An article first published on Providend website here:
https://providend.com/estate-planning-distributing-your-financial-assets-after-death/
In this article, we focus on estate planning, which is the process of strategically managing and distributing your wealth and assets to future generations after death. It involves creating a comprehensive plan that ensures the smooth transition of assets and values, while minimizing estate complications and conflicts among beneficiaries.
Most people would think of Wills when we mention estate planning, but it is a lot more than just Wills. There are other important areas to consider, such as Jointly Owned Asset, CPF Nomination, Insurance Nomination and Trust Set Up. We will cover all these areas in this article.
Why is Estate Planning Important?
We are no longer around to make or amend decisions after death, hence the greater need for estate planning while you are alive to ensure that your assets are distributed according to your wishes after your passing.
Without an estate plan, your assets will be distributed according to Intestate Succession Act[1] or Muslim Inheritance Law[2] (known as the Faraidh), which might not reflect what you wish for your estate distribution. The entire probate process may take up to six months or more, with increased hassle, stress and cost more for your family members.
Some practical questions to ponder before making your estate plan:
- Who do you want to appoint to manage and distribute your estate?
- What are the assets you want to distribute?
- Who do you want to distribute each asset to?
- What percentage of your assets you want to distribute to each of your beneficiaries?
- When do you want to distribute your estate to your beneficiaries?
Wills Writing
Will is a legal document governed by the Wills Act[3] and it outlines how your assets and property should be distributed after death. A few key aspects of a Will are:
- Asset Distribution:
A Will specifies how your assets should be distributed among their beneficiaries. The assets might include financial accounts, insurance policies, personal belongings, real estate, and investments. You would need to consider which beneficiaries are suitable for inheriting which assets. For example, you would prefer someone who are investment savvy to inherit your investments. - Executor Appointment:
A Will appoints an executor who is responsible for carrying out the instructions outlined in the Will. The executor manages the estate’s administration, including paying debts, taxes, and distributing assets according to the Will’s provisions. Therefore, you would want to appoint someone you can trust and capable of handling the estate administration. - Guardianship for Minor Children:
If you have minor children, the Will can designate guardians to care for them when you pass on. Obviously, you want to designate someone who you can trust and who love your minor children to be their guardians. - Will Drafting:
You can draft the Will yourself through online will-writing services if your distribution wishes are relatively straightforward. However, to ensure validity of your Will, it is best to engage a lawyer or professional Will writer to draft up the Will. You need to sign the Will in the presence of 2 or more witnesses. - Will Storage:
You can keep your Will in a safe deposit box or with your lawyer. You can upload a digital copy of your Will to My Legacy Vault[4]. Alternatively, you may consider registering your Will with the Wills Registry[5] at Singapore Academy of Law (SAL).
However, not all your assets can be distributed via Will. There are non-estate assets which must be handled by other means, such as Jointly Owned Asset, CPF, Insurance Policies and Trust.
Jointly Owned Asset
In general, the rule of “Right of Survivorship” applies to jointly owned asset, which can be passed to the surviving owner outside the probate process.
For joint bank account, most banks would have right of survivorship clauses in their terms and conditions to facilitate the payout of all the money in the account to the surviving joint account holder, but things might not be straightforward should there be legal dispute from the estate distribution.
For joint property, there are 2 manners of holding, namely joint tenancy and tenancy-in-common. Right of survivorship rule would apply to joint tenancy property, where the property will pass automatically and fully to the surviving tenants. However, right of survivorship rule does not apply to tenancy-in-common property, each tenant owns a distinctive share in the property and the deceased’s interest in the property remains in his own estate, not pass on to the surviving tenants.
To avoid complications, it is generally advisable to spell out how jointly owned assets are distributed in your Will, especially if you intend to deviate from the default right of survivorship rules.
CPF Nomination
A CPF nomination allows you to specify who will receive your CPF savings in cash and the proportion of your savings each nominee will receive when you pass away. It is needed even if you have already made a Will because CPF savings are excluded from your estate and therefore cannot be covered by the Will.
You can make a CPF nomination online at https://www.cpf.gov.sg/member/tools-and-services/forms-e-applications/make-a-cpf-nomination at your own convenience. Alternatively, you may make an appointment and visit any of the CPF Service Centres to make your nomination.
A CPF nomination covers your CPF savings in your Ordinary, Special, MediSave and Retirement Accounts, unused CPF LIFE premiums, and discounted Singtel shares, but not properties bought with your CPF savings, payout from Dependants’ Protection Scheme (DPS), and investments under CPF Investment Scheme (CPFIS). The latter will form part of your estate and you should list them in your Will for distribution.
For more details in making your CPF nomination, you may refer to CPF website here:
https://www.cpf.gov.sg/member/account-services/providing-for-your-loved-ones/making-a-cpf-nomination
Insurance Nomination
Insurance nomination is governed by the Insurance Act[6] and it allows policyholders to nominate beneficiaries to receive the insurance proceeds. With proper insurance nomination, the insurance proceeds do not form part of your estate, which means your nominees can bypass the lengthy probate process and claim the proceeds in shorter time.
