for state and federal estate taxes
When you pass on, your assets could be subjected to estate and inheritance taxes. However, you can minimise these taxes by ensuring simple estate planning and the total estate amount under the threshold. If your inheritances and estates are over the threshold, you can set up trusts to facilitate wealth transfer, easing the tax burden.
You can also minimise estate tax exposure by using an intentionally defective grantor trust to isolate specific trust assets to separate income and estate taxes treatment on the assets. Since tax laws are complex and could be difficult for you to keep up with, experienced tax lawyers can help create a solid ongoing tax strategy framework to help you maintain compliance or assist your loved ones after your demise.
2. Build a professional team
With the help of a professional team, including financial and tax advisors and estate planning lawyers, you can get a complete estate plan customised to your specific requirements. This is because each professional in the estate planning process plays a crucial role. The aim of assembling this team is to ensure the distribution of your assets to the relevant organisations and people has little to no confusion.
3. Expect family conflicts
Oftentimes, family conflicts are kept hidden when you're alive. They may erupt after your demise. Usually, the estate plan details result in or escalate family resentments or disputes. If you don't acknowledge family conflicts, you're setting up your estate planners for frustration. Additionally, having siblings with varying philosophies or personalities jointly inherit a business or property increases the risk of family conflicts and resentments. With the help of your estate planner, you can ensure cohesion among your estate beneficiaries.
4. Set guardianship for dependents
If you have dependents in your family, including a person with special needs or minors, you'll have to appoint a guardian to look after them in your absence. Talk to the potential guardian in advance to get their consent. They don't have to manage the finances you leave for your dependent's benefit. Additionally, appointing a couple as co-guardians can get tricky, especially when they divorce. Consult your estate planning attorney to prepare for this eventuality.
5. Document your will
Will documentation is a crucial estate planning step you shouldn't neglect. It shows how your assets should be distributed after your demise. The court won't accept a will that isn't documented. In such cases, the court will determine who will acquire your estate. So, draft your will with complete scrutiny and verify the document to prevent complications
Endnote
Preparing an estate plan is a crucial task, but it isn’t easy. Use these tips for successful estate planning.
What’s your story?
My journey to Squiggle and estate planning started initially in the banking industry. Back then, I was an adviser to a wide range of small businesses. When I listened to the stories and challenges of these businessmen and women, a pattern started to emerge. I couldn’t help but notice that many of their challenges and struggles were often at odds with the banking industry’s relentless focus on profit margins, metrics, and data.
So, when I was headhunted for a senior client-facing role in the legal industry, I didn’t hesitate to make a move, as I believed I could make more of an impact as I believed at the time that this was a more ‘caring’ industry.
However, several months into my new role, it started to slowly dawn on me just how archaic and traditional this sector was as well. I saw so many things that badly needed to be shaken up. Charging the client by the hour led to a transactional culture. There was a poor understanding of how technology could really help the customer and increase customer service levels. The ‘paperless’ office seemed to be a far-fetched idea in many cases, all leading to a culture of silo-thinking, poor security protocols, little or no transparency and poor knowledge sharing. This all translated into an extremely unwieldy and expensive service for the customer with bottlenecks everywhere.
All these challenges represented an opportunity for me and that was when I decided to found Squiggle – to leverage the best of technology, people, and good old-fashioned customer services to provide the customer with an entirely new experience.
What are currently the hottest topics being discussed in relation to Wills, Trusts & Estate Planning?
There are a number of topics that are quite ‘hot’ at the moment. A key concern of mine has always been the ability of a client to access their information at any time of the day, seven days a week. Of course, this has a lot to do with the introduction of the latest technology. But not everybody likes technology for a number of reasons. First, the introduction of any technology can be seen as a threat by many solicitors. Less interaction time with the client means less billable hours. Secondly, solicitors have often felt threatened by the technology themselves. Many solicitors simply outsource their technology to an IT firm without understanding the strategic role that technology can play. Lack of this vital layer usually results in unwieldy ‘legacy’ technology that is costly and complicated.
On the client-side, many of our older clients have generally been technophobes (although that is now changing gradually), and when they’re faced with having to use legacy technology that I spoke of just now, it’s not surprising that many clients prefer the more expensive solicitor interaction (to the solicitor’s glee).
It's my firm belief that technology doesn’t have to be complicated. Mobile devices and better connectivity have enhanced the customer experience massively, driven down costs, improved security protocols, and made it so much easier for family members to collaborate with each other. All these things are vital, especially when it comes down to something as sensitive as estate planning and inheritance matters where you want to keep confusion and miscommunication to an absolute minimum. Technology is absolutely vital.
Something else I hinted at earlier was the issue of bottlenecks. Estate planning can be complex with many moving parts, so it is vital that bottlenecks are kept to a minimum and we can take care of our clients’ documentation as seamlessly as possible.
But it’s not always easy. Let’s take a government department such as the Office of the Public Guardian or the Land Registry which are dealing with thousands of documents on a daily basis. It’s therefore not surprising that these departments can cause huge delays in our comprehensive estate planning process. In some ways, that goes back to the technology point I made earlier. You can’t have excellent customer service without the ability to communicate quickly and clearly. And when there’s a delay from a government department, it is absolutely vital that we communicate that promptly with our customers without them feeling that they’re being charged by their solicitor for writing a letter.
Regulation is also something that has been spoken about a lot. One of my frustrations in the past was witnessing how many ‘middlemen’ and ‘fly-by-nights’ there are in this industry with no self-regulation. And this gives our industry a very bad name. I decided not only to build a team and the technology to eradicate this but also to ‘self-police’ by keeping ourselves to the highest standards possible.
