The month of Aughost
You (may) still have time. Take charge of your future now.
QUESTION: I see where you are coming from. In your recent articles during the so-called “ghost month,” you had been talking about the ill effects of not being prepared for an untimely death. But is estate planning the only way to do so? Are there other options?—posted at PFA’s “ask a friend, ask Efren” service at www.personalfinance.ph
Answer: Well, you saw right through me. It is said that the seventh lunar month in the traditional Chinese calendar is the month when the Gates of Hell are sprung open to allow ghosts to visit their families, feast and look for victims. And since this happens usually in August of the Gregorian calendar, we might as well call the month “Aughost.” They say that some of the things to avoid doing during the ghost month is taking evening strolls, traveling, moving house and starting a new business.
Yet the word “august,” as an adjective in Western civilization, means venerable, majestic, magnificent, noble or that which is increased.
I believe I had already cited in this column statistics from the worldlifeexpectancy.com that people’s life expectancy levels have been growing longer across all nations. But what cannot be denied is that man, being a mere mortal, will eventually succumb to death. The probability of dying is 100 percent. We just don’t know when.
Perhaps the ghost month is a perfect reminder of our not being around for our family forever and of how we should work on an august financial plan that will support them in the event we are called from this life early.
It would be great if our loved ones would get along nicely after we are gone. But that cannot be assured. There are 16 scenarios of legitime or legal right share of a decedent’s estate. This is the portion of a person’s estate from which he cannot disinherit his children or parents without sufficient legal reason.
For example, a person can pass away with: two or more legitimate children and a surviving spouse; legitimate parents or ascendants and a surviving spouse; two or more legitimate children, a surviving spouse and illegitimate children; and many more scenarios. Each scenario has its own limits on sharing. And it can very well happen that heirs will go to court if the testator apportioned his estate in an inofficious manner. While blood is indeed thicker than water, money tends to dilute the blood, hence the many quarrels of improperly apportioned estates.
And guess what, if you die without a will, there are 18 scenarios.
Investing is a natural part of estate planning. It is through investing and compounding those earnings that the assets to be apportioned are created. Investment assets may be donated periodically to minimize on donor’s tax and avoid having to pay the more expensive estate taxes.
Tax savings can be optimized by investing in bank fixed income issuances that are at least five years in tenor. You will save on the 20-percent final withholding tax on interest income. Investments can also be made with cooperatives, where dividend payments, albeit not guaranteed, are exempt from taxes.
Investments can also be done under the Personal Equity Retirement Account or Pera law. Once implemented, Pera contributions are given tax credits while earnings on them are exempt from both the final withholding tax on interest income and 1/2 of 1-percent stock transaction tax.
Wealth can also be created through life insurance policies where payouts to irrevocable beneficiaries will be exempt from estate taxes. Some life insurance policies, called variable life or variable unit-linked insurance, bundle investments together with life insurance.
But whatever the means to create wealth and minimize income, donor’s and estate taxes, the proper apportionment of wealth is still the stuff of estate planning. Preparing for death is preparing for a sure thing. This situation is perhaps one of only a handful of things where the saying “good things come to those who wait” does not apply.
And if you feel that you had been preparing poorly for your departure from this life, take heart in the words of Oogway of Kung Fu Panda: “Yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called the ‘present.’”
You (may) still have time. Take charge of your future now.
If you want to learn more about proper apportionment of estates, read the works of Filipinos who wrote books on Philippine laws and regulations on estate planning. You may also want to learn directly from an estate planning lawyer at one of the 2014 EnRich™ Estate Planning training runs happening in Cagayan de Oro (Sept. 6), Angeles (Sept. 19), Cebu (Sept. 26), Davao (Oct. 3) and Manila (Oct. 10). E-mail info@personalfinance.ph or SMS 0917-5050709 for the details. Details for the training may also be found in www.personalfinance.ph.
Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines. He is best selling book author of Pwede Na! (A Complete Guide to Personal Finance) in 2004, and is the chairman and president of the Personal Finance Advisers Philippines Corporation.
Source: http://business.inquirer.net/177458/the-month-of-aughost
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