The Changing Needs of HNW Clients

K Pun [email protected]

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Life Stages

Age 45-60 Age > 60

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Life Cycle

Death/ Disability Birth

Succession Planning Inheritance

Estate & Tax Planning Insurance Financing

Gift

Job / Marriage Retirement Financial Planning

Business Start-up Investments Capital / Pension Purchase / Sale Real Estate Revenue / Wealth Fluctuation

Retirement Planning Education Planning Investment Career Development Children / Education

Separation / Divorce Change of Residence

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Life Events

 Marriage / Divorce  Birth / Death  Changing Career / Entrepreneur  Illnesses / Handicap  Losses / Bankruptcy  Overseas Education / Migration

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Changing

...

Simple, Domestic Sophisticated, Cosmopolitan

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8  Insure against the uncertainties  Save for future goals  Invest the idle money  Plan the taxes  Pass to the children

Needs

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More Needs ….

 Insure against the uncertainties with max benefit and min payment  Save for imminent and future goals hedging against inflation  Invest the idle money locally and internationally on diversification  Plan the taxes worldwide legally  Pass to the children , born legitimately or not, or even to other loved ones

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Need For Planners

 Knowledgeable  Qualified  Professional  Initiative  Trusted

Advisers

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Assets

Corporate Asset: 1. Net Asset Value 2. Intangibles a) Goodwill b) Patents / Rights Personal Asset: 1. Movables 2. Immovables 3. Intangibles

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Personal Assets

Your country Overseas Movable Immovable Cash/Deposit/Shares/Bonds/Unit Trusts/Provident Fund/Life Insurance Policies/Net Asset Value inside Local Private Companies/ Collectibles / Car / Clubs Residential Properties / Commercial Properties Shop House/ Office / Industrial Properties – Cash/Deposit/Shares/Bonds/Unit Trusts/Life Insurance Policies/Net Asset Value inside Overseas Private Company/ Collectibles / Car / Clubs Residential Properties / Commercial Properties – Shop House/ Office / Industrial Properties

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Four Step Planning



Identify and plan for significant events with profound effect on life



Analyse financial situation in achieving goals / objectives



Develop / execute customised solutions



Review financial plan to ensure relevance and take account of changes

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Asset Ownership

Own Assets And Control Movement?

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Transfer Assets To Loved Ones During Life?

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Assets subject to creditor claims against the recipient, including divorce claims

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Use Nominees To Hold Assets?

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The use of nominees subject to

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Their integrity The legality/validity of the structure in case of challenges



The estate claim in case of intestate death

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Asset Ownership Planning

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Transfer Assets To Loved Ones?

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Do not give assets Give access to the benefits through a trust structure

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Use Nominees To Hold Assets?

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Use corporate nominees with proper documents of calling the assets back

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Ask the Nominee to make a simple Declaration of Trust

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Effective asset protection requires advance planning

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Investment



Self directed

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Sound knowledge on economics

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Clear understanding of risks and returns

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Close monitor of positions

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Professionally managed

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Good knowledge on economics

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Clear objective of risks versus returns

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Close monitor of the performance

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Review periodically with the professional

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Set objectives

Investment Planning



Set duration of investment

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Get the suitable service provider

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Practice asset / class allocation

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Traditional / Derivative / Alternative

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Monitor positions Determine the loss strategy

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Local Tax

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Income Tax

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Capital Gain Tax

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Gift Tax

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Estate Duty

Tax Payment Overseas Tax

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Income Tax

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Capital Gain Tax

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Transfer Tax

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Inheritance Tax

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Tax Planning

Use Tax Structures that can stand up in court in case of tax reviews

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Decide the way of transferring assets – Gift? Sales?

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Caution the Crawl-back period in case of Gift, e.g. 5 years in Singapore

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Caution the Stamp Duty or Capital Gain Tax in case of Sale

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Review the Tax Structures periodically in view of changes in tax law and family situations e.g. migration to high tax countries

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Succession

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Families with

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Wastrel squandering money Incapable / weak children

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Incapacitated / mentally challenged children

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Discernible members fighting for power

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Disinterested members ignoring family business

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Legitimate and illegitimate children First and other wives

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Succession Planning

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Inter Vivo / during life distribution not recommended unless the recipients are discreet and ready to accept responsibilities

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Post life distribution subject to cumbersome Probate procedures and Estate Duty



Will ? Will Substitute? PICs ? Trusts? Charities ? Family Office?

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Personal Investment Company

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Jurisdiction - British Virgin Islands (BVI) / Cayman Islands /Jersey Islands / Bahamas Islands / Labuan / Singapore / Hong Kong

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Types - Standalone / Underneath a trust



Benefits – Confidentiality / Continuity / Tax efficiency / Asset consolidation

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Weakness – Asset claw-back (personal shareholding) / Taxable ( depend on domicile)

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PIC - Structure

Business contract PIC Movable Assets Immovable Assets Universal Life Policy

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Trust



A Trust established by the Settlor, in which he severs part or all his powers of his assets to the Trustee who represents the interest of the Beneficiaries named under the Trust via Letter Of Wishes

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The Trust is governed by the laws of the origin

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Common Law proposition – 3 Certainties

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Certainty of intention

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Certainty of subject

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Certainty of object

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Trust



The Trustee must act for the overall benefit of the beneficiaries, regardless of the beneficiaries’ personal, social or political views

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Trustee owes a fiduciary duty to the beneficiaries should negligence and malice occurred in its management of the trust assets

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Inter Vivo Trust

Self-directed Discretionary Irrevocable 1 3 Irrevocable 2 4

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Settlor Movable Assets Trustee Personal Trust PIC Immovable Assets Beneficiary

Settlor Director

Trustee

Business Trust

PIC Com

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Subsi diary Subsi diary

Com Com

Beneficiary Property

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Settlor Family/Bank /Professional Advisor

Trustee

Charitable Trust Beneficiary or charitable bodies Movable Assets Immovable Assets

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Family Office

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Systematically manage:

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How the family members enter the business entities and work harmoniously to promote family culture and preserve values

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How to enhance the accumulated family wealth

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How to grow the business and attract more talents

Family Advisers Family Member Management Family Office Wealth Management Business Management

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Family rules

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Education

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Family activities

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Charities

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Asset allocation

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Investment direction and management

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Collateral for loans

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Management training/succession planning

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Staff options

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