Did you blink over the holidays and wonder where they went? You have missed all the fun – it passed you by. We seem to travel through time so rapidly these days
Wait – did I just hear a “pop”? Was that your bubble that just burst? It’s January; have you already reverted back to old habits? New Year resolutions are fun amongst family, friends and colleagues. They are frequently a source of amusement to see who can make their own resolution last the longest in positive friendly competition.
These pledges for change are usually short lived as people accept the fun value. A ‘popular’ resolution amongst smokers is to quit but often after a few days of being short tempered and irritable the habit wins.
Only the minority see resolutions seriously, endeavouring to follow them through successfully. This usually applies to decisions which will ultimately benefit the person who is determined to make improvements for themselves.
As an expat in Asia do you feel the need to do something different? Are you secure? Are you comfortable that you have made adequate arrangements for your future? There are a number of important factors contributing to a successful life ahead. Each is important and collectively they create an archway of protection for you; no matter how young or old you are or how precarious your situation appears to be.
For the many expats who are serious about their future there is much to consider and a great deal of action to take. Over a long period of time you can achieve what you really want and be in an advantageous position in your long term future.
Let’s take some one-off examples to demonstrate:
Do you have any pension provision? Perhaps you have a scheme or two from previous employers? Have you reviewed these and assured yourself that they are adequate? Have you created any kind of addition to your pension provision to ensure that you have provided beyond the initial projected requirement?
Expats are often shocked at the amounts they ought to be providing for themselves. Inflation is a real enemy. It can be a stealth attacker, creeping up on us without warning. For a number of years now we have been in a period of relative calm from inflation, although it is still there and it is still very dangerous and real.
The antidote to this is compounding growth. If you are saving regularly you are building some inflation protection into your overall plan and this will certainly help. The positive effects of dollar cost averaging are quite remarkable and allow you to make greatest use of this phenomenon over a period of time.
What is your most valuable single asset? Most people do not think in reality but it is actually your power to earn a living. Many people insure their belongings and personal property; even their pets. But they overlook themselves as valuable people.
If you were to suddenly die would you leave any liabilities behind for which your heirs would need to take responsibility? A mortgage or a loan would be prime examples.
What about providing for your loved ones financially in the future? A spouse and children would need ongoing financial support and these could be secured by life assurance cover.
Even worse if you were disabled for life being unable to work again, how would you survive? This would create an even heavier drain on your resources. You can insure against future loss of earnings and be secure in the event you were disabled.
Do you have medical insurance for yourself and your loved ones? Whilst many do not perceive they will need expensive medical treatment there is always a possibility that this will become reality. By then it is too late and medical treatment can be beyond you financially. Whilst many expats see this as an unnecessary provision they are often all too shocked when “it does happen to them”
Are you aware of the global rules about probate and wills? Your executors are required to obtain a grant of probate for each jurisdiction in which you have assets. This process can extensively delay your beneficiaries from access to resources to cover their living costs, causing serious financial difficulties for them. Is it not bad enough that they would be grieving from your death without having these types of difficulty to deal with? Creating wills will assist greatly.
Where assets are more substantial you would be wise to investigate the use of trusts. These give greater flexibility allowing a succession plan to be created accounting for varying circumstances. Assets settled into a trust are not subject to a will or to probate because the trustees legally own the assets rather than the person who has died. Trusts allow you to plan for several generations. You may thus provide for grandchildren and great grandchildren if you so desire.
Most expats see this subject as low priority until they realise just how exposed they can be. This is not just about your income tax liability, it can relate to capital gains, inheritance tax, liability on pension income including the complexities of double taxation agreements where you have assets and from where you generate income.
Tax is complex usually requiring highly specialised evaluation and advice. Starting with an overall view and some strategic planning often allows you to get the feel for the future with your professional adviser making initial moves toward future planning.
Many expats unexpectedly face difficulties they had never envisaged. Situations will often rear their heads out of nowhere creating havoc in your life. They are diverse and often create very difficult circumstances which need to be dealt with.
One example could be the refusal of a work permit where you have secured a job. Governments often appear fickle and unfair in these types of area. Such denial can change your life for good when you are effectively an innocent bystander.
Another example is the calculation of pension drawdown requirements. These are often subject to complex rules resulting in restrictions which can leave you with less income than you had anticipated.
Do you have a resolution for 2015 about how your life may be improved in the long term? No matter whether you are a new expat or a seasoned old hand at living abroad it is almost inevitable that there are some aspects you are unaware of. These can be uncovered and dealt with to ensure you are on course to cope with any eventuality which may arise in the future relating to your “business of living life”.
Andrew Wood is executive director of PFS International, which assist expatriates with the business of living life. This includes wealth creation and protection; life financial planning; pension structuring; investment reorganisation; insurance planning for medical, life, critical illness and salary continuance; succession strategy preparation; tax planning; investment management and all the areas associated with the business of living life.
Questions to the author can be directed to PFS International at: [email protected]