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Tag: Estate Planning

  • Securing Your Legacy: How Life Insurance Empowers Young People as Estate Planning Rockstars

    “By failing to prepare, you are preparing to fail.”

    – Benjamin Franklin, Writer, Inventor, Statesman and Diplomat

    By Realttorney®

    Estate planning is a critical aspect of financial management that often gets overlooked, especially by young people who may perceive it as something only relevant for older individuals with substantial assets. However, estate planning is not just for the wealthy or elderly.

    It is a crucial process that should be considered by individuals of all ages, including young people. One essential element of estate planning that is often underrated among the younger generation is life insurance. Life insurance can serve as a valuable estate planning tool for young people, providing financial protection and peace of mind for themselves and their loved ones.

    Life insurance is a type of insurance where the insurance company pays out a sum of money after the death of the insured or a benefit on a specified date. It is a contract wherein the individual pays regular premiums in exchange for a death benefit that is paid out to their beneficiaries upon their passing.

    While the primary purpose of life insurance is to provide financial protection for loved ones in the event of the insured’s death, it can also serve as a powerful estate planning tool, particularly for young people who may have dependents or financial responsibilities.

    One of the key reasons why life insurance is important for young people as part of their estate planning strategy is to ensure that their loved ones are financially protected in the event of their untimely death. Young adults may have dependents such as spouses, children, or aging parents who rely on their income to maintain their lifestyle or meet financial obligations.

    In the absence of sufficient savings or investments, life insurance can provide a much-needed financial safety net to cover funeral expenses, outstanding debts, mortgage payments, and ongoing living expenses for loved ones. This can prevent financial hardships and ensure that their beneficiaries are taken care of during a difficult time.

    Moreover, life insurance can also be used as an estate planning tool to address potential estate tax liabilities. While the current estate tax rate has been lowered to six percent (6%) under Rep. Act No. 10963, the value of an individual’s estate normally appreciates over time, especially if they own valuable assets, such as real estate, investments, or a business.

    Young Filipinos who anticipate accumulating significant wealth over their lifetime can use life insurance to provide liquidity to cover potential estate taxes so that their beneficiaries do not have to sell valuable assets to pay taxes, which could lead to financial strain or the loss of assets.

    Another benefit of incorporating life insurance into estate planning for young people is that it can provide opportunities for wealth creation and accumulation. In the Philippines, there are typically two main types of life insurance: traditional life insurance and variable life insurance.

    Traditional life insurance focuses mainly on guaranteed death and/or living benefits. In contrast, variable life insurance is investment-linked, providing the policyholder with death benefits and also accrued cash value over time. The cash value can be invested and grow tax-deferred, providing an additional savings component that can be utilized during the insured’s lifetime. However, the cash values are non-guaranteed because the performance of the investment is affected by current market conditions.

    Still, variable life insurance can be particularly advantageous for young people who have a longer time horizon for investment growth and can benefit from the compounding effect of the cash value over time. The accumulated cash value can be accessed through policy loans or withdrawals, which can provide a source of tax-advantaged funds for various purposes, such as funding education, starting a business, or supplementing retirement income.

    Furthermore, life insurance can also be used as a succession planning tool for young business owners. Many young entrepreneurs may have started their own businesses and have aspirations to pass on their business to the next generation or a chosen successor. Life insurance can be utilized to fund a buy-sell agreement, which is a legally binding contract that outlines the terms and conditions for transferring ownership of a business in the event of an owner’s death.

    By funding a buy-sell agreement with life insurance, young business owners can ensure that there is sufficient liquidity to facilitate a smooth transition of the business and provide financial compensation to the deceased owner’s family for their share of the business.

    In conclusion, life insurance is a valuable estate planning tool that should not be overlooked by young people. It can provide financial protection for loved ones, address potential estate tax liabilities, offer opportunities for wealth creation and accumulation, and serve as a succession planning tool for business owners.

    Hence, incorporating life insurance into an estate plan can provide peace of mind knowing that loved ones will be financially protected in the event of an untimely death, and can help young people achieve their long-term financial goals.

    So, when considering life insurance as part of an estate planning strategy, it’s important for young people to carefully assess their individual needs, financial situation, and long-term goals. Consulting with a qualified financial advisor or estate planning attorney can provide valuable guidance in selecting the appropriate type and amount of life insurance coverage that aligns with their specific circumstances and objectives.