That’s why Squiggle are members of the Society of Trusts & Estate Practitioners, the Institute of Paralegals, and the Society of Will Writers. We’re also a member of the relatively new ‘BEST Foundation’, a governing body for Estate Planners, they have recently sent an open letter to the Office of the Public Guardian with the industries concerns around the Office of the Public Guardian – I fully support this.
In this regard, Squiggle aims to be at the forefront of education in estate planning and we have published our own Code of Conduct and Quality Guarantee on our website.
What are the main mistakes people make when it comes to wills and trusts?
Having dealt with thousands of clients now, the one thing that comes to mind is just how much people underestimate the intricacies of estate planning. It’s all very well saying ‘we’ll implement simple technology’ and outstanding customer service, but everybody’s story is different. Every family has its own unique background and circumstances and it’s important we get to the bottom of each person’s circumstances as quickly as possible without charging an arm and a leg.
So when somebody says to us: “our situation is really quite simple. Just leave everything to my spouse and then down to our children”, I’m tempted to respond with: “hold on, not so fast!” Life is full of unexpected twists and turns. A beneficiary might unexpectedly get divorced and/or remarried? Or they may go bankrupt. What happens then? We ALWAYS present different scenarios to each client, based on what they tell us as it’s important for them to know the potential consequences of each scenario. At the end of the day, that’s the difference between having a will written for you and getting proper advice from a qualified Squiggle Estate Planning consultant.
Squiggle is the company that’s decided to do things differently. We don’t charge by the hour, like most legal practitioners. We’re completely open and transparent. And we seek to educate. We’ve set the bar high for ourselves.
What are your thoughts on DIY wills & online wills?
Cheap DIY wills should not exist in my opinion. You’re talking about potentially leaving your estate to your loved ones and you want to rely on a cheap online will? Really? Why? I just don’t get it.
Of course, online will services do have their rightful place. We even offer it ourselves at www.squiggle.me. But it’s important to maintain that crucial balance, ensuring that there’s somebody who can handhold you through the process cost-effectively with other services such as a Lasting Power of Attorney and additional support and advice when needed.
Remember, you don’t know what you don’t know. I often compare our industry to owning a car. You know a car needs four wheels and an engine, but do you know why you need the pistons and what causes them to go up and down and so forth? Most people don’t need to, but at least they should understand the inner workings of estate planning. That is why you need a mechanic, or, in our case an Estate Planner.
Why should more people consider working with you?
Because we’ve turned the cart completely upside down. Squiggle is the company that’s decided to do things differently. We don’t charge by the hour, like most legal practitioners. We’re completely open and transparent. And we seek to educate. We’ve set the bar high for ourselves.
We ruthlessly audit all documents to make sure they are legally binding. We’ve come across so many wills from competitors where the company hasn’t even bothered pursuing the signing of a will. In our case, it’s so important for us that have a dedicated meeting to ensure this happens. And it’s written into our process.
Another point is security. So many legal practitioners tell their clients they must keep their documents securely, but then they seek to charge their clients for secure storage. That’s unfair and unethical in my view. We guarantee free lifetime secure storage - period.
We also help our clients register all their documents as part of the service. What’s the point of investing in these costly documents if they’re never registered? Again, it’s all part of our service and part of the relationships we are building. We just don’t believe in flooding the market with poorly drafted wills that are never finalised.
What do you do to help the local community as a business owner?
Our communities are what help us keep doing what we love. And to be honest, Squiggle wouldn’t be here without the support of our communities.
That is why there are two parts to our Strategic Partner Programme. Firstly, we have our charities. We know that it is so difficult for small local charities to raise the critical money they need to support their important causes. That is why we provide ‘free wills’ to our partner charities’ donors to help them give to charity in their will. “Legacy Giving” can be such a big income earner for charities and it allows them to make such a huge difference.
Secondly, we partner with local businesses. Employee retention and satisfaction are so important to most businesses, so providing a ‘free wills’ service to our partner companies is a unique way for them to differentiate themselves from their employees.
What have been some of your main achievements since starting Squiggle?
When I founded Squiggle five years ago, it was just me. I am now incredibly honoured to say I have a team that helps me look after a base of over 4,000 clients. It feels great to have had such an impact on thousands of lives and securing tens of millions in inheritance for generations to come. Also, being invited to be a Fellow of the Institute of Paralegals was a very humbling moment.
In addition, many solicitors, financial advisers and other industry professionals have decided not to open their own private client departments. Instead, have partnered with Squiggle, safe in the knowledge that we have the right technology, processes, standards and protocols in place. And I’m proud to say that we have a really great team.
What has the COVID-19 pandemic taught you?
The difficult days of COVID have shone a light on both our humanity and our mortality. We not only cheered loudly for the heroes who have helped keep us safe in the dark days of this global pandemic but we have all been forced to assess what is really important: our lives, our loved ones and our peace of mind.
That’s why we have developed systems, processes and a team around these very values – to help people take care of this very important aspect of their lives – before it’s too late.
After working with us, our clients tell us they feel like a weight has been lifted and that they can sleep peacefully at night thanks to Squiggle – and we love knowing we have helped take care of such an important part of their life.
For more information, go to https://www.squiggle.me/
Catherine Yuan is the Executive Director and Trust Officer of Tricor Trustco (Labuan) Ltd, a fully-fledged licensed trust company regulated by the Labuan Financial Services Authority (LFSA) based in Malaysia. She has over 15 years of corporate management experience, which includes strategic and leadership training for management development, as well as wealth succession planning. She has a deep understanding of Eastern and Western cultural differences, essential to creating a mixture of strategies catered to multinational corporations and global families’ needs. She is also a STEP (Society of Trust and Estate Practitioners) member. We sat down with Catherine to discuss wealth and estate planning, and the uses of a Labuan Private Foundation for such purposes.
What are the current trends reshaping the estate planning sector?
