1912, the Japanese gave to the people of Washington, DC, 3,000 cherry
blossom trees which, this weekend, virtually paint the gardens around
the DC memorials in the freshest pink blooms, as DC launches the
Cherry Blossom Festival, with the symbolic lighting of the Japanese
the same way that beautiful things can be transferred across oceans
and generations, so, too, can wealth be transferred.
those readers who sought clarification on the usefulness of the
beneficiary in pension and annuity plans, this analogy is quite
useful: the beneficiary designation is one device that allows you
to transfer wealth to heirs.
big question is for how long? The simple answer is that it depends
on the selection you choose.
other big question is how is the payment subject to tax? The last
shall be first.
payments are considered by the Inland Revenue Board to be income.
Under the law, all income is subject to tax.
the law, the first 25 per cent of money due to you in your pension
savings is exempt from tax, and can be collected as a lumpsum.
the balance of the money is typically paid out as monthly cheques.
The pension provider, under the law, will furnish you with a statement
of pension income at the end of every year.
monthly cheque is income and is subject to tax. Currently, the tax
rate is 25 per cent for everybody, after your claims have been deducted.
example, should your pension cheque be $5,000 per month, or less,
you will pay no tax, if that is all your income. That is because
the law allows you up to $60,000 as a personal allowance, tax-free.
you receive $7,000 per month as a pension, you will have to pay
tax on $24,000 for the year (84,000-60,000).
you want to pay no tax, and you fall in that income bracket, you
can simply save $24,000, in a new individual annuity, and you will
pay no tax at all, while you save $24,000, for a rainy day.
is an incentive to save.
all pension and annuity cases, there is something called a guarantee
guarantee ensures that the monthly cheque will be paid to someone
else if you die within the guarantee period.
you select a 15-year guarantee period, and you die in year 5, the
beneficiary that you name will get the cheque for another 10 years
you outlive the 15 years, the pension cheques will continue until
pension cheques that pass to the beneficiary are still considered
income in the hands of the beneficiary.
more substantial aspect of transferring wealth is broadly titled
estate transfer and it deals with wills, the selection
of an ownership title or the making of the deeds of ownership, and
are mechanisms that allow individuals to perpetuate wealth through
generations, and ensure that wealth stays in the family.
the cherry blossoms that have bloomed in DC for almost 100 years,
as an act of friendship between governments, so, too, the will remains
testimony to an act of love between families.