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Why Asian High-Net-Worth Individuals Cannot Afford to Ignore Legacy Planning

07 August 2020 | 5-mins read

Photo by Yaoqi LAI on Unsplash

The majority of Asian High-Net-Worth Individuals (HNWIs) remain underprepared when it comes to legacy and succession planning. This can jeopardise both family harmony and the businesses they have worked so hard for.

As wealth continues to flow into the continent, the numbers of Asian HNWIs continue to increase. According to Knight Frank’s 2020 Wealth Report1, there are 103,335 HNWIs with a net worth of over US$30 million in Asia. While still trailing behind Europe and North America, its numbers are rapidly catching up, with a projected growth rate about double that of the West. It seems clear that Asian wealth will inevitably overtake its Western counterparts.

Much of this wealth comes from family-owned businesses. Ernst & Young estimates that at least 85% of companies in Asia-Pacific are owned by families2. This naturally makes succession and legacy planning a top priority for the heads of these families—a finding confirmed in a 2019 research study by the Asian Private Banker surveying relationship managers on the behaviour of their Asian HNWI clients.

Yet, their actions are failing to match their words.

Most Asian HNWIs Remain Reluctant to Establish Definitive Succession Plans

Despite listing succession and legacy planning as their top priority, most Asian HNWIs have yet to implement any definitive plans. According to the same research study, a mere 40% of Asian HNWIs have or are currently planning a succession plan. Astoundingly, two-thirds of them said they have never even broached this matter with their families.

This is corroborated by other research, such as UBS’ 2019 Global Family Office Report3. It found that among family offices—which already implies a more structured and coordinated nature to managing familial wealth—only 49% of Asian family offices have succession plans in place, below the global average.

There are, of course, understandable reasons for this mismatch between actions and priorities. The topic of legacy planning encroaches on cultural taboos surrounding the discussion of death, leading to procrastination in even starting such a discussion. Despite this however, family heads must consider the very real risks of not having adequate succession plans in place. These include:

  • Successors being unwilling or unable to take over the family business, jeopardising the future of the business
  • Potential disputes over the split of familial assets
  • Being unable to equitably split assets because of a large proportion being held in fixed assets or in the business
  • Inability to meet cash needs at death—e.g. from personal and family debts, discharging personal guarantees, as well as estate and inheritance taxes (in the case of foreign investments). This can create financial anxiety for family members and even necessitate the selling of fixed or business assets
  • Not having enough cash to sustain themselves for a comfortable retirement after handing a business over. The UBS report notes that the average age of succession in Asia is 45, meaning the family head is likely to have at least several decades to enjoy their retirement.

Despite individual variations, the core of these challenges is largely universal to many Asian HNWIs. As such, the solutions to these challenges—such as universal life insurance plans—are similarly applicable across the board.


Life Insurance – A Popular Solution for HNWI’s Legacy Planning Challenges

For non-HNWIs, life insurance policies are often taken out to cover things like funeral costs and loss of income from the main income-earner. However, for HNWIs, who have little worries about sustaining the basic financial health of their families in the event of their passing, life insurance instead becomes a useful legacy planning tool.

The Asian Private Banker research study found that interest in life insurance among HNWIs continues to rise—ranking as the third most popular succession planning tool, behind cash equivalents and trusts. Interestingly, the greater the net worth of the individual, the more likely they would be to already have purchased a life insurance policy.

For instance, over 75% of HNWIs with over US$30 million in net worth had life insurance policies, compared to a mere 35% on those with a net worth between US$1 million to US$5 million. This indicates that the more successful the client, the more they realise the value of having such policies in place.

But if HNWIs don’t need life insurance to compensate for funeral costs and loss of income, how does life insurance help them in constructing their legacy plans, particularly when each of them has different needs and circumstances?


Two Common Scenarios of Using Universal Life Insurance in Legacy Planning

There are a variety of scenarios where universal life insurance can be invaluable in legacy planning. Two of the most common ones—which we will explore here—are to increase total estate size for a better retirement, and providing the necessary liquidity for equitable asset division.

Photo by Bobby Burch on Unsplash

Scenario 1 – Increasing total estate size for an improved retirement lifestyle

Consider a hypothetical HNWI, Mr. Lee, with a US$5 million net worth. US$2 million of this is tied up in his primary residence, while the other US$3 million is in cash and other liquid investments. He has two heirs that he wants to leave his estate to, but after a lifetime of hard work, he also wants to enjoy his retirement. He plans to retire within 10 years and savour several decades living a retired lifestyle.

However, he also wants to leave his heirs at least US$1 million each, plus his home, when he passes. To do that, he will have to live a more conservative retirement, as he will need to ensure at least US$2 million in liquid assets by the time he passes. He now faces a dilemma—either live more humbly or leave less for his heirs.

A universal life insurance policy can help resolve said dilemma. Say Mr. Lee pays a single premium of US$1 million for a policy with a death cover of US$3 million. That leaves him with US$2 million in liquid assets which he can spend in his retirement years. Upon his death, each of his heirs will receive US$1.5 million each—more than he intended—and he also gets more money with which to relish his retirement.


Scenario 2 – Generating estate liquidity to avoid forced selling of fixed or business assets

Now, let’s look at another Mr. Lee, now a business owner with US$18 million in assets. He owns real estate worth US$6 million, his wholly owned business is worth US$6 million, and he has US$6 million in other liquid assets. He also has three heirs, but only one of them is willing and capable of taking over the family business.

His dilemma is now different—how does he ensure an equitable division of assets between his heirs without needing to sell off business assets or real estate? He also wants to leave each heir with some amount of liquid assets while keeping everything balanced. Finally, he would also like to set aside some cash for himself.

He chooses to pay US$2 million in premiums to buy a universal life policy with a death cover of US$6 million. Up till his passing, he spends US$1 million in cash.

Upon his passing, his estate value will have increased to US$21 million - i.e. US$6 million in real estate, US$6 million in his business, and US$9 million in cash. Now, he can divide his assets as follows:

  • US$6 million in his business + US$1 million in cash for Heir 1
  • US$6 million in real estate + US$1 million in cash for Heir 2
  • US$7 million in cash and liquid assets for Heir 3

Legacy Planning is About Having Options – Life Insurance Can Give You Those Options

In the finance world, there is something known as a ‘liquidity premium’, which is the extra return investors demand for non-liquid investments. The liquidity premium only exists because liquidity is valued, as it gives investors options—such as the option to move in and out between investment opportunities and adjust their portfolios quickly.

Similarly, when planning your legacy, you, as an HNWI, want options. The option to divide your assets as you see fit. The option to enjoy a lavish retirement, while still leaving more to your heirs. There’s a reason those with the highest net worth also have the highest likelihood of using universal life insurance policies—because they know the value of the options to them when it comes to their legacy plans.

If you’re interested in learning more about how Manulife’s Signature Solutions can help you in your legacy planning, speak to one of our Financial Consultants today.

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    These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This article has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

    This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC web-sites ( or

    We recommend that you seek advice from a Manulife Financial Consultant or its Appointed Distributors before making a commitment to purchase a policy.



    2 EY Family Business Yearbook, 2017

    3 UBS – Global Family Office Report 2019

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    If you’re interested in learning more about how Manulife’s Signature Solutions can help you in your legacy planning, speak to one of our Financial Consultants today.


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