Do this asap If you are married or planning to get married
Married life is great and when we sign the “contract” of this big life project, we mostly only look at the bright side. But have you got things set up in a way that can undergo the worst scenarios, e.g. divorce? If you have kids or you’re a shareholder of a company, make sure you take immediate action if you wish to take full control of your assets.
Income & assets acquired after the date of marriage are usually considered matrimonial assets
[Putting on my Certified Trust Planner hat]
In Hong Kong, once you are married, any income, salary, shares of a company, or investment gains under your name are considered jointly owned with your spouse. So if you experience a divorce without arranging these assets early enough (it can be traced back to 3-5 years before divorce), you will have to divide them with him/her.
Real Case
Mr. A has been rich for generations. He owns multiple corporations, luxurious houses, and supercars and lives a lavish lifestyle with his wife and two kids. His wife (let’s call her Jane) works as a doctor and opened her own clinic after getting married. They were working towards a divorce and Jane thought she could get a cut of Mr. A’s multi-billion assets. She overlooked one part - she assumed that everything was under Mr. A’s name. Mr. A was smart enough that before they got married, he’d already set up a trust where he kept all of his assets - including his local and international company shares, houses, cars, etc. And you wouldn’t believe it - he only gets HK$30K salary every month.
On the other hand, Jane earns around HK$200K/month, has her company shares, stocks, and a few other apartments that she never disclosed to Mr. A. On paper, she is way richer than Mr. A, so she is required to pay alimony to him upon the judge’s order. What’s more, her clinic and income earned from the year they got married are considered “matrimonial assets”, which also need to be divided between the two upon divorce.
In this case, even if Jane moves all of her assets to a trust before requesting a divorce, she might also have the same ending if it isn’t set up 5 years ahead - because asset transfers can be traced back up to 5 years, and any transfers within this period would be deemed as an intention to hide assets before the divorce, which is unlawful. Therefore, timing is key for your asset allocation to set up a safe firewall. The earlier, the better.
Actions TO take now
There are a few tools that can be used to isolate your assets from potential risks. Take one of these actions now so you know which tool(s) suit you best:
Consult a Certified Trust Planner for a tailored plan - A trust is a legal arrangement that allows you to transfer ownership of your assets to a trustee, who manages them for the benefit of your beneficiaries. By setting up a trust, you can potentially isolate your assets from creditors, lawsuits, estate taxes, and probate. These asset types can range from your properties, cars, company shares, stocks, cash in your bank… etc, basically anything. Normally setting up a trust wouldn’t break the bank as it only costs around US$10K, while the operation costs depend on the asset size and complexity. There are ways to offset these ongoing costs so you won’t have to worry about it in the future. So everyone should have a trust, no matter how big or small your assets are. Book a free 30mins consultation here to learn more.
Consult an Insurance Consultant who has relevant experience - some insurance products can act as a simple firewall for your cash. Although it has the limitation of asset type, it is probably the easiest and cheapest way to do so as there are no set-up or operation fees. You can also schedule a free 30mins consultation here to learn more.
opportunities are for those who are prepared
Once we’ve got ourselves prepared for whatever might happen, we acquire more options for the future. The more responsibilities you have, the earlier you need to act. Ask questions here if you have any. Speak soon!