Based on my experience, the wealth management industry in the Asia Pacific has been continuing to grow rapidly, and I believe that as the population of high-net-worth individuals (HNWIs) increases, so will their assets. For example, HSBC estimated that Chinese households will have RMB 300tn (USD 46.3tn) of investable assets by 2025, an amount equivalent to the entire US bond market. Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them. I recommend HNWIs to seek sound advice on navigating international borders, devising the right wealth structures and continually refining them. This will ensure a solid legacy and that their wealth smoothly reaches their intended beneficiaries in an internationally compliant manner.
I personally believe that the lack of comprehensive financial and structural knowledge regarding wealth solutions and succession planning hinders them from finding the right arrangements to fit their families’ needs. Asian HNWIs are typically more familiar with the use of wills and trusts since these instruments have been around for centuries. Many reports suggest an increasing number of Asia families hold various kinds of assets, and these assets are moved across various countries. For example, according to CNBC, inquiries about setting up a family office in Singapore from China have doubled over the last 12 months. It is crucial for these families to devise a wealth structure that is flexible, secure, and compliant enough to safeguard their assets. I can help them achieve these goals by offering them the only Private Foundation structure available in all of Asia.
Today’s ageing generation is closing in on retirement and it will only be a matter of time before the younger generation takes over. I have had talks with clients, who are business owners, and they all share a similar concern: the successor of their businesses or companies. Not every child seeks to succeed through their parents. Often times they wish to forge their own path to success, their own place in the world. They may also lack the business tack or acumen to take over a leadership role in their parents’ businesses. This is where, historically, we usually see the downfall of corporations after losing their original founding members. I would advise these clients to start thinking about their succession plans ahead of time, to decide who is deserving to inherit their shareholdings in corporations, and most importantly, their responsibilities as well. I assist my clients in exploring various estate planning structures to achieve their family business succession goals.
Today, we can see that the younger, smarter generation is reshaping the wealth management industry. Digital assets are gradually finding their way into estate and inheritance planning as we see a greater investment interest in them. I have had clients that have cryptocurrencies, digital wallets, and social media accounts, all of which are relatively new forms of assets.
As the adoption of digitalisation continues to rise rapidly, we need better protection and planning of digital assets. I would advise my clients to make a thorough inventory of all online accounts and passwords so that their beneficiaries have access to them after their passing. Digital assets in estate planning can be complicated. The laws that govern digital assets vary from country to country, platform to platform, and governments around the world struggle to keep up with the ever-changing technological landscape.
I have come to notice that the HNWI’s families in Asia have an increasing need for family wealth planning to preserve and pass on their assets to future generations, including increasingly prevalent digital assets. I strongly believe that Asia’s wealth management community must adapt to digitalisation trends so that the products and services offered can cater to today’s wealth planning needs.
Why do clients need to consider using your help with estate planning?
I have over 10 years of experience in the wealth planning industry. Our team specialises in the handling of Labuan company registrations, financial license applications, and private foundation set-ups in Labuan. We provide a comprehensive suite of services for corporate estate planning – including corporate secretarial services, corporate governance, and management advisory – to global families, multinational companies, entrepreneurs, and investors from all parts of the world who seek to preserve their wealth through the Labuan Private Foundation.
Tricor Trustco (Labuan) Ltd has actively promoted the Labuan Private Foundation since the inception of the Labuan Foundations Act 2010. We are part of the Tricor Group and are backed by a strong global network with offices in 22 countries or territories scattered all throughout Asia and other parts of the world to provide bespoke services to all our clients. Tricor Group is the largest company secretarial firm in Malaysia. We serve major publicly listed companies in Hong Kong SAR, Singapore, and Malaysia, offering services such as share registrar and company secretary. Our major clients also include 40% of all existing Fortune Global 500 companies, and we serve them as their all-in-one corporate services provider.
I trust that with our many experts and professionals, covering many different corporate industries and from countries all over, Tricor has the resources, expertise, and manpower to meet any challenges our clients may face.
Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them.
How can a Labuan Private Foundation help with estate planning?
My experience in estate planning has taught me that there is no “one-size-fits-all” approach. An estate plan must be tailored to meet specific goals, adapt to family dynamics, and improvised to suit evolving family trees.
Popular estate planning tools such as wills, trusts, and foundations all have their similarities and their differences. It is my job to help clients identify their objectives, choose the right tools, and construct the proper structures to effectively fulfil their goals. The fundamental objective of succession planning is for you to ensure that your wealth is passed on to your loved ones so that they are equipped to face hardships in your absence.
The sole jurisdiction in Asia that offers private foundation wealth protection is in Labuan, Malaysia. The Labuan Private Foundation is the only one of its kind in Asia. The Labuan jurisdiction is a white-listed jurisdiction by Organization for Economic Cooperation and Development (OECD), supported by a strong and transparent regulatory framework covering all business solutions and wealth management needs.
The Labuan Private Foundation is a legal entity fully protected by the Labuan Foundations Act 2010. The Private Foundation has its own separate legal identity, which is similar to that of a company, which helps to limit the risks and exposure of a Foundation to the Founder. With its own legal identity, the Foundation can own a multi-currency bank account and even have a trading account to hold shares of public companies listed on stock exchanges and so on. It essentially acts as an ultimate holding structure.
It is also governed by a set of customised Charter and Articles, which allows each and every Foundation to be unique and flexible enough to suit each Founder’s purposes. The lifetime of a Foundation can also last in perpetuity, in either the Conventional or the Islamic form, which allows for families to further plan for their long-term objectives.
Personally, I have seen families struggle internally when the patriarch or matriarch of a family passes, leaving behind unclear directions or vague interpretations of their wealth distribution instructions. This causes significant distress, confusion, and discord amongst the surviving members of the family. I have helped clients overcome these issues by devising a profound Labuan Private Foundation structure that details the blueprint of how wealth should be managed upon the passing of a loved one. With the Labuan Private Foundation, I am able to give my clients the priceless gift of a peace of mind.
