Singapore with its 224,000 millionaires was ranked among the top five Asia Pacific countries in terms of the number of High Networth Individuals (HNIs), according to a research done by Asia Pacific 2016 Wealth Report, by New World Wealth. The country’s super-rich population is exploding, thanks to the investments in the real estate sector paying off.
But wealth managers are worried as affluent Singaporeans are least prepared for minimising the impact on their estates, and pass on their wealth and businesses to their family or legal heirs in an efficient and flexible way. According to the RBC Wealth Management’s new Asia Pacific Wealth Transfer report, 4 in 5 ultra-rich Singaporeans don’t have a full wealth transfer plan.
This has raised concerns that the next generation might not be able to manage their inheritances well.
The importance of early wealth transfer planning is paramount for HNIs. By creating proper wealth transfer plans, HNIs can ensure long-term financial stability for their heirs. But sometimes, this may not be as simple as the creation of a will due to the nature of their investments or family relationship structures. This might also happen because many individuals may not have access to verified information and understanding to formulate a fully-functional wealth transfer plan.
Needless to say, when uncertainty sets in, the wealth transfer plan is pushed to the brink. Many times, people don’t want to confront the reality of their eventual end and avoid writing a will. But the way forward is clear:
Plan now to protect your assets, maximise your holdings and harmonise your family succession for the benefit of your heirs and for uninterrupted continuation of your legacy.
However, before exploring how to create a plan that will serve your end goals efficiently, let’s go over the roadblocks which are present as of today.
Most HNIs and UHNIs hold illiquid assets and are shareholders in publicly traded companies or privately owned organisations globally. They may also have a significant holding in cash. Most of the wealth is held in the form of shares in their own companies and this might bring them on crossroads – should they cash out of the companies they have painstakingly built, hold on for longer or pass on the equity to their heirs. Of course, the choice depends on the choice of the heirs as well. If the natural heir doesn’t have the inclination to pursue the family business, it’s easier for the UHNI to make a choice of cashing out. Transferring family businesses is never an easy choice when multiple siblings or generations are involved in the business.
Real estate is the most popular asset class for UHNI individuals and most of them have asset holdings in Singapore and abroad. Transferring property in Singapore is a cumbersome task. Transferring international properties may be even more cumbersome where both foreign and local laws impact the investments. Investors may want to transfer their property to their spouse, offspring, members of the family or friends during their lifetime.
The Way Forward
In Singapore, there are primarily two ways in which an individual can transfer the ownership of their wealth or property :
An Inter Vivos Gift
By transferring ownership of wealth during their lifetime to another person. For example, as a wedding gift to the spouse, in philanthropic service, as a safety and security measure for their children’s future. Although, the situation for real estate under the Housing and Development Board (HBD) is a little cumbersome. These properties, unlike private properties, can only be transferred to immediate family members or individuals who meet the specified requirements.
A will is created by giving a written statement or a testament stating what is to be done with their testator’s assets after their demise and how it is to be distributed. It is the most common plan for the transfer of property after an individual’s inevitable death. In case of properties outside of Singapore, it is advised to involve international lawyers from those places as a precautionary measure even though there are no particular difficulties that one may face as long as all the legal formalities are fulfilled.
Bottom Line : Get Started Today
Wealth transfer planning is a sensitive discussion but an important one. As a UHNI/ HNI, you should take the initiative to consult a capable succession planning firm who can help you in identifying the value of all your assets globally and then planning out the succession. It may involve cashing out of companies you own, selling global and local real estate. Most wealth transfer firms advocate the importance of cashing out of illiquid assets and holding on to cash, Of course, in such situations, the local and international laws and tax planning become extremely vital.
There are internal and external challenges in wealth planning but, through efficient, timely planning, UHNIs can leave a lasting legacy.
In the coming weeks, we will be diving deeper into how with the help of technology, and abiding by the necessary rules and regulations, it is possible to create and execute a fully-functional wealth transfer plan.
We would definitely like to learn about your thoughts on the same. Let us know your queries or suggestions, in the comments section below or write to us at email@example.com. If you would like to explore how you can grow your wealth with based on specific financial goals, sign up at www.kristal.ai, and we would be happy to help you.
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