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Financial File or 'Family File'

It is important for expatriates to have a firm grasp on the fact that many situations change when they live abroad. It is dangerous for new expatriates to assume that things are dealt with in the same way as in their home country. Travelling often adds a level of complexity to the organisation and filing of all personal papers that are important. Paguro explains why creating a 'Family File' is so crucial for expats.

Everybody in the family has to have a clear idea of where all the family's important documents are kept, in case of emergency.  Therefore, the organisation and filing of important papers is crucial if anything goes wrong. This means that the executor of any will should know where the document file is, and even have a copy, in case both parents die.

One suggestion is to create a Family File , which creates a central location for all important documents pertaining to the family. Not only could it contain all your financial information (mortgage, life insurance, bank account numbers, pension plans etc.) but non financial papers (wills, birth certificates, passports, health and vaccination records). The storage location of such a Family File should then be revealed to your dependants and all the parties involved.  

This exercise is useful also for the daily life, since it allows monitoring your financial situation more easily.

The Family File: 'Why is it important to have it and keep it updated?'

The twists and turns of life are unpredictable, and if a tragedy occurs in a foreign country,  it is dangerous to assume that the system works in the same way as that of your own country. You need to be aware of the differences and how they could affect your life and that of your children.

Creating the Family File gives you peace of mind. You know what you have, where everything is and how to give access to others should the need arise.
Every move will bring the need to update the Family File.
For example, your will may not be valid in the country you are currently living in, unless it is registered with a lawyer or a notary, or changed to adapt it to the local requirements.
Tax exposure in the event of death abroad is another important element to keep in mind and do some research on.

The financial nightmare that could follow, if steps have not been taken to be prepared, could  threaten the future of a family. 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 the working partner.
  • You have your papers in order and ready to be passed on and  your papers are up - to - date and clearly state your wishes for your family's future. 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 costs to the minimum required;
  • You are aware of company and government (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 your and your family's financial independence;
  • You are already funding your retirement and your children's education.

Are you prepared?

Paguro has also compiled for you a list of the most important documents to be kept updated when you move around the world. If you know can think of any more, we would like to hear from you. Send us your comment using the "add comment" button.

Health Insurance

First: do you have a health insurance policy? If yes, what kind of a coverage do you have?

If you are on a company pension scheme, then you need to find out which 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 governments is likely to decrease - though still a personal decision.
Be aware that your children may need health insurance after a certain age if they are still studying. Look into the possibilities of your child joining a health care insurance plan. This is especially advisable in case your child suffers from a chronic illness like diabetes for example. Health care companies usually do not accept new clients in such cases.

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 dependents.

Then establish precisely which policies are already in existence and which benefits would be available from the company's pension scheme (it will tell you if a further coverage is needed).

Where life insurance policies 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.

Should a death occur, generally speaking the spouse has to provide a copy of the employee's death certificate - certified in the country of death.  Make sure that your working spouse ascertains that the company has on file beneficiary forms listing the employee's named beneficiaries (in some countries it may not automatically be the spouse or the children) for pension, profit sharing and life insurance. Make sure that your spouse has a pension plan for that matter!


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 do not always have a beneficiary designation (check with your company!).  The best piece of advice is to ensure that the beneficiary designations for their life insurance, pension and profit sharing plans are current. They could be separate for each of these plans.

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.

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 options
  • Incentive stock options

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 pension 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 but there is a cure:method and constant monitoring of your papers!  Paguro would welcome suggestions on all of the above topics.  We have heard of companies that supposedly go through the paperwork nightmare of collating all these schemes into a unique list, but we have not been able to come up with any names. Do they really exist?

Ask yourself, "If I were to retire now, what level of income would I need?"

It is a good start for your pension planning (do not forget about inflation before and after you retire!)  to understand where you are, where you want to be and decide on 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 available. 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 realise the severity of the impact only when it actually happens. To avoid being one of those, take your time and review all the existing arrangements, list where all the documentation is and take note if any further action that is needed.

Savings

Most people have bank and building society accounts, but do your dependents 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 of these items 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 or it could be easy, if you are organised!

If you have everything on the 'Family 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 returns is a daunting task for everybody, filing it in a foreign country as well does add to the stress. Keep a file of all documents needed, from the documentation about the details of interest paid on your bank accounts, to where to find the tax credit vouchers from share dividends, and so on.
Living in a different country from 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 out ahead of the game instead of being overwhelmed by it.

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! One cannot assume that the distribution of your wealth is going to happen as you envision it, without clear instructions in a will. 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 from those in your home country and your dependents may find themselves in deep trouble without a will.

Make one now! It is vital for husband, wife and children.
If you have one, is it updated? Have you reviewed it recently since your latest move, or since a major change of circumstances occurred (marriage, divorce, new business arrangements etc.)?

Do you, your dependents or executors know where it is?
Make sure you inform your dependents and any other party involved as to how to locate it and who the lawyer is.