While these may seem complicated and confusing at first, I can advise on vehicles that suit my clients’ best interests and help drive their estate planning forward.
For more information, go to https://www.tricorglobal.com/locations/labuan
1031 Exchanges Must Be Like-Kind
Section 1031 of the Internal Revenue Code specifies that no gain or loss shall be recognised on the exchange of one piece of investment real estate for another, as long as they are of like kind. That doesn’t mean that you have to trade your apartment building for another – it just means that you have to trade it for another investment property.
You Need An Intermediary
In order to perform a 1031 exchange, you need to find a qualified intermediary. The qualified intermediary will hold the proceeds from the sale of the first property on your behalf, and use it to buy the property you’re swapping for. Because the intermediary handles your money, you can’t be said to have received any proceeds on the sale of your initial property.
There Are Some Important Deadlines
Sometimes, you can perform a 1031 exchange if you happen to find someone with a property you want who wants your property. In that case, the sale of your old property and the purchase of your new one can take place at the same time. But you’ll usually need some time after the sale of your initial property to find another property to invest in. In that case, you can do what’s called a delayed 1031 exchange, and buy your replacement property some weeks or months after you’ve sold your initial property. You can even do what’s called a reverse 1031 exchange, in which you buy the replacement property first and then sell your original property.
If you’re doing a delayed 1031 exchange – which is the most common type – you’ll have 45 days from the sale of your initial property to designate some properties you’re interested in buying. You should designate the replacement properties in writing to your intermediary. Once you’ve designed your three properties, you‘ll have 180 days to close on a replacement property.
You Can Do As Many 1031 Exchanges As You Want
As long as you do your 1031 exchanges correctly, you can do as many of them as you want. You can roll the capital gain on your initial property over into a new property, and then sell that property and roll those capital gains into a new property, over and over for as long as you want. Eventually, if you do sell a property outright, you’ll have to pay long-term capital gains taxes, but you can defer paying capital gains tax for years and have that much more capital for your property investments.
1031 Exchanges Can Help With Estate Planning
You can only use 1031 exchanges to defer capital gains, not to avoid them – with one exception. If you die without ever selling your replacement property, your heirs will inherit it at its current market value, and they won’t have to pay capital gains taxes on the appreciation in the value of the property.
You Can Only Exchange Investment Properties
Prior to 2004, when the tax code was changed, you could use 1031 exchanges to swap one holiday home for another, and even turn that home into a primary residence while still delaying the recognition of any capital gains on the property. You can’t do that anymore – now you can only buy a holiday home through a 1031 exchange if you’re renting it out for income. If you want to swap your current holiday home for another property using a 1031 exchange, you’re going to have to rent it out for six months or a year to convert it into a rental property.
Conversely, if you want to move into a property you bought in a 1031 exchange, you need to wait at least two years, during which you rent the dwelling at market rate for at least 14 days each year, and during which your personal use of the property can’t 10% of the number of days each year that the property is rented, or 14 days, whichever number is greater.
1031 exchanges can be a great way to save on capital gains taxes, especially if you want to pass the investment property down to your heirs. With a little advance planning, you can use 1031 exchanges to significantly increase your real estate holdings and personal wealth.
Even though you won’t be around to play a part in managing your estate, you do have a say in what happens with it once you’ve passed. Consider doing some of the following things to look after your money and loved ones.
Create A Will
A core part of estate planning involves drawing up a will. A will or testament is a formal, legally-binding document that outlines your wishes once you have died, such as who you want to manage your estate and how you wish your assets to be divided. A will can also outline instructions for any dependents or pets.
According to a 2021 Gallup poll, less than half of US adults don’t have a will, and the results have been relatively similar in poll results dating back to the 1990s. While it can be challenging to think about your passing and put instructions in place for how your family can manage it, it can be crucial to have your money and family looked after.
Failure to create a will can mean that your estate is divided in probate court, and someone other than who you wanted may end up with your assets. Not making a will may also mean that your family can wait months, or even years, for a resolution, and the details of your probated will can be a public document for anyone to read.
Name Your Beneficiaries
Telling certain friends and family members what they can expect from your estate upon your death doesn’t guarantee that your wishes will be followed. Unless you have legally named people and assets, there is a genuine risk of your wishes being contested.
To prevent this from happening and ensure your money goes to the right people, legally name beneficiaries for your assets, and don’t forget to update them as the years pass. If you have a retirement fund or life insurance, you may be able to name beneficiaries at the time of their creation.
In some states, such as Colorado, transferring properties to your loved ones upon your death can be made much easier with beneficiary deeds. These are legal documents that allow you to pass titles to property under a grantee-beneficiary at death, with no need for probate administration. These deeds must be recorded before your passing.
Keeping your preferred beneficiaries up-to-date is crucial, for any discrepancies between a will and deed will see the deed beneficiaries prioritised.
Set Up Trusts
It’s natural to worry about what your family will do with your money once you pass. You might have concerns about specific family members misspending it, or you have a large estate that will see someone receiving hundreds of thousands of dollars upon your death.
One of the most sensible options to look after your money is a trust. You can appoint a trustee who will distribute your wealth as you see fit, and the money within the trust isn’t subject to estate taxes. However, once your assets are in a trust, they no longer belong to you.
Setting up trusts can be a complicated undertaking, particularly when several assets are involved. Estate planning attorneys may be necessary for ensuring your money is taken care of how you would have preferred.
Gift Your Money
When your estate is subject to hefty taxes that could see your family members receiving less than you would have liked, consider gifting them assets and money while you’re still alive. In the US, you may give one person up to $15,000 per year without having to pay tax. However, if you plan to gift assets in this way, be mindful of value appreciation. Depending on when you provide the gift, they may need to pay tax on it if its value is adjusted upon your death and ends up being worth more than $15,000.
