Are you leaving a pool of debts or assets?

The best investment decision you made today, may end up being the worst when it comes to estate distribution.

Is leveraging good or bad?

With low interest rate being offered across the global market, there is an increasing trend of investors acquiring credit assets in the hope of enhancing their returns.

Buying stocks on margin may appear to be a great way to make money, but in the event of your untimely death during a bear market, all your assets will be frozen. Your family members are liable to top up the difference in your margin account. Will they be able to do so?

Taking advantage of low balance transfer rates to acquire more assets? You are essentially acquiring more debts, not assets, and these may be passed on to your next of kin upon your demise.

Do you do cash-out refinancing? Many turn to mortgage loans for their low interest rate by pledging a fully paid property as collateral for a loan. They then invest the money, commonly by acquiring more properties.

Do you intend to leave behind a legacy of real or credit assets? How familiar are you with the terms and conditions of the loans take you take up? Or the law of the land pertaining to your property?

Inheritance equalisation

Your estate comprises more than just your money. A family business, commercial property, an overseas vacation house or a collection of luxury watches may form part of your legacy which you wish to pass on to your children and grandchildren. These assets can be tangible or intangible and may not be easily divisible. They may also lack liquidity, are subject to value fluctuation, and even potential legal and tax fees.

When we leave behind a legacy, we hope our family stays together and is contended with their inheritance. However, how do we pass down specific assets to certain beneficiaries while ensuring that each beneficiary is treated fairly and equally?

Ignorance of the law may cause your beneficiaries to lose their inheritance

Many investors acquire multiple properties by leveraging on loans with low interest rates. But are you aware of the repercussions of these loans that your family members will face upon your demise? Will your family members be able to continue to finance these loans while your assets, including your mortgage insurance payout, are frozen? This will affect your intended beneficiaries’ Total Debt Servicing Ratio (TDSR) which may result in them inheriting your hefty debts instead of your properties.