your family might be in debt because of you
Imagine this scenario: You've worked hard to provide for your wife and two beautiful kids, ensuring they have a comfortable home and a promising future. But what happens if the unexpected occurs, and you're no longer there to support them? Will your loved ones be burdened with the weight of your outstanding loans and mortgage? In this blog post, we'll explore ways to protect your family's financial stability. Don't let your absence add to their debt!
Impact of Unexpected Loss
The loss of a loved one is undoubtedly emotionally devastating. However, it can also unleash a financial storm, especially if significant debts, such as loans and mortgages, still need to be repaid. If there is no prior protection planning, your bank account will freeze upon your absence, and the common sequence of processing your assets in Hong Kong will:
Go through the Probate Registry (average waiting time 9-13 months)
Settle estate duty/death tax (there was estate duty in HK before 11 February 2006, and no one can be sure if it will be reinstated in the future)
Repay all outstanding loans (e.g. mortgage, cars, personal loans, company debts via personal guarantee, etc.)
Any remaining assets will be split as below:
Spouse: movable properties x 100% (e.g. jewellery, watches, car, etc) + first HK$500k cash + remaining assets x 50% (including real estate)
Children: equal shares of the remaining assets
What if your asset value is not enough to repay loans?
Your family members will have to settle all loans before they can receive any assets from you. For instance, if they wish to change the ownership of your apartment to them, they will have to take care of the remaining mortgage. This is an all-or-nothing choice, so if they wish to take over one of your assets, they will have to be fully responsible for your entire portfolio and outstanding loans.
LIFE INSURANCE payouts - Excluded from probate registry, estate duty and loan repayment
Life insurance is an invaluable tool designed to safeguard your family's financial security as the benefit payouts go directly to your desired beneficiaries stated in the policies. But how much is “enough” benefits for my loved ones?
As we have briefly discussed in this previous post, life insurance covers the benefits of our dependents. The sum assured should cover:
Your outstanding loans and debts (remaining mortgage amount, car loans, personal loans, credit card debts, company personal guarantee loans, etc.)
Your dependents’ remaining expenses (e.g. kids’ education costs x remaining period at school, parents’ living expenses x their expected living years, spouse’s living expenses x expected living years, etc)
Optional: 1-2 extra years of family living expenses to spare some time for the family to figure out how to manage the assets and move forward financially
*Term length: Minimum covering the years of your remaining mortgage
SAFEGUARD YOUR LOVED ONES ASAP
If you have any debts and you love your family, it’s time to review your life insurance. It is essential to have annual reviews so that we know where we are at, especially when our goals and circumstances change more frequently than we expect. Don't let your family bear the burden of your debts in the face of an unexpected tragedy. Life insurance serves as a financial safety net that can alleviate their worries and allow them to grieve without financial strain.
Remember, your family's well-being and financial security should be your utmost priority. So, take action today and secure their futures with the protection of life insurance - it's a sign of love and a decision they'll be eternally grateful for. Book a free 30-minute consultation to get a clear overview via this link.
