How to Protect Your Heirs: A Cautionary Guide For The Man Who Has Everything
It’s a touchy topic in our culture, but it cannot be ignored
When you’ve arrived at the tail end of a good career, a legacy to leave behind, and all the corresponding material rewards, the last thing you’d want to talk about is how you’re going to let it all go when you’re gone.
Inheritance tends to be an especially sensitive topic in our culture, likely because its necessary antecedent is death, and Filipinos tend to avoid talking about anything remotely morbid. But while we may not like talking about it, death is one of two things in this world that are certain, along with taxes. And if you’re not careful, your heirs and loved ones may have to face the worse ends of both when your time comes.
In many cases, the burden of settling estate taxes falls unto the heirs themselves, who, to acquire the inheritance, must put up the money within six months or face a penalty surcharge of 25 percent of the total unpaid amount, plus an additional 20 percent per year that it remains unsettled. These amounts are fairly large, and can balloon to even larger amounts, until heirs are no longer able to inherit what is rightfully theirs, because for as long as the amount is unsettled, the inheritance will remain frozen.
So while the thought of it may be unsavory, serious consideration of the inevitable is necessary. Because estate taxes are steep and potentially problematic, estate planning—or making arrangements for how your personal assets will be passed down after your death—is necessary.
One method of estate planning is to transfer all your assets to your heirs while you’re still alive, either by donation or sale (there are other, more complex ways of transferring your assets, but these two are the most straightforward ones). Not only does this allow you to control where and to whom everything goes, but it can also be less costly. While these transactions still involve having to pay taxes, they can be cheaper than estate taxes if done right. The drawback—and it is a significant one—is that you run the risk of passing your fortune on too early. Young heirs might not be ready to manage large sums of money, and could squander it or fight over it while you still draw breath.
A more elegant method does exist, though: life insurance, coupled with a last will and testament. If you can invest in a good life insurance product that will provide for the payment of your estate taxes upon your death, you won’t have to worry about frozen assets or premature inheritance or any of the convoluted ways of transferring your wealth. Rather than trying to game the estate tax, life insurance pays for it directly. All it requires is a relatively enough amount to pay insurance premiums, and of course, that you are still insurable.
Therein, however, is the urgency: to get the most of your life insurance product, you’d want to explore the option earlier on—while you’re as young, healthy, and financially capable as can be. This is why it’s never too soon to start talking about estate planning, even if it does necessarily mean considering your own death. This is a matter of preserving your legacy, after all, so you must not be afraid to look far ahead.
SUN Smarter Life is one of Sun Life Financial’s protection products that can help you with estate planning. It provides double life insurance coverage until age 100, ensuring a financially secure future for the family no matter what happens. Should the insured pass away, the insurance proceeds from SUN Smarter Life can be used by the beneficiaries to settle estate taxes. To learn more, get in touch with a Sun Life advisor, or vist their Facebook page.