    While it’s easy for young people to underestimate the need for estate planning, including life insurance, it’s a proactive and responsible approach to protecting their loved ones and safeguarding their financial future.

    In the end, by incorporating life insurance into their estate planning strategy, young people can ensure that their financial affairs are in order and provide a solid foundation for their estate plan as they continue to build their wealth and navigate life’s uncertainties. Planning for the unexpected today can help secure a brighter tomorrow for themselves and their loved ones.

    *The image in this post is courtesy of https://www.summitplanners.com/estate_planning/insurance-the-secret-tool-to-a-successful-estate-plan/

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • Is Estate Planning for Rich People Only?

    “Sometimes the poorest man leaves his children the richest inheritance.”

    – Ruth E. Renkel, Author

    By Realttorney®

    Estate planning is often seen as a practice reserved for the wealthy, conjuring images of mansions, yachts, and enormous amounts of money. Many people assume that only the rich need to worry about estate planning, while others may feel that estate planning is a complex and unnecessary task that only applies to those with a large asset base.

    However, this common misconception could not be further from the truth. Estate planning is not just for the rich or “high-net-worth individuals”. Estate planning is a crucial process that everyone, regardless of wealth status, should consider to protect their assets, their loved ones, and their legacy.

    As a side note, a “high-net-worth individual” is someone whose net estate (where all assets such as real property/ies, businesses, investments, and cash, minus any liabilities) is estimated to be at least P100,000,000 or more. Now, this amount is a random number. It may go down as low as P50,000,000 or north of P150,000,000. But, the key here is liquidity.

    Estate planning offers many benefits, such as asset protection, planning for major life events, tax savings, and transferring of wealth. Through estate planning, individuals can ensure that their assets and wealth are distributed according to their wishes. It also helps them to prepare for potential life changes, such as retirement, incapacity or death. Additionally, estate planning can help to minimize taxes, making the most of the individual’s wealth.

    Contrary to popular belief, estate planning is not solely about money or the size of one’s estate. While wealthy individuals may have more complex estates with a higher value of assets to manage, estate planning is relevant for individuals of all income levels. Here are several key reasons why estate planning is not just for the wealthy:

    Protecting Minor Children: Estate planning allows parents to designate guardians for their minor children in the event of their death or incapacitation. This is a critical aspect of estate planning that applies to all parents, regardless of their financial status.

    Without proper estate planning, a court may appoint a guardian for the children, and it may not align with the parent’s wishes. Estate planning provides an opportunity for parents to name a guardian who will raise and care for their children according to their values and beliefs, in the event that both parents pass suddenly.

    Managing Healthcare Decisions: Estate planning also involves creating documents such as a health care directive or a living will that specifies an individual’s wishes for medical treatment and end-of-life care. This is not limited to the wealthy; it applies to everyone.

    Estate planning allows individuals to appoint someone to make healthcare decisions on their behalf if they are unable to do so. This can provide peace of mind and ensures that an individual’s medical treatment aligns with their values and preferences, regardless of their financial status.

    Avoiding Probate: Probate is a special proceeding mandatorily required for the purpose of establishing the validity of a will. It can be time-consuming, costly, and public. Estate planning can help individuals avoid probate or minimize its impact.

    This is relevant for individuals of all income levels, as probate proceedings are costly, and the complexity of probate depends on the size of the estate. If you have meager resources then the more it is important for you to consider estate planning to save on court costs, lawyer’s fees, and other expenses.

    By creating a trust or implementing other estate planning strategies, individuals can ensure that their assets pass directly to their heirs outside of probate, allowing for a smoother and more private distribution of their estate.

    Preserving Family Harmony: Estate planning can help avoid conflicts among family members that may arise after an individual’s death. Disputes over assets, inheritance, and distribution can often strain family relationships and cause irreparable damage.

    Estate planning provides an opportunity for individuals to clearly outline their wishes and intentions, minimizing the potential for conflicts among family members. This is important for all families, regardless of their wealth or financial status, as family disputes can occur at any level of income.

