Planning a smooth transfer of wealth can be a delicate matter at the best of times, but the task becomes trickier when heirs are living in another country. This is the challenge facing many of Asia's global families, as the next generation seeks education and opportunity abroad.
“As soon as you cross a border and you've got someone on either side, all of a sudden your life becomes very complex and you need advice," says Michael Reed, head of Wealth Management, Southeast Asia, chief executive, RBC Singapore Branch. Adding new jurisdictions to a transaction means dealing with multiple sets of laws.
But it is something that high-net-worth individuals (HNWIs) in Asia are increasingly dealing with. A 2016 report by the consultancy Capgemini found the number of people in the Asia-Pacific region with more than US$1 million in assets has topped 5 million. That means there's lots of wealth to be passed down, with much of it destined to cross borders.
At the same time, research from The Economist Intelligence Unit, commissioned by RBC Wealth Management, found 76 percent of Asian HNWIs believe they have an obligation to transfer wealth to the next generation, compared with 61 percent in the West.
The new face of wealth and legacy survey reached 1,051 high-net-worth individuals (HNWIs), including 220 respondents in parts of Asia (China, Hong Kong, and Singapore), from March to May, 2018. The survey explores how the meanings of legacy and wealth are being redefined across regions, genders and generations.
As an increasing number of Asia's families become global, they need sound advice on navigating international borders to ensure their legacy smoothly reaches their beneficiaries. “There's so much regulation, there're so many nuances, you've got different currencies you've got different rules," says Reed.
The power of Will
The Will is perhaps the most common estate planning tool, and one that will make the probate process - the distribution of assets after death - considerably easier. However, many individuals don't have one in place, says Vivian Kiang, RBC Wealth Management's head of wealth planning for Asia, based in Hong Kong.
“If assets are not properly indicated in the Will and the parents pass away, then that's going to lengthen the whole probate process," she says.
But a single Will may not be enough if there are assets in multiple jurisdictions. International real estate holdings, for instance, are popular among Asian HNWIs, she says. Having different Wills for each jurisdiction where property or other assets are held - prepared in the local language - can speed up the probate process significantly.
“It's a lot easier because the government doesn't have to identify who should receive it and how much," she says. “Otherwise, if you only have one Will, then that Will with the probate will have to go around the world to unfreeze the assets one by one."
A matter of trust
Using a trust structure can often bypass the probate process, or at least greatly simplify it. It should also make things easier things from a tax point of view, says Kiang.
RBC works in conjunction with tax advisors to create solutions that meet the needs of clients.
Trusts also allow the older generation some control of how and when their assets will be distributed to the next generation, which Reed says is important to many clients. With much of Asia's new wealth in the hands of first-generation millionaires, many parents worry their children may not appreciate the full value of their money if it's just handed down to them.
“Because it's new money, we're finding that the patriarchs and matriarchs are more concerned about the kids getting 'affluenza', so they put a lot of conditions on passing the wealth on," he says.
Specific conditions could stipulate a certain level of education achieved, or be tied to age so as to allow the recipients to fully mature before they inherit.