Quora Answer: Do You Pay Taxes on Life Insurance?

The following is my answer to a Quora question: “Do you pay taxes on life insurance?”

This varies depending on the nature of the policy, the ownership structure, the tax residence, and the beneficiary.  In some places, especially the US, there is a tax if the cash value is greater than the coverage of the policy.  This is specific to investment-linked plans, since people use it as a vehicle to hide, and move funds for the specific purposes of bypassing KYC.

In the US, and Singapore, the payout from a claim, such as a death benefit, is not taxable by itself, if the beneficiary is a natural person.  However, if there is a delay in the payout of the policy, regardless of the reason, the interest earned in that interim period is taxable income.  If the payout is not to a natural person, but to the estate of the deceased, that death benefit adds to the value of the estate, and that estate is subject to estate tax.  This is not a consideration in Singapore since we do not have an estate tax.

In many places, there is a different tax on the payout, depending on whether the owner is a legal person such as company or trust, or a natural person.  This means it matter who paid the premium, and who the policy is absolutely assigned to.  In some countries, paying the premiums personally affords you a tax break.  In other countries, it is more advantageous for the policy to be assigned to an entity, and the premiums paid are on the books as a benefit to the director.

Quora Answer: Do You Lose Money in a Savings Account?

The following is my answer to a Quora question: “Do you lose money in a savings account?”

In real terms, you lose money in any vehicle where the return on the investment, the interest earned, is lower than the rate of inflation.  In Singapore, for example, even the very highest interest rates for savings accounts do not reach 2.5% per annum.

In Singapore, the official inflation rate is low, at around 1.33% in 2018.  However, that is not the full story.  In Singapore, inflation is measured using the cost price index, which is a basket of select goods and services consumed.  This would mean, for example, that if you eat your favourite prawn noodles, and it cost 20 cents more than last year, according to the CPI, we could say that the inflation is that 20 cents.  However, we must also consider that while the prawn noodles did cost 20 cents more, they also gave you one fishball less, and used a cheaper sauce.  If we were to factor that, the inflation is much more than that 20 cents.

Likewise, if we were to consider inflation in those real terms, applied to everything we consume, at a higher price for less, whether less quantity or quality, the inflationary impact on us is much more than the official inflation calculated on the CPI.

As a rule of thumb, for a stable economy, such as Singapore, we should consider that inflation to be around 2.5%, and any investment, any deposit, that earns less than that, is viewed to be diminishing in value, in real terms.  You most certainly lose money in savings accounts.  This is why ordinary people have savings accounts, and wealthy people have investment accounts, current accounts, and checking accounts.

Quora Answer: Do the Rich Always Have Financial Consultants?

The following is my answer to a Quora question: “Do rich people always have financial consultants?” 

The wealthier the person is, the more assets they have to manage, the greater the likelihood that they will have financial consultants, not just one.  This is in addition to asset managers, accountants and investment bankers.  One of the jobs of a financial consultant is to manage the client’s insurance portfolio, himself, his business, his key business associates and his family.  There are different categories of liability protection, different levels of assignment and ownership of policies, and all the attendant consequences of such policies.  The last would be claims management and follow-up, the use of certain policies for tax avoidance and as financial instruments in their own right.  That is a lot of work.

Quora Answer: Do Singaporeans Believe in Singapore Exceptionalism?

The following is my answer to a Quora question: “Do Singaporeans, on a subconscious level, believe in Singapore exceptionalism?”

It is a part of nationalism that every nation and territory believes it is special.  That is why we have the national anthem, a national pledge, flag and all the accoutrements of the state.  Any nation that does not have a healthy dose of exceptionalism cannot engender any form of loyalty to the state.  Such a state would eventually dissolve, or be absorbed by larger, more dynamic neighbours.

Singapore has a sort of dichotomy among the citizenry which is evident on social media sites such as Quora, and elsewhere.  There are those who would believe that Singapore is special in every way, and form, and any form of criticism is a fatal disparagement of the nation, and injurious to the national psyche.  And then there are Singaporeans who do nothing but disparage the country, and fellow citizens.  The latter have misconstrued their displeasure with the political system for self-hatred of the nation.

