Hong Kong - Financial File

To ease the chore of filing your taxes, keep your records organized. This will ease your work or the fee if you have a professional prepare your tax return. Be sure to keep records concerning the purchase of your home and investments and any transactions related to these items until three years after the sale of these items. If you plan to apply for foreign social security benefits you may wish to keep your foreign tax returns as proof of your earnings history.

Excerpt from Personal Finance for Overseas Americans
Copyright © 2000 by Barbara Frew
Permission to reprint given by the publisher GIL Financial Press
Make a list of the services you need to establish
                        Auto Insurance
                        Banking
                        Brokerage
                        Credit Cards
                        Home Insurance
                        Life Insurance
                        Mortgages

  
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Why do you need a financial file and why is it important to keep it updated? It all begins with a story, a sad one.A friend lost her young husband - while they where living abroad - unexpectedly,  very unexpectedly, and left her with two young children. Adding to the loss of her husband, she had to take control of all the implications that this loss implied. Facing a situation like this is hard enough if you are in your home country, supported by your family and friends, but it can take a nightmarish twist when confronting a foreign jurisdiction in a foreign language, sometimes with the chance - if anything goes wrong - of being denied access to your own assets. In her case, both her and her husband had carefully planned for the future and for the worst, they had a will and she was fully aware of their financial situation; all their paperwork was in order and updated and easily located. The closeness and the suddennes of such event is overwhelming, the twist and turns of life are unpredictable. The possibility of a tragedy hitting a family are not that remote. How to secure our children's future? Are you prepared?
The financial nightmare that could follow could be threathening the future of a family.

The File
Everybody in the family has to have a clear idea of the kind of financial arrangements and, vital!, where the documentation is kept. This means also including the person chosen should both parents die.
A suggestion is to create « The File » to keep handy for the unknown future and be sure that all your financial informations (mortgage, life insurance etc.) and non financial (wills) are recorded together, then inform your dependants and all the party involved of the location or forward a certified copy to her/him..
This excercise will prove to be useful also for the daily life, since it allows to monitor your financial situation more easily.

Wills  
You might have not considered having a will for several reasons like the belief that your dependant will automatically inherit.
Well, let's get real! It is not that obvious that the distribution of your wealth is going to happen as you envision it. As an example, Texas law is very clear about guardianship, if there are no instructions (a will or other) and both the parents die, the children are assigned to a tutor by the government. If you are in a foreign country (and this happens often to you, doesn't it?), the rules could be different than in your home country and your dependants may find themselves in deep trouble without a will. Make one now! It is capital for both husband and wife.
If you have one, is it updated? Have you reviewed it at regular intervals or whenever a major change of circumstances occurred (marriage, divorce, new business arrangements etc.)?
Do you, your dependants or executors know where it is?
Make sure you inform your dependant and any other party involved on how to locate it and who the lawyer is.

Life Insurance  
Carefully assess the protection your family will have in case of the employee's death. As a rule of thumb a sum ten times one's salary should be the amount of life coverage required to adequately protect dependants.
Then establish precisely which policies are already in existance and which benefits would be available from the company's pension scheme (it will tell you if a further coverage is needed).
Where life insurances are involved, check if they are written in trust. This means the proceeds can be paid directly to the trustees for the beneficiaries, rather than having to wait for probate to be granted or laws of intestacy to prevail if no will has been made.

Health Insurance  
First: do you have one? If yes, what kind of a coverage do you have?
If you are on a company pension scheme, then you need to find out whick sickness coverage is already provided, which private medical insurance is available and if it meets your needs.
Funding for long-term health care could be a good choice - the population is growing older and the availability of state care funded by governemnts is likely to reduce - though still a personal decision.