Switch To Roth Accounts
Your heirs may be required to pay a significant amount of tax on an IRA or 401(K) account, which means they may not receive as much as you had anticipated upon your passing. This is especially true on accounts with large balances since heirs must withdraw all money from the account within 10 years.
By converting your traditional retirement accounts to Roth accounts, your heirs may be able to make tax-free withdrawals. They will still need to pay income tax, but it will likely cost less than it would if you hadn’t converted the account.
Final Thoughts
As challenging as it can be to think about your death and the future of your assets when you pass, it can be necessary to ensure your money is managed in a way you would have wanted. Now might be the right time to put a will in place and start thinking about family members you’d like to take care of.
Over his 33-year career, he’s grown his practice from a specialty insurance firm in New Jersey into a holistic financial planning practice with over $1B under management and locations across the US. Greenberg and Rapp Financial Group is a one-stop-shop for all the financial needs of their clients - from investment management to Estate Planning, Insurance, and everything in between. Tom specialises in tax-advantaged solutions for high-net-worth individuals and his favourite part of the job is crafting unique strategies for closely-held business owners to maximise their business and legacy.
Is there a strategy or product that your clients are most excited about right now?
A lot of our clients are always looking to add alternative investments like Private Equity to their investment mix. Many offerings in these alternative asset classes are not registered products and they are also extremely tax-inefficient. These two considerations make these asset classes unsuitable for many investors. Private Placement Life Insurance (PPLI) and Private Placement Variable Annuities (PPVA) are the perfect solutions for an accredited investor/qualified purchaser in this situation. PPLI and PPVAs mix the income tax and estate tax advantages of an insurance product with the flexibility of a taxable brokerage account. PPLI and PPVAs also give investors access to Private Equity and Hedge Funds without the tax inefficiencies that usually come with those asset classes. Insurance is also a crucial piece of estate planning which is more important now than ever.
What are some estate planning mistakes you’ve seen high-net-worth individuals make?
The biggest mistake I have seen is that high-net-worth individuals do not start planning early enough. Many people believe estate planning is too complicated or only for the elderly. They are generally extremely focused on their business ventures in the present that they do not think about their legacy. By the time they realise the importance of planning their legacy, it is often too late to maximise what we can do. I believe that estate taxes, also known as death taxes, are almost entirely voluntary if you work with the right team and start early enough. Research recently done by the Williams Group found that 70% of family wealth is depleted by the end of the third generation. Proper planning can ensure your family does not fall into that 70%. Not having a plan is planning to fail and failure with respect to estate planning can be crushing for your loved ones.
Why is estate planning more important than ever for high-net-worth individuals in the current financial environment?
COVID has changed the world in many ways, investing and estate planning for wealthy individuals is no different. Government spending has increased, unemployment has risen, and US GDP has dropped significantly. Ask yourself who is likely to foot the bill for this? Over 40% of Americans already pay no federal income tax. Wealthy Americans pay the lion’s share of taxes and that burden is only increasing. The current lifetime gift tax exemption is over $11M. It is set to drop significantly in 2026 and regulators may act sooner. This alone would cost some families millions of dollars. Tax elimination strategies are constantly changing and the best time to act is now.
Each year, more and more investors are migrating away from large financial institutions and choosing to work with independent, holistic financial planners. Why are these types of firms more attractive to the modern investor?
Today, investors have more choices than ever when it comes to both investments and advisers. They also have access to information on commissions and fees. These investors value their relationship with their adviser. When doing business with an adviser who is associated with a major wirehouse, there is a third partner in the relationship and the client has no choice but to pay for the name brand of the wirehouse or bank. There is no guaranteed performance increase associated with the extra cost, so we have seen investors flocking to lower-cost independent advisers. The investors we talk to every day would rather save a significant percentage of their fees rather than pay for the name. Holistic financial planners also become the “go-to guy” for all the financial needs of their clients and do not manage investment assets in a vacuum.
Disclosure:
Alternative investments involve risks that may not be suitable for all investors. These risks include (but are not limited to), the possibility that the investment may not be liquid, principal return and/or interest rate risk. Higher fees associated with alternative investments may offset any potential gains. Investors should consider the tax consequences, costs and fees associated with these products before investing.
Private Placement Life Insurance (or Annuities) is an unregistered securities product and is not subject to the same regulatory requirements as registered products. As such, Private Placement Life Insurance should only be presented to accredited investors or qualified purchasers as described by the Securities Act of 1933. This material may be delivered only by an individual licensed to present PPLI. The information in this article is for educational purposes only and is not intended as a solicitation. A PPLI Account combines the protection and tax advantages of life insurance with the investment potential of a comprehensive selection of variable investment options. The insurance component provides death benefit coverage and the variable investment component provides you the flexibility to potentially increase the PPLI Account’s surrender and loan value.
Over more than three decades in private client work I have seen that as globalisation impacted the lives of many (if not most) clients, the work in tax changed. The frictionless trade borders coming in and then hardening as protectionism was enacted by some of the world’s major economic powers has seen families spread across borders and then get locked in by them. This has made cross-border transactions yet more difficult and convoluted.
A consequence of this movement of people is the increased movement of personal funds. Cross-border remittances are now worth more than foreign direct investments to lower middle-income countries with an estimated $689bn transferred across the globe in 2018, according to the World Bank.
The picture created is a complex web of currency passing over borderlines and weaving economies deeper into each other. This is before inheritance, which is usually the largest one-off transfer of assets made by a person, comes into question. And lifetime wealth transfers – for example through trusts – add another layer of complexity again.
