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 In the coming months, we will be bringing you a series of articles on financial planning for residents of Ras al Khaimah. We will look at the importance of continuing to contribute for retirement whilst living overseas, inheritance planning (especially assets in a country practicing Sharia’h Law), saving for a child’s future education costs, expatriate medical insurance, tax-efficient investment, etc...
"I would like to start with the basics, the foundations of all financial planning which, for some reason, many of us forget when we move overseas — protecting our assets. Probably the biggest asset many of us have is our homes; or at least the contents within the home. In our home countries, it is one of our main priorities to ensure our homes and our belongings are protected against fire, water damage or theft.
Despite this, well over 50% of expatriates have not even thought about ensuring their assets in the UAE are protected, or they got buildings insurance when they purchased their home but have never checked that the policy is still running. And it is not a cost issue, buildings and/or contents insurance is relatively cheap in the UAE; for example, it will cost approximately AED 600 per annum to insure an Al Hamra townhouse.
The other main asset we need to protect is our savings — not against damage or loss but to ensure our families have access to money should the worst happen.
Many expatriates are unaware that both individual and joint name banks accounts in the UAE will be frozen on an expatriate’s death. Consequently, a surviving spouse will not have access to money in a joint name bank account (even where they are one of the accountholders) or any account which is in their spouses’ name.
These accounts will remain frozen until probate is granted and all the deceased’s debts in the UAE (including parking tickets and other fines) are repaid. The procedure for reactivating bank accounts is complex and it can take up to 18 months for the Courts to name the beneficiaries to whom the monies should be paid.
Obviously, this can create major problems if the majority of the family’s savings are in their UAE account. The surviving family will have no money (for up to 18 months) to pay the rent or mortgage, the utility bills, food and clothing, education fees, or even their return home.
However, only the UAE based bank accounts are frozen so this does not affect savings in other countries. Consequently, this problem can be simply avoided by establishing an offshore bank account outside the UAE. A good solution is a UK offshore account which offers tax-free savings as well as financial and legal regulation familiar to the expatriate. These accounts also offer debit cards, cheque books and internet banking for easy access to savings. Best of all, they cost nothing to establish!
When advising expatriates, I always suggest holding 3 months’ salary in the local UAE account for day-to-day living and to cover any unforeseen emergencies.
The rest can be held in an offshore account where it is protected and can easily be accessed if required. If money is transferred offshore on a quarterly basis (as opposed to every month) this will reduce the bank transfer fees and help liquidity.
It is also important to note at this stage that, if there is not enough money in your offshore account to live on for 18 months, a small life assurance policy (written in trust) will easily provide the family quick access to cash for a small monthly premium.
Not protecting ones assets can result in potentially huge problems, instantly wiping out all their savings. However, these problems can easily and cheaply be mitigated by a little basic financial planning, which we would undertake without thinking, if we were back in our home countries."
About the AuthorDarren Ashley is Managing Director of Candour Consultancy.
Candour advises on the full range of financial services available to expatriates in the Middle East.
www.candourconsultancy.com |