A certain sense of pride in the achievements of the nation is healthy, and should be cultured.  Singapore has much to be proud of, and Singaporeans who have worked overseas would have that sense of perspective.  But we should also call out areas where we lag, or are underperforming.  If we believe we are the best, then it is only right that we expect the best.

Quora Answer: Do Insurance Agents Know Why People are Denied Coverage?

The following is my answer to a Quora question: “Do life insurance agents know the reasons why people get denied?” 

If you are the incepting, and current servicing agent, you will know why, but it may not be the exact details.  For example, if the client was rejected due to compliance issues, you will know the exact reasons so that you have an opportunity to address them.  These reasons pertain to paperwork, legal declarations, and business relationships.  They require clarification. 

If it pertains to prior non-disclosure, or suspected fraud, you will also know, so that you can possibly clarify.  If, however, this triggers an investigation, you are not privy to details.  If it is due to a modification of terms of coverage due to inclement health conditions or pre-existing conditions, you will know exactly what it is, so that you can explain to the client.  The client may choose to take up, or reject coverage. 

If, however, it is due to a medical condition detected during a screening or the check-up, you will only know that there is an issue that may require further investigation, without the details of it, due to medical confidentiality.  The client may choose to buy the full report, or go for a medical with his own preferred doctor.

Quora Answer: Do Singaporeans Also Admire Duterte because of His Similarity to Lee Kuan Yew?

The following is my answer to a Quora question: “Do Singaporeans also admire Rodrigo Roa Duterte because of how similar he is to Lee Kwan Yew, in policies and greatness?” 

I am not sure, in which universe, would Rodrigo Roa Duterte would be considered great.  He is the current president of the Philippines.  He is still in office, and has no signature policy developments that can be said to impact the country positively.  On one hand, this is premature.  On the other hand, there are no signs of it. 

Firstly, whilst both are thought to be authoritarian, they are very different people.  There is much to criticise about Lee Kuan Yew, by his detractors.  But no one can ever claim a hint of any credibility issue.  Lee Kuan Yew never had affairs.  He was not known to lie.  He was ruthless, but he was fastidious in his relationships.  Duterte cannot even be faithful to his wife.  Can we trust his promises? 

Secondly, Lee Kuan Yew is an intellectual.  He was a sharp operator, an accomplished debater, and read profoundly.  Duterte is bluster, and bullying.  No one would ever mistake him for an intellectual.  He comes across as dim. 

Thirdly, Lee Kuan Yew understood the power of dressing well.  He has never been pictured looking disheveled, or unkempt.  Duterte looks like he is estranged from the shower, and has a deathly fear of ironed shirts. 

Putting all that aside, Lee Kuan Yew would never pander to a foreign power to the extent Duterte is hanging on to China’s tits.  As Prime Minister of Singapore, he made the Secretary of State of the United States of America issue a groveling apology for even attempting to bribe our ministers.  Duterte cannot even secure his country’s interests in the South China Sea. 

Lee Kuan Yew fired ministers for having more than one wife, or mistresses.  The reasoning being that a man who cannot be faithful to one woman, cannot be faithful to the country.  Duterte himself is guilty of multiple affairs, and admitted to sexual assault.  He has appointed sycophants to important posts in government, even as they are being investigated for corruption.  They do not have the same moral fibre.  Lee Kuan Yew was particular about adherence to the letter of the law.  He would never approve of extrajudicial killings of suspected criminals, activists, and journalists. 

In summary, let alone this laughable comparison with Lee Kuan Yew, Rodrigo Roa Duterte, on the consideration of his own merits, is far from impressive, and definitely not admired.  He is an improvement on other Filipino politicians, but not by much.  Choosing between him and other candidates, such as the Marcos clan, is like choosing your favourite form of haemorrhoids.  I feel very sorry for Filipino voters, because they deserve better.

Quora Answer: Do Revocable Trusts become Irrevocable upon the Death of the Grantor?

The following is my answer to a Quora question: “Do revocable trusts become irrevocable upon the death of the grantor?”

Upon the death of the grantor or settlor, a revocable trust becomes a testamentary trust.  Testamentary trusts, by their nature, are always irrevocable trusts since there is no settlor alive to change the trust agreement.  This process is automatic, upon the filing of the death certificate.