Full guide to estate planning Singapore
Have you ever wondered what estate planning is?
Estate planning is the preparation of tasks to manage an individual’s assets in the event of incapacitation or death.
This planning determines how one’s assets would be distributed and managed after death or in the event of unforeseen circumstances with the help of an attorney!
Death is a sensitive topic, so many avoid discussions about it. But this only results in an under-preparedness of their assets, debts and financial arrangements should they pass on.
Not doing estate planning can result in losses for surviving family members as they might not be aware of all the assets you have, leading to forced liquidation.
We can’t stress this enough, it is important that everyone carries out estate planning as they become adults.
Benefits of estate planning
Estate planning brings clarity and direction to the distribution of assets.
With clarity, it would bring about better financial management for surviving members as debts and inheritance would be stated clearly, hence future finances can be better managed.
There will also be a shorter time lag on the distribution of assets upon death.
The estate plan would contain the details and direction on asset distribution amongst family members, preventing any potential internal disputes.
Estate planning prevents forced liquidation of assets to happen.
If you do not have a will, your assets will be distributed according to the Intestate Succession Act.
Assets like properties need to be sold before proceeds can be split.
Without advance planning, the executor has to do a forced sale of assets, quickly liquidating non-cash properties to generate the cash flow needed.
Properties may be sold at unfavourable prices due to bad timing or short timeframe. Hence, the price obtained is often far lower than fair market value.
Estate planning allows you to nominate beneficiaries of your CPF savings
In Singapore’s context, CPF savings may be left unclaimed or assets may go unaccounted for if a Will is not made.
CPF monies in your account would be distributed according to the Intestate Succession Act, which may not be in line with your wishes. Hence, with an estate plan, beneficiaries of your CPF monies can be nominated.
Estate planning allows your heirs to manage your portfolio
With estate planning, your heirs would be able to inherit your assets and investments in accordance with your will.
On top of that, they would have a plan to follow on how your portfolio should be managed and executed. This determines how your surviving family members should take over your investment portfolio.
How early should you start estate planning?
There is no appropriate time to start estate planning, but you should start planning when you are still young.
Once you reach adulthood around the age of 20, it would be wise to start thinking about your estate plan.
Estate planning is not just for retirees but for everyone.
No individual would be able to predict how long we live, the illness we may contract or any accidents that may happen.
It is always better to have an estate plan to better prepare for the future and any unforeseen circumstances.
There is also no limitation on when and how much you require in order to plan your estate. Hence, you should start estate planning when you are young to have a better idea of the number of assets you have, and how they should be managed and distributed.
This is especially important for adults with children as you would be able to determine the distribution of assets to each child and avoid any dispute amongst surviving family members.
We should always start estate planning when we are young to better prepare us for the future and our children.
Do I have to be rich to start estate planning?
Everyone can benefit from having an estate plan. You do not have to be rich to start estate planning.
Estate planning is all about how you want your assets to be managed or distributed.
The amount of assets that you have currently does not affect the need for estate planning.
The purpose of having an estate plan is to be better prepared for the future and have peace of mind should death prevail.
Everyone is eligible to start estate planning, no matter how many assets you possess.
To find out more about how you can start estate planning, consider contacting us.
We adopt a holistic approach, from will-writing to insurance planning to estate planning. By doing so, we ensure that the process is relatively affordable, efficient and transparent!
Common Estate planning terminology
Some common estate planning terminologies include Beneficiary, Testator, testate, Intestate, probate, executor, administrator and trustee.
Beneficiary - any person who is eligible to receive a distribution from a trust, will or life insurance policy.
Testator - someone who makes and executes a last will and testament.
Testate - when someone has passed on with a last will and testament in place.
Intestate - when someone has passed on without a last will and estate in place.
Probate - The legal process of governing a person’s estate after their death.
Executor - an individual appointed to administer the last will and testament of a deceased person.
Administrator - the person in charge of compiling assets and managing the estate through probate court.
Trustee - the person who acts as a custodian for the assets held within a Trust.
What happens after you pass on?
When you pass on, your assets would be first used to pay any outstanding debts before any distribution to the respective beneficiaries can happen.
Failure to understand this may lead to overestimation of the eventual size of the assets left behind for your loved ones.