Pension   
If you have been working for different companies, this means that a variety of pension benefits may be accrued, and it is essential to know:
- Which benefits you have built up
- What you are hoping to achieve
- How to take advantage of the available tax concessions

If you have been in company pensions schemes, make sure you receive information from them as to which benefit you will be entitled to at retirement.
The picture gets even more blurry when you or your spouse have not only worked for different companies, but in different countries as well - in some of those you have not paid a private entity but the government (like in Norway, France or Italy).
Well there is no quick fix nor is there a cure. I would welcome suggestions on that, as I have heard of companies that supposedly would go through the paperwork nightmare of collating all these schemes into a unique one, but I have not been able to come up with a list of names. Do they really exist?
Ask yourself «If I were to retire now, what level of income should I need?»
It is a good start for good pension planning (do not forget about inflation before and after you retire!) and also to understand where you are, where you want to be and decide the necessary steps to bridge the gap.
Include in the calculations any personal pension policies you have subscribed to, check the death benefits of these policies as well.
Governments normally provide tax concessions on all forms of pensions and you have several options open. Take those into account as well.

Since pension planning is a long-term exercise, the earlier you start, the less financially heavy it will be. Most people do realize the severity of the impact only when it actually happens. To avoid being one of those, take your time and review all the existing arrangememts, list where all the documentation is and take note if any further action is needed.

Mortgage 
If you have a mortgage, it is important for you to know what type of mortgage you have, what you are paying and where the paperwork is, relating to the arrangements.

Savings  
Most people have bank and building society accounts, but do your dependants know where to find all the details?
What other savings do you have? Stocks and shares, national savings, endowment policies etc. Keeping track of all is essential both for personal and tax reasons. Trying to find the policy for the endowment which is about to mature, could be time consuming and a challenging process.
If you have everything on « The File », a glance will give you all the information you need. Furthermore, this gives you the possibility to assess if your savings are achieving your set goals.

Tax   
Filing tax return is everybody's daunting task, filing it in a foreign country as well does add to the stress. Keep a file of all documents needed, from the details of where the details of interest paid on your bank account are, to where to find the tax credit vouchers from share dividends, and so on. Living in a different country than your own can give you the advantage of having more options tax wise; with the help of an expert in international tax planning, you can select the option that is more advantageous for you. This «creative tax plannning » is an area that is now being explored by companies to offer their employees first class advice on how to come ahead of the game instead of being overwhelmed by it.

Creating «The File» should give you a peace of mind. You know now what you have, where everything is and how to give access to other should the need arise.

Other Assets
In the event of the death of a married employee the spouse has to know what paperwork is required in order to gain access to:
Pension
Discounted stock option
Incentive stock options
Life insurance
generally speaking the spouse has to provide a copy of the employee's death certificate - certified in the country of death.  Make sure with your working spouse ascertain that the company has on file beneficiary forms listing the employee's named beneficiaries (in some countries may not automatically be the spouse or the children) for pension (make sure that has been done!), profit sharing and life insurance. 
For stock options, it is preferable for the employee to have a last will and testament.  This is not an absolute requirement but without it, the exercise by the spouse in some jurisdictions can be delayed.  Stock options not always have a beneficiary designation (check with your company!). 
The best piece of advice is to insure that the beneficiary designations for their life insurance, pension and profit sharing plans are current. They could be separate for each of these plans.

Here is the brief check list to find out if you have everything in place.
You are prepared for the worst if you know
- How much you need to live and raise your family in case of death or disablility of your working partner
- You have your papers - in order and ready to be passed on - that clearly state your wishes for your
  family. This includes: financial, tax , investment and estate planning documents (wills, trusts etc.);
- Your family income and expenses, your assets and your liabilities;
- You are aware of income taxes and have a legal, but aggressive, plan in place to reduce the cost to the
   minimun required;
- You are aware of company and governement (you are a foreigner so you need to know about more than
  one government) benefits;
- You are aware of return on investment you can undertake to secure yours and your family's financial
   independence;
-  You are already funding your retirement and your children education.

Do you know it all? You are set then, congratulations!