    Protecting Assets from Creditors or Lawsuits: Estate planning can also help protect an individual’s assets from creditors or lawsuits. This is not limited to the wealthy, as anyone can face potential liabilities or legal claims. Through estate planning techniques such as irrevocable trusts, individuals can safeguard their assets from potential creditors or legal actions. This can be particularly important for individuals who have valuable assets such as a home, investments, or a business, regardless of their level of wealth.

    Charitable Giving: Estate planning provides an opportunity for individuals to leave a legacy by supporting charitable causes that are important to them. Charitable giving is not limited to the wealthy; individuals of all income levels can incorporate philanthropy into their estate planning.

    Through various estate planning tools such as charitable trusts or bequests in a will, individuals can make a meaningful impact and leave a lasting legacy by supporting charitable organizations and causes that align with their values and beliefs.

    Business Succession Planning: If an individual owns a business, estate planning can be crucial for ensuring its smooth transition to the next generation or a designated successor. This applies to small business owners and entrepreneurs, not just large corporations.

    Business succession planning can help preserve the continuity and success of a business, protect the interests of other shareholders or partners, and ensure that the business continues to operate according to the owner’s vision and wishes after he/she passes away.

    Tax Planning: While tax planning may seem like a concern only for the wealthy, it is an essential aspect of estate planning that applies to individuals at all income levels. Proper estate planning can help minimize the tax implications of transferring assets to heirs or beneficiaries, regardless of the size of the estate.

    Strategies such as gifting, setting up trusts, or creating a charitable remainder trust can help individuals reduce their estate tax liabilities and maximize the number of assets that pass on to their loved ones.

    Planning for Incapacity: Estate planning also involves planning for incapacity, which can happen to anyone regardless of their financial status. In the event that an individual becomes mentally or physically incapacitated and is unable to make decisions for themselves, estate planning documents such as powers of attorney and living trusts can ensure that their financial and healthcare decisions are managed according to their wishes.

    Planning for incapacity is important for all individuals to ensure that their interests are protected and their healthcare and financial affairs are managed in their best interests. A case in point is the situation of Avelino “Samboy” Lim.

    The Skywalker collapsed on the bench during an exhibition game in November 2014. He fell into a coma for five weeks due to cardiac arrest. He is currently wheelchair-bound and unable to speak and see. Of course, this incapacity was unplanned and sudden.

    Peace of Mind: Lastly, estate planning provides peace of mind, knowing that one’s assets, loved ones, and wishes are protected and accounted for. It can be a source of comfort for individuals at all income levels to know that their affairs are in order, and their loved ones are taken care of according to their wishes.

    Estate planning allows individuals to have control over their legacy and provides them with the assurance that their assets and wishes will be managed according to their intentions, regardless of their level of wealth.

    In conclusion, we reiterate that estate planning is not just for the wealthy. It is a critical process that applies to individuals of all income levels. Remember, estate planning is not solely about money or the size of one’s estate.

    Estate planning allows individuals to have control over their assets, legacy, and wishes and ensures that their loved ones are taken care of according to their intentions. It encompasses various aspects such as protecting minor children, managing healthcare decisions, avoiding probate, preserving family harmony, protecting assets, charitable giving, business succession planning, tax planning, planning for incapacity, and providing peace of mind.

    By taking the time to plan, individuals can rest assured that their estate is in order when the inevitable happens. Therefore, it is never too early to start estate planning, regardless of one’s level of wealth. In fact, the earlier one starts, the more time they have to develop a comprehensive plan that aligns with their changing circumstances and goals.

    Finally, it is important to consult with a qualified and experienced estate planning attorney or financial professional to help navigate the complexities of estate planning and create a customized plan that meets one’s specific needs and objectives.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • What is an Estate Planning Attorney?

    “Death is not the end. There remains the litigation over the estate.”

    – Ambrose Bierce, American short story writer, Journalist & Poet

    By Realttorney®

    An estate planning attorney is a special type of attorney who specializes in helping individuals and families plan for the orderly distribution of their assets after death or incapacity. He or she is a certified professional that creates an estate plan that will ensure the wishes of the individuals and families concerning their finances and properties are carried out after death or in the event of incapacitation.