This world in constant flux with borders opening and tightening and generations of families having migrated across borders leaves tax advisers in a difficult position. Unable to apply one strategy to a single estate planning case, we have to take account of multi-jurisdictional factors which mean that sensible measures in one place can cause problems in another.
The potential pitfalls became very apparent when I was advising on a trust structure for a family originally from the UK, where the main beneficiaries had emigrated to Canada. In structuring distributions to the beneficiaries, it transpired that sensible planning for Canadian tax purposes was inefficient for UK purposes and vice versa.
This is where having the experience to seek out the right knowledge is vital. Personally, through years working in the international sector of the market, I have gained knowledge of a variety of tax systems and have to spot where foreign tax issues arise even though I do not advise on them. But as tax lawyers, we know that knowledge is an entirely different thing to expertise and the ability to advise on the intricacies of tax models built over years.
The world we now live in, and the one after coronavirus has reshaped the globe, requires tax experts to have access to more than just the knowledge within the confines of our borders.
It is because of this that I believe that one of the most useful aspects of working internationally isn’t just spotting an issue, but developing the overseas networks of trusted talent to rely upon for advice and collaboration.
The traditional model of being part of an international firm or an international network, surprisingly, can be no real advantage when it comes to taking overseas advice. In fact, it can be a disadvantage or a restriction as there is an obligation to use the offices of your own firm or network and they may or may not be the best people for the job. In this case, working with a UK-based firm such as The Wilkes Partnership is liberation as I am free to involve whoever I think is right for the client and the advice required.
Knowing how to spot an issue and seek out the right expertise from within a jurisdiction is the skill when creating the right, sensible succession plan for clients. Some of those issues can arise:
- Where a UK client (without other overseas connections) has overseas assets.
- Where an overseas client (without other UK connections) has UK assets.
- Where an overseas client coming to the UK, or already here but only for a relatively short time, plans to remain for the longer term.
- Where an overseas client from certain countries (especially India and Pakistan) has been in the UK for a long time and has overseas assets or assets that can be transferred overseas.
- Where a UK client is emigrating or has already emigrated.
It’s not just certain scenarios to be aware of when working internationally. There are, of course, some foreign tax systems that are especially difficult to navigate. For example, the USA has its estate or gift tax (like its income tax) based on citizenship, not residence or domicile. And the taxes in some jurisdictions work on a very different basis to our inheritance tax and can be difficult to understand. For instance, the capital acquisitions tax in the Republic of Ireland falls into this category and given large numbers of UK residents have families in the Republic of Ireland, this is an area that tax specialists must be aware of.
In contrast, there are some are helpful jurisdictions like India and Pakistan, whose domestic tax laws give rise to tax planning opportunities in the UK.
The UK has a small number of estate tax treaties with other countries (separate from the normal double tax treaties) but there are only ten of these. Their main purpose is to prevent double taxation where the same assets could be subject to tax here and abroad. Where there is no treaty, the UK gives unilateral relief for foreign tax but the conditions which have to be satisfied mean that it does not always work perfectly.
Four of the treaties are “old” (India, Pakistan, France and Italy) and in theory, give rise to tax planning opportunities but in the light of the countries’ domestic tax systems, it is often only Indian and Pakistani clients who can avail themselves of these.
Finally, it is always essential when undertaking an international estate planning assignment to take account of other taxes as well as inheritance tax – e.g. capital gains tax - or their overseas equivalents.
As remittances increase, generations continue to migrate, and protectionism and globalisation fluctuate, cross-border tax will be a vital part of estate planning. This has created a climate where tax experts need to not only know their own jurisdiction but also have the knowledge to see barriers and call in expertise from other jurisdictions. The world we now live in, and the one after coronavirus has reshaped the globe, requires tax experts to have access to more than just the knowledge within the confines of our borders. In this climate, we need personal connections overseas and the ability to foresee barriers if we are to deliver private and business clients the best service possible.
For more information on The Wilkes Partnership, go to www.wilkes.co.uk
When should financial advisers, such as Wealth Managers, Bankers and Trust Officers, Tax Advisers or Attorneys call in a Personal Property Appraiser to work with their clients? Why do clients need appraisals when they want to have financial advice? To answer these questions, one only has to ask: “How can I help my clients to effectively plan their financial future, if they don’t know what all they own and how much it’s worth?”
As financial professionals know, clients have wide-ranging needs relating to personal property ownership, and the services that appraisers provide can establish a solid foundation and basis of value so that one can advise and help a client manage their assets.There are many situations when working with a qualified professional appraiser is a necessity, such as when deciding about scheduling for Insurance, Estate Planning, Wills and Trusts, Equitable Distribution of Property, Estate Taxes, Gift Tax, Charitable Contributions, Damage Claims and Litigation for any reason.
Unlike major art collectors, the majority of clients inherit or collect bits and pieces for years, but are often unaware of what they own, or the current value. Contacting an appraiser to do an inventory and detailed
appraisal is the first step. An appraisal report is a legal document and one as important as a will. Frequently having an appraisal done will be the first time that a client’s property will have been accurately identified, described and valued for any purpose, and has proven particularly important for the recovery of items in the case of theft. Often a client’s personal property will be of greater value than their residence, and by having an appraisal to review, advisers are able to help clients make informed decisions and plan ahead. Once an
adviser has the necessary value information about the client’s property, they can make sure that there are no surprises and help them avoid potential problems with heirs or make choices that might keep them from reaching their financial goals.
Although laws may differ according to country, it is particularly important for financial advisers to work with a professional, accredited appraiser who has no vested interest in the property to be appraised.