The estate consists of everything with monetary value that is left behind by the deceased. This includes all the capital one has such as properties and investments.
However, there are exceptions.
The CPF monies and assets do not fall under the category of one’s estate and cannot be touched by creditors.
Any remaining CPF monies will be disbursed to the nominees by the CPF board after any deductions to MediSave to pay off outstanding medical bills.
Once someone passes on, all their assets will be frozen. The executor, which is the person designated to handle the deceased’s will, would be granted probate to settle any deceased liabilities and distribute the remaining assets.
Cost of funeral would take precedence, following that, outstanding debts would be paid off.
After the court has ensured that all debts have been paid off, the remaining assets will then be distributed to the beneficiaries stated in the will.
In the case where the debts of the deceased exceed their assets, there would be an order of debt repayment following the Bankruptcy Act, after accounting for the cost of a funeral.
What happens if a person dies intestate?
The Intestate Succession Act will apply to determine who manages the estate and how the assets would be distributed.
You will have no say in how the distribution would be done, and all decisions would be decided by the state.
Should such a case occur, assets would be frozen and next of kin must apply for letters of administration to unfreeze the assets.
Additional fees would be required for the letter of administration on top of a grant of probate, whereby an individual is recognised as the executor of the deceased’s estate.
In such cases, the person’s beneficiaries will still inherit his assets as his assets will be distributed according to the rules under the Intestate Succession Act.
Under this process, the person willing to be the Administrator must apply to the Court to extract the Grant of Letters of Administration. He will then distribute the estate according to the Intestate Succession Act.
Some provisions under the Intestate Succession Act:
In the absence of any surviving spouse, children or parents, the deceased’s siblings will be entitled to the estate. If not siblings, the grandparents will share the estate.
What are the main steps in estate planning?
There are 5 main steps in estate planning:
Determine how much you have – identify and itemise all major assets and how much of each you own and the debts you owe; prepare your Statement of Net Worth
Decide how you wish to distribute your assets - make a list of individuals you would like to leave something for and allocate accordingly
Decide on how and when you would like to transfer the assets – you may wish to transfer the asset upon your death or a specified period after your death
Execute your plan – the most common way is to draft a will or set up a trust to manage the assets
Review your plan and revise as necessary – this is necessary as needs and circumstances change over time.
The estate planning checklist
Some common estate planning tools in Singapore include:
Wills and testamentary trust,
Central Provident Fund (CPF) nomination,
Insurance nomination,
Lasting Power of Attorney (LPA),
Advanced Medical Directives (AMD), and
Advanced Care Planning (ACP)
Wills and Testamentary Trust
Wills contain instructions on how one’s estate should be issued after death. It is important to identify your assets to ensure that all assets are accounted for.
Next, you would have to select beneficiaries, including reserve beneficiaries, who are persons who would benefit from the will in the event that all the beneficiaries listed in the will are no longer alive.
On top of that, executors and trustees have to be appointed, where both persons must be at least 21 years old at the time the will takes effect.
A testamentary trust is a trust that is established in accordance with the instructions contained in a last will and testament.
A trust can also be created under your will to hold certain property “on trust” for the beneficiaries of your will upon your death, which is also known as a testamentary trust.
How can you make a will? Feel free to approach us if you’d like to make one!
Techiya partners with fortiswill to provide will-writing and estate planning services.
We adopt a holistic approach to make estate planning more affordable!
CPF Nomination
CPF Nomination does not fall under a deceased’s estate, hence cannot be distributed under a will.
With a CPF nomination, your savings will be distributed to your nominees according to your wishes.
In the absence of a CPF nomination, your CPF savings will be distributed by the Public Trustee’s Office to your family members based on the intestacy laws or Muslim Inheritance Certificate.
You would not be able to decide which family member will receive your savings or how much they would receive.
A separate nomination would have to be done in order to complete a CPF nomination. This nomination can be done online by logging into My cpf Online Services with your Singpass.
The nomination must be done and signed in the presence of two witnesses who are at least 21 years old, and they must each possess a valid Singpass to log in to My cpf Online Services to witness your nomination.
Alternatively, the nomination process can also be done in person at the CPF Service Centres.
Insurance Nomination
Similar to CPF monies, insurance policies such as life policies do not form part of the deceased’s estate.
