Oran Hall | Creating an effective estate plan for your assets

There are many considerations to be made when making an estate plan that will prove effective in fulfilling the purposes of the person who makes it.

Matters such as cost, convenience, your needs and the needs of beneficiaries, the ability of different types of assets to address those needs, when assets are to be transferred, the requirements of the law, and identifying trusted individuals to play a role in executing the plan are some of the major considerations.

Financial planning is a multiphase process, which includes acquiring, using, and preserving your assets during your lifetime and arranging your affairs to effectively transfer them to the beneficiaries during your lifetime or after death. Acquiring and preserving your assets are important because if you do not own assets, you do not have an estate.

Although it may be necessary to make changes to the plan from time to time as assets are acquired or liquidated, as beneficiaries and their needs change, as your needs and priorities change, and as the laws of the land change, it is necessary to pay close attention to types of assets you acquire and how ownership is registered.

It is important to ensure that you hold clear title to any asset that you have reason to believe you own to avoid disputes and legal challenges. It is also good to understand the implications for different types of ownership. Let us take property ownership, for example.

There is a significant difference between owning property as a joint tenant and owning it as tenant in common. In the former, you are not able to transfer your share to another person, and it passes to the other joint owner or owners upon your death. In the latter, you are able to transfer your interest to a person of your choice, through your will, for example.

In acquiring any asset, it is important to consider if it is suitable to use the joint-ownership approach. This can be used for property, bank accounts, and investment instruments such as stocks, bonds, unit trusts, mutual funds, and real estate. Although it may cost less for the joint owner to assume full ownership of the asset upon your demise, and the transfer may be done quickly, considerations such as the trustworthiness of individuals cannot be overlooked.

On the other hand, owning an asset just by yourself may seem to be a good idea, but provisions have to be made to transfer it – by a will after your death, most likely - and this has associated costs and takes time. You may also choose to set up a trust to hold assets, but then they are owned by the trust and not you, and it does cost to set up and manage a trust. Trusts, by the way, are not common in Jamaica.

Whatever your assets are, it is important to have proof of ownership in a safe place and that a trusted person knows that place and has access to it in defined circumstances. In cases in which your claim to ownership is in electronic form, it is good to have hard-copy evidence as well.

Bear in mind that your liabilities are a part of your estate. As you acquire assets, avoid burdening your estate with debt as it has the potential to erode the value of your estate because debt must be repaid.

As you acquire assets, consider the risk of loss and how it can be reduced. Insurance can be effective in protecting the value of your estate against the losses that can be inflicted by hazards such as fire and natural disasters.

The greatest loss, though, could be you. Life insurance offers good protection by providing funds for testamentary expenses, debt repayment, and living expenses, especially for dependent children. You should consider whether you prefer to have a relatively quick settlement by naming the beneficiaries or whether you want to name “estate” as the beneficiary, in which case, you must make a will stating who is to benefit and what the entitlement of each beneficiary is.

There are other options for distributing your assets. If you use a will, be specific about who should get which specific asset, and keep your house in order so that whenever death comes, little time will be lost in completing the probate process and distributing your assets. You can also choose to distribute assets by gift while you are alive – an inter vivos gift.

Pay attention to the needs of dependent children and family members with disabilities, and consider whether you need to give a power of attorney to a trusted person to act in your stead if the need arises.

Your life is not static. Your estate plan should not be static. Regular review is necessary if it is to be relevant and useful.

Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel. finviser.jm@gmail.com