    Also known as an estate planner, some websites say that an estate planning attorney is someone who specializes in “end-of-life planning” or premature death planning. But, most importantly, an estate planning attorney helps inform and educate the general public about the estate planning process, as well as the laws, rules, and regulations that affect the transfer, partition, distribution, and taxation of one’s estate.

    Why do you need an estate planning attorney?

    Estate planning attorneys create an enduring legacy.

    Estate planning attorneys review current estate laws and regulations to advise clients of their rights and duties, and suggest options for reducing taxes on their inheritance, providing for the care of family members, and creating an enduring legacy.

    The role of an estate planning attorney is to provide clients with knowledgeable, compassionate advice that helps them make informed decisions regarding their financial and personal welfare. Moreover, the estate planner can help the clients properly administer the estate of a deceased family member or friend.

    In this capacity, he can provide guidance on the tasks involved in settling an estate such as filing the necessary court documents, locating and appraising assets, and distributing the deceased’s property in accordance with the wishes of the client.

    It is important to note that the benefits of working with an estate planning attorney are numerous. These include asset protection, avoidance of probate court proceedings, tax savings, and peace of mind. The process of estate planning involves a deep understanding of existing laws and interpretation of those laws with the purpose of developing an estate plan that works for the individual or family. Once the estate plan is in place, it is important to execute the documents and communicate any changes in laws that may impact the plan.

    What do estate planning attorneys do?

    An estate planning attorney is among several professionals (tax advisors, financial planners, and life insurance agents, among others) that assist individuals to create estate plans based on their unique situations and concerns.

    Depending on the unique situation or circumstance of each client, the estate planner provides an array of services that include –

    1. Identifying legal or compulsory heirs, legatees, or devisee;

    2. Preparing or drafting a will, powers of attorney, and other estate planning documents;

    3. Creating healthcare directives and plans for long-term care;

    4. Assist in determining the best kind of trust for the client, creating such a trust that will protect the assets, and funding the trust to provide for the financial needs of the beneficiaries in the future;

    5. Coordinate with the financial advisor to reduce estate tax and other tax burdens through effective tax planning; and

    6. Identifying ways to avoid probate proceedings.

    The cost of working with an estate planning attorney varies greatly depending on the complexity of the estate and the expectations of the client. Generally, legal fees range from a few thousand pesos to many thousands of pesos.

    Yet, working with a trusted estate planner who has experience preparing estate planning documents is worth the investment in order to get the outcome desired. He is a treasured and reliable resource as one works through the process of estate planning.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • What is Estate Planning?

    “Frankly, for Die Broker this isn’t estate planning, it’s premature death planning.”

    – Stephen M. Pollan and Mark Levine, authors of “Die Broke: A Radical, Four-Part Financial Plan”

    By Realttorney®

    Estate planning is the process of making decisions regarding the ownership and distribution of assets upon death, and taking proactive steps to increase and maximize the value of the estate while minimizing legal costs, taxes, and other expenses associated with death. It is a necessary process for everyone, no matter their age or financial situation.

    Creating an estate plan is a significant part of financial planning for any individual. Creating an effective and comprehensive estate plan is a critical step for anyone looking to secure and protect their assets after death. As such, a comprehensive estate plan is composed of several components, which typically include a will, powers of attorney, health care directives, tax planning, and beneficiary designations.

    A will is a formal document that dictates how the assets will be divided by the compulsory heirs upon the decedent’s death. Powers of attorney is a document executed that appoints someone to handle financial and medical decisions in the event the individual is incapacitated. Health care directives is a document written to provide instructions for medical care in the event of incapacity or death. In addition, tax planning should be taken into account to minimize the estate’s tax liabilities. Lastly, beneficiary designations should be established to ensure that the assets are distributed according to the individual’s wishes.

    When creating an estate plan, it’s important to tailor the plan to the individual’s specific needs. Every person’s assets, family structure, and personal preferences are unique. Estate plans should be created with these specific needs and situations in mind in order to ensure that the individual’s wishes are properly executed upon his/her passing.

    Estate planning services can be provided by a variety of professionals, depending on the complexity of the plan. Attorneys have the legal understanding to create the necessary documents and ensure that they are legally binding. Financial advisors can provide advice on how to maximize the value of the estate, as well as minimize taxes. Life insurance agents can provide advice on insurance policies that can help to protect the estate and/or the beneficiary-heirs. And, depending on the complexity of the estate plan and the individual’s needs, other professionals may also be consulted – investment bankers, and real estate brokers, among others.