Whether it involves fine art, a particular collection or the accumulated valuables in their residences, an appraisal report, if properly prepared by a qualified professional appraiser, will provide a defensible value at
a particular given time. A proper appraisal report should be prepared by an independent, accredited professional appraiser, who belongs to one of the major recognized appraisal organizations and is compliant with USPAP (Uniform Standards of Professional Appraisal Practice) which are the quality control standards for all appraisals performed in the United States and its territories. The report should be presented in a cohesive,
logical, readable manner and should provide a client with evaluations and analyses of their tangible assets. In this respect, appraisals are particularly applicable and necessary for wealth managers, trust & estate practices, the insurance industry, and to collectors.
Although laws may differ according to country, it is particularly important for financial advisers to work with a professional, accredited appraiser who has no vested interest in the property to be appraised. This will ensure that the value conclusion is independent, accurate and will clarify questions of value under any circumstances. Not only do national taxation services, but also museums, institutions, businesses, insurance companies
and collectors all require appraisal reports that are objective, true and independent of auction houses, dealers and other collectors.
Recent hurricanes, fire disasters, earthquakes and tsunami around the world spotlight how financial advisers and insurance companies working together with appraisers/valuers can help their clients to be prepared for and begin to recover from such natural disasters.
Therefore it would be prudent for those working in a financial advisory capacity to always consider working with a qualified professional appraiser, to ensure that they have all the facts needed to advise their clients on how best to prepare for the future.
About Jean O'Brien:
Jean O’Brien, Principal of JA O’Brien Associates, is an Accredited Senior Member of the American Society of Appraisers with over 30 years of experience appraising a broad range of Fine Art, Decorative Arts and Antiques. Her background includes degrees in Studio Art and Art History, ASA professional appraisal training, and over two years at Christie’s International Auction House Education Division in London, where she earned two diplomas from the Royal Society of Art.
Contact details:
Jean A. OBrien, ASA
Principal, J.A. OBrien Associates, LLC
4817 West 69th Street
Prairie Village, Kansas 66208, USA
Telephone: 913 722 2460
913 787 1926
Finance Monthly speaks to Pierre-Noël Formigé, the Founder and CEO of Swiss company SEQUOIA, about the wealth management and estate planning solutions that his company provides, as well as his tips on maintaining and growing wealth for future generations.
Can you tell us about the core services that SEQUOIA offers?
SEQUOIA offers a holistic approach of wealth management thanks to a genuine "open architecture" which includes: wealth management, establishment of funds, management of funds - advice and follow-up, estate planning (trusts, foundations, companies), services of family offices, life insurance, financing (real estate, aircrafts, boats), reports and record keeping, risk management, compliance and regulatory assistance.
What would you say are the particular benefits for individuals of having professional assistance in relation to managing their wealth?
There are numerous benefits for individuals that decide to trust SEQUOIA with their wealth management. Our aim is not only to offer financial services, but also a financial experience and networking. Each solution and experience that we offer are specifically and uniquely tailored. SEQUOIA’s modularity and extensive experience allow for easy adaptation to our clients’ expectations.
What strategies do you and your team at SEQUOIA implement to ensure that your clients’ goals and objectives are achieved?
At SEQUOIA, clients are in the centre of our decision-making processes - they are our key priority. We have developed a well-informed overview of each of our clients’ financial situation, as well as a better understanding of clients’ goals and limitations.
Every portfolio construction starts with a discussion with the client or its representative, in order to fully understand their objectives and deliver a tailored-made investment proposal, allowing to approach and negotiate with partners. Our team can, at the request of the manager, take on a direct role in the relationship with customers, in accordance with their objectives and needs.
In your experience, are individuals fully aware of their assets and worth so that they can take advantage of tax planning? Which types of assets are usually missed?
SEQUOIA’s clients are fully aware of their assets, however, they might not be fully aware of their tax impact. We ensure that clients have better tax awareness, as it does have the potential to improve individuals’ returns. According to surveys, while many factors impact investors, the majority of high-net-worth investors say that it’s more important to minimize the impact of taxes when making investment decisions, thus we offer the right measures to help high-net-worth clients reduce the taxes owed on income and investment gains.
In order to do so, we put a lot of effort in selecting the right investment products. We try to take advantage of some losses, and implement additional strategies that can help our clients to manage, defer, and reduce taxes. However, sometimes, clients do not mention their real estate assets, which could have an effect on tax planning; we provide advisory services in relation to that too.
What solutions do you offer in respect of maintaining and growing wealth for future generations of the same family?
Transmitting heritage built from generation to generation and building a better future for entrepreneurs is the essence of SEQUOIA Group. Our team of professionals provides high-quality services in order to manage our clients’ wealth, taking future generations into account.
From portfolio management - with tailor-made investment solutions matching the clients’ needs, to liability management - which includes heritage planning, distribution agreements, trustee and real estate project management, SEQUOIA provides a cost-effective turnkey solution based on legally compliant practices to deal with the impact of new regulatory landscape and the different legal, technical and operational risks.
How challenging is it to work in an ever-changing regulatory environment?
It is obvious that the status quo cannot be maintained in this ever-changing regulatory environment, however, SEQUOIA’s approach regarding this is to constantly adapt and understand those changes to serve our clients better. Choices that have been made in the past may not be completely relevant in today’s environment or vice versa, but our job is to continuously develop strategies that are relevant to our clients.
Website:
Sandy Tao Chen serves as Executive Director – Head of Trusts of the First Advisory Group’s Hong Kong branch and its entities. First Advisory Group is a wealth planning group that was founded in Liechtenstein in 1954.
Sandy’s professional career has been split between New York and Hong Kong, having accumulated more than 20 years’ experience in the provision of wealth planning solutions, specializing in asset protection and succession planning. She is a full member of Society of Trust and Estate Practitioners, the NYS Certified Public Accountant (CPA) and is a member of AICPA. Below, Sandy speaks to Finance Monthly about First Advisory Group and trust and wealth planning trends in Hong Kong.
Tell us about First Advisory Group and its mission?
