When you hear “inheritance”, you probably think about the money someone receives when their loved one passes on. But inheriting wealth involves so much more, from housing loans to substantial monetary gifts that parents give their children during their lifetime. In fact, there are many ways to transfer your wealth – and you can get started right now.
As we age, issues around the inheritance of wealth can divide loved ones. People usually pass on assets like properties, land, stocks, or cash to their children. Along the way, family relationships can suffer, and trust can erode.
The good news? You can transfer your wealth and keep your family relationships intact. To preserve both your family harmony and wealth for the next generation, you can use three essential tools: purchasing life insurance, making a will, and setting up a trust.
In this article, we’ll go over the three tools you can use to transfer your wealth and set your children up for success.
To ensure that they have enough savings when they reach their golden years and keep their loved ones free from worry, many people manage their inheritance and retirement savings separately. Purchasing life insurance can help you achieve this goal.
The premiums you’ll pay in the early years are significantly outweighed by the financial benefits of insurance. The right plan will allow you to protect your children effectively well into your twilight years and beyond.
A will is a document that outlines how someone’s assets are to be distributed after his or her death. Having a will can help you control what happens to your property at the end of your life, distributing your assets as you see fit.
However, it may take around 13 months for funds from a will to transfer to your chosen recipients. What’s more, a variety of factors can delay the process even further – from lost or damaged properties to objections between the beneficiaries.
A trust is a legal arrangement in which you give cash, property or investments to someone else so they can look after them for the benefit of a third person. When you set up a trust, you decide the rules about how it’s managed. For example, you could say that your children will only get access to their trust when they turn 25. It’s a way of keeping control and protecting assets for the beneficiary. However, trust management fees are often very expensive.
After analyzing the above three essential tools, it’s clear that purchasing life insurance is the best way to transfer wealth – combining the benefits of the other two options without the downsides.
In addition to providing comprehensive financial protection for your family in the event of your death, you can use life insurance to flexibly change policy beneficiaries, enjoy potential wealth growth and provide liquidity in the meantime.
When the insured passes away, the life insurance company will pay the death benefit to your chosen beneficiary. The process of providing the relevant information and documents to make a claim is significantly faster than receiving an inheritance through a will. However, it’s important to note that beneficiaries may be required to pay inheritance taxes on certain types of foreign property.
Among the various options available in the market, the Chubb MyLegacy Insurance Plan II stands out due to its unique features of long-term wealth accumulation, flexible payout arrangement and passing wealth from generation to generation. This plan also provides three channels for steady wealth growth, including guaranteed cash value, a non-guaranteed reversionary bonus and a non-guaranteed terminal bonus. This allows you to receive a fixed monthly annuity income until age 120 to enjoy a worry-free retirement¹.
What’s more, you can change the insured of the policy or convert the partial surrender value of the policy to a split policy an unlimited number of times². You can also freely choose the payout arrangement for each beneficiary that suits you best, from one-off to annual or monthly instalments, over a period of 10, 20 or 30 years. This allows policyholders to proceed with settlement options easily and flexibly, passing on the accumulated wealth to their loved ones.
¹ On or after the 10th Policy Anniversary, you may choose to accumulate the Withdrawal Amount when you apply for Cash Withdrawal, or exercise the annuity option if the conditions are fulfilled and subject to our approval. A fixed monthly annuity income determined by the Company at our sole discretion will be paid to the Insured until the Insured reaches the Age of 120 or passes away – whichever occurs first.
² On or after the specific Policy Anniversary, you may convert Partial Surrender Value of the original Policy to a Split Policy and name an insured of the Split Policy, which is subject to certain conditions.
Please refer to the product brochure or Chubb Life’s website to understand further details and key product risks. Please refer to the website of the Inland Revenue Department (IRD) (www.ird.gov.hk) or contact the IRD directly for any tax-related enquiries.
This article is for general reference only and should not be regarded as professional advice or recommendations. It is not part of any policy. It provides an overview of the key features of the product and should be read along with other materials which cover additional information about the product. Such materials include, but are not limited to: product brochures that contain key product risks; policy provisions that contain exact terms and conditions; and benefit illustrations (if any) and other policy documents and other relevant marketing materials, which are all available upon request. You might also consider seeking independent professional advice if needed.
The above information shall not be construed as an offer to sell, solicitation or persuasion to buy or provision of any of our products outside Hong Kong. For further information, please contact your Chubb Life Hong Kong Insurance Consultant or call our Customer Service Center Hotline at (852) 2894 9833.
“Chubb Life Hong Kong”, “Company”, “we”, or “our” herein refers to Chubb Life Insurance Company Ltd. (Incorporated in Bermuda with Limited Liability).