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The basics of expat financial planning

Basic financial foundations are often overlooked by expats, but they are important for those living outside their own country.

Could your family survive?
This question is an obvious one but we are always surprised at how many expatriate families ignore international life assurance. This is even more important for cross cultural relationships & marriages. For a myriad of good reasons, most expatriates will retain the bulk of their capital, bank accounts and investment portfolios, outside of the country that they are living in. If the survivor(s) is not aware of the existence and/or location of those assets they could remain undiscovered for years. 

In any event, on the death of the person named on the account (and if not in joint names and/or with named beneficiaries), those assets will be frozen in each country that they are based in, and will then have to pass through probate in the domicile country of the deceased. This can take up to a year and no one gets any money in the meantime – a huge burden on loved ones to say the least. The bills keep coming in, school fees still need to be paid, and in many cases the survivor will not be able to generate an income level sufficient to meet initial and ongoing needs, leading to severe downgrading of current lifestyle or a complete depletion of capital.

Check that any existing Life protection you have in place already still covers you whilst living overseas. Many expatriates assume that the life cover they took out years ago in their home country will still cover them in Asia. This may be so for a few but the vast majority of domestic insurance companies will not extend cover to overseas residents, and will certainly not take the trouble to tell you so until it is too late.

Protection for your business
Installing alarms and employing security guards is one form of protection but you might not be protecting the most important part of your business – you. There is no getting around the fact that whatever type of business you have, your death could have a catastrophic effect on its future, not to mention your estate and the inheritance for your beneficiaries.

Of course no one knows when their time will come. However, knowing that you have taken steps to help those you leave behind to cope if the worst should happen can be hugely reassuring. The most straightforward and cost effective way to provide financial protection for your family (or indeed any named beneficiary) for a fixed period of time, is to take out an International Term Assurance Plan. This is a simple and transparent product, yet it can have many uses and can provide protection for your family, your mortgage, your business or indeed all of these.

How would you cope with the financial consequences of a major illness?
Despite regional variations, wherever you are in the world, everyone is vulnerable, and the diagnosis of a critical illness could have a devastating effect on your life and that of your family. A cash lump sum from an International Critical Illness policy would allow you to focus on getting better without worrying about your financial situation.

Critical Illness, some facts

• You are five times more likely to suffer a critical illness than to die before retirement
• Almost everyone knows of someone who has suffered a heart attack, heart bypass, cancer or a stroke
• Due to medical advances, many people now survive previously life-threatening diseases for many years.

With improvements in modern medicine leading to higher recovery rates, Critical Illness Cover can pay out a cash sum if you are diagnosed with a pre-defined critical illness covered by the plan. This type of cover pays out almost straight away and the proceeds can be used for any purpose – but would perhaps settle an outstanding mortgage and/or car loan, pay for long-term home care, or simply cover the family with living expenses for many years.

People with international lifestyles have individual requirements and no two expatriates´ needs are exactly the same. You may be dividing your time between different countries, retiring abroad, temporarily moving overseas to develop your career, or perhaps working in a foreign country while retaining your main residence at home. Whatever your situation, a change of location brings many challenges as well as opportunities. Some simple preparation and an action & review plan now can pre-empt all of the above scenarios and mitigate the damage to your wealth. 

LEX only placed an abridged version of the article.
Source: http://www.property-report.com
Date of publication: 22 December 2009

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