There are 2 main types of nominations:
- Revocable Nomination:
You can make revocable nomination to anyone and revoke it in the future by a new revocable nomination or a Will. It is only applicable to the death benefits and not living benefits. For example, critical illness claims are paid to policyholder. - Trust (Irrevocable) Nomination:
You can only make trust nomination to spouse and children, and it cannot be revoked without the written consent from all the nominees. It is applicable to both living and death benefits. One major benefit of a trust nomination is the protection of the proceeds against claims from your creditors.
You can make insurance nomination by filling in a Revocable Nomination Form or Trust Nomination Form obtained from your insurance company.
For more details in Insurance Nomination, you may refer to “Your Guide to the Nomination of Insurance Nominees” by the Life Insurance Association (LIA)[7]:
https://www.lia.org.sg/media/2076/nomination-of-insurance-nominees_english_2019.pdf
Trust Set Up
Trust is a legal arrangement governed by the Trustees Act[8] in which you (known as the Settlor) appoint a Trustee to administer and manage your assets for the benefit of the Beneficiaries. You may also appoint a Protector to supervise the actions of the Trustee and to ensure that the Trustee acts in accordance with your intentions.
Trust is optional for estate planning. You may consider setting up a Trust instead of a Will or in combination with a Will for various reasons:
- Probate Avoidance:
A Trust does not pass through probate, which is a legal process that involves the validation of a Will and the distribution of assets under court supervision. Assets held in a Trust can pass directly to the beneficiaries outside of probate. - Confidentiality:
When a Will goes through Probate, it becomes a public document, and anyone can access it to see how your assets are distributed. On the other hand, a Trust are typically private arrangements, and the details of asset distribution remain confidential. - Flexible Distribution:
A Trust can be structured to provide a high degree of control and flexibility. You can specify how and when beneficiaries receive distributions under what conditions or restrictions. - Asset Management:
If you have complex assets, such as multiple properties, business interests, or investments, a Trust can include specific instructions for managing and distributing those assets that may be more detailed than what a Will can provide. - Special Needs:
If you have beneficiaries with special needs, such as minor children, individuals with disabilities, or spendthrift tendencies, a Trust can be tailored to address those needs by providing for their financial well-being while ensuring that assets are managed responsibly.
Practical Considerations
Start Early While Still Able
It is beneficial to start estate planning early, especially when you have assets to protect and loved ones to provide for. Some key milestones and life events that often trigger the need for estate planning are:
- Marriage:
When you get married, you would want to create or update your estate plan to ensure that your spouse and loved ones like parents and siblings are provided for. - Children:
Once you have children, it is crucial to establish guardianship provisions in your estate plan. - Assets Acquisition:
As you accumulate assets, such as a home, savings accounts, investments, or a business, you should consider how these assets will be managed and distributed in the future. - Life Changes:
Any significant life changes, such as divorce, remarriage, or death of loved ones, can warrant updates to your estate plan. - Retirement:
As you plan for retirement, consider how your assets and income sources will sustain you during retirement and what will happen to your assets when you pass on.
Getting Professional Help
There are various professionals and services you can engage for estate planning:
- Wealth/Financial Advisers:
Wealth/Financial advisers can help you assess your financial situation and develop a comprehensive estate plan that takes into account your investments, insurance policies, retirement accounts, and other financial assets. - Estate Planning Lawyers:
Estate planning attorneys specialise in creating legally sound estate plans that meet your specific needs and comply with Singapore laws. - Private Trust Companies:
Private trust companies can act as a trustee to your Trust and manage your assets according to your instructions. - Insurance Agents:
Insurance agents can help you select appropriate policies and coverage for your protection needs. Life insurance can be used for instant estate creation.
At Providend, our Client Adviser would work with you and engage a network of lawyers and private trust companies to coordinate and execute a comprehensive estate solution for you.
Conclusion
Estate planning is another crucial aspect of life planning. The primary objective of estate planning is to ensure that your assets are managed, preserved, and distributed according to your wishes after your passing. Ultimately, we want to ensure that our loved ones are provided for financially with proper estate planning.
– Footnotes –
[1] Intestate Succession Act: https://sso.agc.gov.sg/Act/ISA1967
[2] Muslim Inheritance Law: https://www.syariahcourt.gov.sg/Inheritance/Overview
[3] Wills Act: https://sso.agc.gov.sg/Act/WA1838
[4] My Legacy Vault: https://mylegacy.life.gov.sg/vault/
[5] SAL Wills Registry: https://wills.sal.sg/
[6] Insurance Act: https://sso.agc.gov.sg/Act/IA1966
[7] LIA: https://www.lia.org.sg/
[8] Trustees Act: https://sso.agc.gov.sg/Act/TA1967
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