Private Clients
Helping you discover more with your time through bespoke wealth management
Succession | Intergenerational Wealth Transfer | Legacy Planning
Providing fairly for beneficiaries
Saturday, December 24, 2022
Our capabilities in action
Background
Our clients own restaurants in Singapore and Kuala Lumpur. They have a daughter who was helping with the running of the family business. Their son, on the other hand, was a passionate golfer and decided to make a professional career of it. The restaurants are held under a PIC and the total value is approximately S$15m. In addition, we manage their investment portfolio worth more than S$5m spread between different currencies and asset classes. Mr and Mrs Shah, the parents, want to make sure their wealth is passed equally to their children when they pass away but are concerned about how they can do this fairly when the daughter is the one active in the business.
The solution
Using a life assurance policy provides a high level of life cover in exchange for sacrificing some of the returns on the invested capital. There is no need for probate as beneficiaries can be nominated under the Singapore Nomination of Beneficiaries framework. There are no estate taxes in Singapore either. Mr and Mrs Shah create a high-value policy by transferring some of their private company shares as a bespoke asset which becomes the underlying asset of the policy in determining its value, in this case, S$5m.
Once Mr and Mrs Shah pass away, the policy will pay a total of $15m to the children as follows: Their daughter will receive the company shares worth S$5m, along with the remainder of the business bringing her inheritance to S$15m. Their son will receive the remaining $10m from the policy plus Mr and Mrs Shah’s investments worth $5m. This brings his inheritance to $15 million, the same as his sister's.
Outcome
Estates can be smoothly passed on from one generation to another without the need for probate or dispute on how the assets are disseminated. Each child receives the same level of inheritance but there is no need for the son to become involved in the business, a better outcome for both him and his sister since they equally have the capital to pursue their business interests, and protect their families and themselves.
