WEALTH DISTRIBUTION POLICY STATEMENT

RECENTLY, Wong, a successful entrepreneur, approached me.
He wanted some advice on wealth distribution. What he wanted help in however was something over and above a will, trust or estate planning. He was keen for us to help him draw up a document on his wealth distribution goals and values - to serve as a guide during his life-time but also a reference point for his heirs. In professional terms, we call such a document a wealth distribution policy statement.
 

Current Practice

By and large, wealth distribution planning is viewed as a chore. This stems from the fact that it is largely perceived to be a responsibility instead of an opportunity.
 

Statistics reveal that 9 out of 10 people die without a will. Of this, it would seem that those who have Wills, have spend very little time paying attention to important aspects such as goals or alternative plans. Most of the time, they rely very much on professional advice - listening as if they were bystanders and not actively participating in the entire planning process.
 

Clearly, an estate planning adviser, whether he is a professional will writer, lawyer, trustee officer, life insurance agent or financial adviser is not attuned to their clients' values and goals, unless they are well communicated. The best he or she can do is to make some guesses in the absence of pertinent information that could allow him to understand the client's goals better. This in turn, will result in a Will that incorporates more the perspective of the adviser than that of the individual who needs to plan. Needless to say, a weak or irrelevant Will can have disastrous implications.
 

Moreover, different advisers usually have their respective agendas or solutions. For example, a single client is likely to get numerous perspectives of handling wealth planning issues from different scope of advisers.

A lawyer will obviously place emphasis on the legal perspective of such a process. But what if the lawyer is involved actively in certain charities? Is he or she more likely to recommend charitable distributions?
 

Likewise. if the adviser is an insurance agent, it is far more likely that the recommendation will incorporate life insurance. Therefore. it is important that the individual makes the effort to be a lot more discerning and aware of 'bat he wants, which can narrow the scope of such limitations.

Without clear objectives in mind. both individuals and professional advisers tend to focus more effort on analysing strategies first, solving the problems before it is clear what the overriding objectives are. In short, they all too often put the proverbial planning art before the horse.

The Policy Statement
The solution to effective wealth distribution planning is to lay a clear and solid foundation. Your financial adviser must be able to help you develop a written wealth distribution policy statement that reflects your financial philosophy before he or she ever considers recommending specific solutions.

Once created, the policy statement  guides every step of the wealth distribution planning process that follows.

What is it?
The wealth distribution policy statement is a written mission statement that defines your values and goals regarding wealth distribution. Drafted and used effectively, the wealth distribution policy statement can effectively govern the estate planning process, guiding relevant estate planning professionals as they recommend strategies solutions that support only the values and goals.

A sample content of wealth distribution policy statement

Some of the sample sections to be included in the policy statement are as follows:
 

Purpose - Why have we prepared this policy statement?
Financial biography - Past experiences that have helped shape one's unique financial philosophy?
Sources of wealth
Responsibilities and obligations - To whom do we feel a sense of responsibility or obligation regarding the distribution of our wealth?
Motivation for planning
Financial philosophy - What meaning does money have for us?
Financial independence - What do we need from our wealth to maintain our financial independence in our lifetime?
Family legacy - How much wealth do we leave to our heirs and why?
Social legacy - Charitable causes or organizations to give to and why
Acknowledgement - To what extent does it represent our values and intentions?

Its benefits
Such a policy statement provides a context within which you. your loved ones and your advisors better understand your values, beliefs, aspirations and goals regarding your financial resources.
 

The process of producing wealth distribution policy statement motivates and stimulates you to identify and examine the people and entitles you hold in the highest esteem, leading to wealth distribution decisions that truly reflect your wishes.

It also helps your loved ones better appreciate and understand the reasons for your wealth distribution plan.

A clearly written document informs all estate planning professionals (Will, trust, insurance and other professionals) of one's intentions. saving both time and money as they explore proper strategies to help you achieve your goals.

Most importantly. the entire process accords you more in control over the final outcome.

From TheSTAR BizWeek dated Saturday 28 February 2004

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