If your family estate includes a business, estate equalisation ensures fair distribution. One way to accomplish this is by strategically using life insurance. Life insurance can provide the cash needed to divide the estate equally, catering to your other children who may not be involved in the business.
Illustrating Estate Equalisation: Mr. Tan’s story
Meet Mr. Tan, founder of a thriving food and beverage company, with assets totalling S$8 million – S$5 million in the business and S$3 million in cash. He wants to ensure each of his 3 children receive S$5 million upon his death.
Utilising S$2 million for a life insurance policy with sum assured of S$10 million on himself, he ensures fair wealth distribution without liquidating the business:
- Upon the death of Mr. Tan, the two children not involved in the business will receive S$5 million each, ensuring their financial security.
- The third child, actively engaged in the food business, inherits the $5 million business, ensuring the brand’s legacy.
This approach proves invaluable, ensuring a balanced distribution even in situations where funds are limited.
