6 psychological reasons we don’t take estate planning seriously
Some aspects of financial planning can be daunting. By its nature, estate planning requires you to think about your eventual demise, forcing you to confront uncomfortable realities – illness, death, and how life might be for those you leave behind.
As an international expat, you may find the financial complexities overwhelming, too. Holding global financial assets can make an already emotional process even more difficult.
So, despite knowing its importance, you may persist in pushing estate planning tasks down your to-do list.
Read on to understand more about the key psychological reasons why so many of us tend to put off or ignore estate planning, even when the stakes are high.
1. Procrastination
Unless you’re some kind of super human, when you don’t want to tackle something head on, you’ll find ways to procrastinate.
You’ll work hard to convince yourself it’s okay to delay organising your affairs because nothing’s going to happen to you tomorrow. It’s easy to think, “I’ll get to it eventually,” especially if you’re in good health or still relatively young.
As an expat with a successful career, life is busy. When you’re juggling work responsibilities, travel, and family obligations, estate planning simply doesn’t rise up the list as a pressing matter.
However, without a clear plan, your family and loved ones may face unnecessary complications, legal battles, and even financial losses.
And yet, because the potential fallout typically occurs after your death, it feels far removed from your day-to-day concerns.
This out-of-sight-out-of-mind mentality could lead you to keep postponing what is, in fact, a critical part of long-term financial health.
2. Misunderstanding technical tax codes
Getting to grips with how tax laws in different jurisdictions effect your estate plans can be overwhelming. Inheritance Tax, Estate Tax, double taxation, or domicile status can make matters seem more complicated.
While there’s no Estate Tax in Hong Kong, if you have assets or heirs in other countries, you’ll need to navigate potentially complex rules.
If you’re worried about making mistakes or misunderstanding the rules, instead of thinking about how you could resolve such problem, you defer starting.
Unfortunately, many practical estate planning strategies require time.
You may need to make plans to share your wealth and survive for seven or eight years to remove them from your estate for Inheritance Tax purposes. In some cases, you may need to wait even longer for a plan to become tax-efficient.
Watch this space for in-depth coverage on this topic next month.
3. It’s simply too difficult
There’s no getting around it, sitting down to figure out the details of dividing up your assets is hard work. When there are several jurisdictions involved, the difficulty level only increases.
Even if you do sit down to deal with matters, you may be left unsure that you’ve covered all the necessary bases.
With multiple assets running into hundreds of thousands of dollars, the complexities of estate planning are magnified. You may need to work with multiple advisers, tax consultants, and legal experts across different countries.
This can be a time-consuming and intricate process, leaving you overwhelmed.
We can help you to break the task into manageable steps, guiding you towards answering tricky questions one at a time.
By gaining clarity on how to approach estate planning, it will be easier to make positive progress. It will help you discuss practicalities with your family and understand the types of structure you could use to safeguard your assets upon your passing.
4. No one likes to talk about death
In most cultures, death is a taboo subject. In China, many people believe that talking about death is bad luck.
Discussing your own mortality is unsettling, and you may feel it’s easier to ignore.
If you’re living a long distance from your family, such conversations could be even more difficult. And talking about your own demise and what happens to assets after you’re gone, can feel like tempting fate.
It’s an uncomfortable conversation, but avoiding it altogether could leave your family vulnerable to legal complications and disputes. So, start thinking about it now, because Christmas could be an ideal time to broach the subject with your spouse, children, siblings, and friends.
5. Uncertainty about how much wealth you’ll leave and who to leave it to
If you don’t know the size of your estate, deciding how to divide it can feel impossible.
We can help you understand your net worth, and use cashflow forecasting to help you work out how much you may leave in your will.
On top of this, you may struggle with knowing exactly who to leave your assets to, particularly if relationships with beneficiaries are complicated – more on this coming up.
For example:
- How are you going to divide your estate?
- Is it equally among two children, like a fixed percentage, or does one child need more than another?
- How are you going to handle any perceived fairness between your children?
If you’re a business owner, you’ll also need to consider who you will leave the running, and assets, of your business to.
You may have multiple properties in different countries, valuable artwork, or antique furniture, and then there are personal assets that may have immeasurable emotional value that you need to account for.
Taken as a whole, no wonder you may simply shunt these emotionally charged decisions down your to-do list.
6. Blended families and extended families cause complications
If you have multiple marriages, stepchildren, or family members living in different countries, deciding how to fairly distribute assets can be even more difficult.
This uncertainty can result in analysis paralysis, where the difficulty of making a decision leads to no decision being made at all.
Yet, waiting too long could leave your loved ones in a complicated and uncertain legal situation.
Complicated family dynamics could also increase the potential for conflict. Yet, avoiding these decisions only increases the likelihood of future family disputes, which can leave loved ones fighting in court over your estate for years.
You may also need to address unique questions about guardianship, inheritance rights, and who should manage your estate in the event of death or if you become unable to manage your affairs.
Get in touch
Estate planning is a crucial part of securing your legacy and protecting your loved ones. While the psychological hurdles are real, the right mindset and professional guidance can help you overcome them.
We can help you evaluate different strategies to preserve your inheritance. So, if you want to grasp the nettle and organise your affairs, get in touch.
Email info@bmpwealth.com or call +852 3975 2878.