First Advisory Group is a leading independent financial services provider with offices in Geneva, Hong Kong, Panama, Singapore, Vaduz and Zurich and has more than 300 experienced employees working around the world to fulfil this commitment. With expertise backed by 62 years’ experience and a diversity of external specialists, the Group offers an independent, one-stop and results focused advisory service for its clients’ wealth management needs.
Furthermore, the Group has formally operated in Hong Kong as a jurisdiction for a number of years, establishing a physical presence in 2010. First Advisory is present and active in all-important financial and business centers worldwide. With its head office in Vaduz, Liechtenstein and further offices in Zurich and Geneva, Switzerland, the Group offers unique locational advantages to its clients, i.e. banking and professional secrecy, highly flexible company law, high legal certainty, high political and economic stability and continuity, highly professional approach to financial services and central location in the heart of Europe.
First Advisory Group offers further attractive locations to its clients in Asia, namely Hong Kong and Singapore, as well as in Central America.
How can trusts be set up and structured in Hong Kong?
- English common law concept;
- One party (Settlor) has a fiduciary arrangement with another party (trustee);
- Settlor transfers legal title of assets to the trustee to hold “in trust”;
- Trustee Holds in trust for the benefit of a third party (beneficiary);
- Protector may be appointed to safeguard interest of beneficiaries.
How can trusts provide tax efficient solutions for clients?
- Minimization of income, estate and inheritance tax;
- Pre-immigration tax planning or planning for returned citizens.
What other wealth planning structures are available in Hong Kong?
At First Advisory, we offer clients diverse and innovative wealth planning services through a single platform. These include international asset structuring by using trusts, foundation and/or corporate solutions. The Group is positioned to deliver a dynamic and sophisticated service, precisely tailored to client needs.
Can trusts be structured in such a way that they can be open to abuse? Which preventative measures can be taken?
Although under the modern trust laws, settlors are given certain powers (i.e. investment power) on the trust, to executive certain investment decisions. The Group’s compliance has taken precautious measures to make sure that we, as a trustee, have the full discretionary power on the trust fund distributions. The investment powers given to the settlors/beneficiaries are only at the limited power of attorney basis. If there is a private company held under the trust structure, one of our Group subsidiaries must act as the director and shareholder of the company. Our compliance department has implemented a strict and powerful system to monitor our clients on an ongoing basis to make sure they are not involved in any legal transactions i.e. money-laundering, drug-tricking, etc.
What makes First Advisory’ services unique when compared to your competitors in Hong Kong?
First Advisory Group offers an independent, one-stop advisory service for our clients’ wealth management needs.
The wealth planning solutions that our Hong Kong office offers are flexible and enduring, aiming at smooth transitions of wealth from generation-to-generation. As all the services derive from one single platform, the Group’s offices can guarantee a seamless and effective solution for our clients. We are one of the very few independent trust companies in Hong Kong that can provide both trust and foundation wealth solutions to high-net-worth clients.
Contact details:
Telephone: +852 2537 9478
Facsimile: +852 2537 9476
Email: sandy.chen@first.li
Howard Ebo is the Managing Partner of Commonwealth of Atlanta – a company that was formed to address the needs of individuals, executives and small to midsize companies (with revenues between 300K and 15M) that were underserved by larger financial institutions. Here Howard tells us more about the company, the services that it offers and the most common challenges that it is faced with.
Please tell me a little about the typical insurance matters Commonwealth of Atlanta deals with?
At Commonwealth of Atlanta we specialize in all types of risk management through insurance. Dependant on a client’s needs, we may recommend term life, universal life, variable universal life, whole life and/or disability income insurances for protection. We take a 21st century approach to addressing client and business needs by examining their entire financial picture and then helping them towards their unique goals. We provide solutions utilizing our strategic partners in advance planning, insurance concepts, and product partners to help solve for client’s concerns resulting in peace of mind. We specialize in four core areas:
- Wealth Accumulation
- Risk Management
- Tax Reduction Strategies
- Retirement and Estate Planning
In fact, we were recently featured in the Wall Street Journal, Atlanta Wealth Guide, which highlighted our 21st Century service oriented approach to servicing clients.
What would you say are the specific challenges of assisting clients with insurance?
Our 21st century approach to address business owner’s needs is remarkable. We strategize with our internal experts to provide advance planning concepts which helps our clients view insurance as protection as well as an asset to their long term plans.
What strategies do you implement to minimize financial burdens in regards to insurance packages?
Our 21st century approach allows for flexibility and creativity when coming up with recommendations for clients. Our access to premiere advance planning experts allows us to bring our best collective thoughts and strategies to consider.
What are the particular challenges that insurers in the US have been facing over the past year in relation to changes in what customers expect in terms of products and services?
Consumers have been faced with a need to know more as they take on more financial responsibilities; some of which may have been covered or shared with an employer in the past. At Commonwealth of Atlanta we believe in educating our clients to help them make informed decisions for their families and businesses. Whatever the situation is, we help educate and close gaps by providing personalized service.
How are you currently lobbying or working towards the development of new insurance regulations or permissible strategies in the state of Atlanta, or nationally?
Many of our agents at Commonwealth of Atlanta are active members in national financial associations to stay abreast and adapt to changes in regulations. All of our agents complete continuing education in the financial industry, which enables them to bring the most current thinking and best strategies to serve our clients.
Can you tell us about your involvement in the community and its impact?
At Commonwealth Atlanta we support and encourage individual and group activities in support of our community. Our agents work on passion projects such as Atlanta Community Food Bank, Open Hand and many more, volunteering their time and talents.
Contact details:
Address: 5909 Peachtree Dunwoody Road, Building D, Suite 990, Atlanta, GA 30328
Phone: (+1) 678-342-3100
Website: cwbfs.com