Life insurance creates and guarantees immediate capital to your beneficiaries. This is important as families may have to liquidate certain assets to fund their livelihood when the breadwinner of the house passes on.
All assets would be required to go through probation or administration before they can be liquidated. But insurance policies provide liquidity to your beneficiaries without probate or a letter of administration.
In other words, it just makes the process more smooth and gives you the peace of mind knowing that no other parties can meddle with the capital handed down to your beneficiaries
If you have no insurance policy and are planning to make an estate plan, it may be smart to reach out to a financial advisor who can sufficiently guide you through the seemingly frustrating process.
Techiya provides Insurance planning services and estate planning services, our team is equipped with the necessary experience and skill to make sure you don’t have to break a sweat planning!
So feel free to contact us for a free consultation worth over $200 and we’ll show you how we can value-add to you.
With regards to Insurance nomination, it allows you to decide how you wish the proceeds from your policy will be distributed!
There are two types of insurance nominations:
Trust nomination
Revocable nomination
Irrevocable vs revocable trust
A revocable nomination is when the policy owner can terminate or change the terms of the trust, allowing the settlor to have some control over the nominees who will receive the policy proceeds.
While a trust nomination is a type of nomination that cannot be rescinded, amended or modified after it has been made unless all nominees consent to the change.
It is not compulsory for policy owners to make insurance nominations if a will had already been made.
The benefits of the policy would be distributed in accordance with the deceased’s will.
Lasting Power of Attorney (LPA)
Lasting Power of Attorney (LPA) is a legal document that allows a person who is at least 21 years of age (‘donor’), to appoint up to two persons(‘donee(s)’) to make decisions on his/her behalf if he/she loses mental capacity one day.
A donee can be appointed to act in either personal welfare or property & affairs matters.
An LPA enables a person to indicate your personal choice of a trusted person who can come forward to act on your behalf should you lose the mental capacity one day.
This also helps to protect your estate from being misused by irresponsible caregivers should you suffer from mental incapacity.
Advanced Medical Directives (AMD)
Advance Medical Directives (AMD) is a legal document that your sign in advance to inform the doctor treating you (in the event you become terminally ill and unconscious) that you do not want any extraordinary life-sustaining treatment to be used to prolong your life.
An AMD is a voluntary decision, determined solely by one’s wishes. It can be made by anyone who is aged 21 years old and above and is not mentally disordered.
The AMD must be made through and consulted by a doctor with a witness.
The AMD form itself is free, however, consultation provided by the doctor would be accounted for.
Advanced Care Planning (ACP)
Advanced Care Planning (ACP) is a national programme that aims to empower Singaporeans to choose how they would like to be cared for.
It promotes care that is consistent with one’s values and preferences.
This process includes discussing one’s personal beliefs and goals for care with their loved ones and healthcare providers in the event of any unforeseen circumstances.
For example, in the case of Mary, a 55-year-old with a 57-year-old husband, Jack. She entered a coma after an unfortunate car accident. She did not discuss her end-of-life care preferences with her husband, and hence he has no advance directive.
The doctors mentioned that there would be a low chance of her waking up from her coma, which leaves her husband to make a choice on whether he should prolong her life or let her go.
Should there be advanced care planning, Jack would be able to make a better decision based on her preference for end-of-life care.
Hence, This plan better prepares you and your loved ones on how treatment and nursing should be done should you lose your mental capacity in future.
Is there inheritance tax in Singapore?
Inheritance tax is the tax charged on the total market value of the assets of the deceased at the date of death, regardless of whether there is a will.
Inheritance tax is only applicable to persons who died before 15 February 2008. This taxation was abolished in 2008 as it did not fulfil its objective of taxing more on the wealthy.
Conclusion
Estate planning is all about being prepared for the future. This planning reduces any additional cost required to unfreeze the assets if you die intestate.
There are also many available planning tool kits which can be used to start estate planning.
With the accessibility and benefits brought about by estate planning, you should try to start estate planning when you are still young.
So if you’re interested in making an estate plan, purchase an insurance policy, write a will or do all three at the same time (why not?).
Consider reaching out to Techiya!
We adopt a holistic approach, from will-writing to insurance planning to estate planning. By doing so, we ensure that the process is relatively affordable, efficient and transparent!
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