“Nothing is certain except death and taxes” — Benjamin Franklin
For majority of us Filipinos, talking about death is taboo.
Why talk about death while you are still alive? We all shall go there, anyway. And why bring up that eventuality with your parents, as well as the orderly disposal of their own property, while they are still alive? You might look greedy or too excited in hastening their death so you could get your fair share of their wealth.
We apparently observe an unspoken rule about not talking about death, as if we can avoid the inevitable by ignoring it. But we all go there one way or another, sooner or later. From the point of view of a financial planner, however, the best way to handle death is to prepare for it, regardless of culture or religion or societal structure one is coming from.
Benjamin Franklin is often quoted as having said, “Nothing is certain except death and taxes.” So true. Death, we cannot avoid, but we can still secure the future for our loved ones and dispose of our properties in an orderly manner. Taxes are just as inevitable. We pay it during our lifetime, and it is paid on our death in the form of Estate Tax.
Preparing financially for one’s death brings to light three basic concerns. First – securing the future of loved ones and families. Second – the orderly and efficient manner of passing on the properties to heirs and intended beneficiaries. Last – the management of taxes that one is likely to incur during his lifetime and in the event of death.
When we die, we leave all of our properties behind. It makes me remember the old saying that you cannot bring all your riches when you die. Ideally, you leave them in an orderly manner for your heirs. How many families, brothers and sisters have been torn apart because of bickering on mana (inheritance)? This is not just applicable to ordinary families who have parcels of land and assets left that must be divided among the heirs —the same level of emotional and bitter engagement can also be gleamed among high profile people—all because the deceased person has failed to make his or her properties orderly before death.
On the other side, how many families have gone through an emotional and financial bind because the father or mother has left tons—not of assets—but of debt?
Given all such concerns, I think even being dead nowadays is still stressful.
But the point here is that you are fixing these eventualities for your loved ones, for the important people whose relationships you want to preserve and whose needs you want to support even after your demise. This inevitably brings us to the point that planning your deathly affairs should begin in the present, while you’re still around — you cannot plan when you are already dead.
Luckily, there is such a thing as Estate Planning, with which one can effectively and efficiently manage all of these affairs legally. It involves various instruments—legal and financial tools to cater to an individual’s needs and aspirations.
For instance, having Insurance instantly creates wealth that can be used to secure a family’s future, to answer to liabilities that may be left, or even pay off incidental taxes and expenses required upon death. Wills and testaments provide a way to dispose of properties in accordance with one’s wishes, but of course, subject to restrictions provided by law. There are heirs and persons that the law requires to have a share in the property of the deceased, after which a free portion can be disposed of freely to whomever the person wishes.
While still alive, giving some of your assets as a gift or donation can already be done to the intended recipients.
This shall enable you to lessen the base of the eventual estate, and thus, save on taxes. Moreover, with proper timing, disposition of assets through gifting and donation can provide tax savings: while estate tax is between 3 percent and 60 percent, donor’s tax is just 1.5 percent to 40 percent. Creating a family corporation is another technique in which properties can be transferred to a corporation in exchange for shares of stock, with significant tax savings and advantages.
And there are Trusts. Trust instruments can be created to suit more specific and special needs: you can create a trust in which the principal can remain intact and assign a person to administer such, with the income to be distributed among chosen beneficiaries—and this is just the tip of the iceberg with what you can do with trusts.
Planning for one’s estate is one arduous and complicated task. Yet the benefits—a peaceful, harmonious relation among surviving family members and loved ones, a secure future for them, or for continuing a noble charitable support to an institution—even when we go into the final sleep, is all worth it.
Rienzie Biolena is a registered financial planner of RFP Philippines. Learn more about personal financial planning at the 66th RFP program this November 2017. To inquire, e-mail email@example.com or text <name><e-mail><RFP> at 0917-9689774.
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