    In other words, estate planning can also be defined as a multi-disciplinary endeavor for designing a program for the effective management, enjoyment, and disposition of property – personal and real – of the planner at the least possible tax cost and avoidance of probate.

    Therefore, it is important to find a professional who is qualified and experienced in estate planning, so that the estate plan put in place is wide-ranging and personalized to the individual’s particular needs.

    On a final note, I leave you with an important insight of Atty. Edson T. Eufemio on why estate planning is not widespread and acceptable among Filipinos. He said: “In the Philippines, legal concerns are not the only ones that stand in the way of bringing the benefits of estate planning to the public. Cultural factors also exist since people rarely enjoy discussing mortality, especially their own. Further, children bringing up the benefits of estate planning to parents will seem like eager gold diggers.”

    It does not matter if you own several or merely one real property. Learn more about estate planning. Research. Ask around. And find the best professional suitable to your needs and personal circumstances.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • Is a Notarized Post-Nuptial Agreement Legal in the Philippines?

    “The Family Code itself provides in Article 76 that marriage settlements cannot be modified except prior to marriage.”

    – Mr. Justice Roberto A. Abad, in Pana v. Heirs of Jose Juanite, Sr. et al. G.R. No. 164201, December 10, 2012

    By Realttorney®

    I was referred to an online article entitled “What is a Post Nuptial Agreement in the Philippines?” last year, which when read by non-lawyers gives an impression that is contrary to legal tenets based on the Family Code of the Philippines.

    The article gives sound estate planning advice when it stated that couples should consider prenuptial agreements before getting married and discuss amongst themselves their income and financial objectives. However, it gets dicey after that.

    The article states the following:

    “A postnuptial agreement is a contract you and your spouse sign after you are married to resolve marital trouble. It is comparable to a prenuptial agreement. However, it takes place after the Marriage. For couples who marry without a prenuptial agreement, it is not too late to establish a postnuptial agreement that addresses concerns of property division, financial management, spousal support, and business split in the event of a divorce or annulment.”

    In fairness, the article recommends that couples seek the guidance of a lawyer. It says that lawyers “can counsel you and will know what must be done for your jurisdiction.” Now, when I read this, I know that this article was written by someone living in the United States. And, the person who posted this article on the Philippine-based website, did not even bother to cite the source.

    On the whole, the article gives the layman the impression that married couples can just visit a lawyer and ask him/her to prepare or draft an agreement that will divide their assets, pay the marital debt, child support, spousal support, and asset distribution in case of annulment, etc. Thereafter, when every provision is in order and to the satisfaction of the couple, they will sign the agreement, have it notarized and keep it somewhere safe where it can be accessed when the need arises.

    To make things absolutely clear for unsuspecting couples, there is no such thing as a postnuptial agreement in the Philippines. If the couples married without a prenuptial agreement then, depending on the date of their marriage, their property regime can be the conjugal partnership of gains or the absolute community of property.

    The conjugal partnership of gains or absolute community of property that govern the marriage of couples cannot be modified except before the celebration of that marriage.

    Post-marriage modification of such property regimes can take place only where: (a) the absolute community or conjugal partnership was dissolved and liquidated upon a decree of legal separation; (b) the spouses who were legally separated reconciled and agreed to revive their former property regime; (c) judicial separation of property had been had on the ground that a spouse abandons the other without just cause or fails to comply with his obligations to the family; (d) there was judicial separation of property under Article 135; (e) the spouses jointly filed a petition for the voluntary dissolution of their absolute community or conjugal partnership of gains.

    Hence, if the married couple wants to modify their property regime to take into account the division of assets, payment of child and spousal support, and division of assets during the lifetime of the marriage or when it is terminated or annulled, they have to seek the imprimatur of the Family Court to do it. It is not as simple as asking a lawyer to draft a contract that the couple will sign and produce legal effects after its execution.

    I hope this article clarifies the issue of postnuptial agreements in the Philippines. There are numerous effects of the Family Code on ownership of properties by married couples, common law spouses, and their children. One just has to seek property guidance and advice from a reputable professional.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.