Estate planning might not be the most cheerful subject to dwell on, but it’s one of the most critical aspects of financial planning. Thinking ahead and making preparations for what happens after you’re gone can ease the emotional and financial burdens on your loved ones. Instead of leaving your family to navigate a maze of legal complications and potential disputes, an estate plan allows you to take charge of your legacy.
While it might feel daunting, estate planning doesn’t have to be overwhelming. This guide simplifies it into 10 actionable steps, ensuring you cover all bases to safeguard your assets and ensure your wishes are honored.
What Is Estate Planning?
Despite the grand connotations of the word “estate,” it applies to everyone who has assets to their name. Whether you own a sprawling property or have modest savings in the bank, your “estate” refers to everything you own.
Estate planning is the process of determining how your assets will be distributed after you die or how decisions about your health and finances will be made if you’re incapacitated. Done right, it’s not just about protecting wealth; it’s about protecting relationships, ensuring peace of mind, and leaving a lasting impact.
1. Write a Will
A will is the cornerstone of any estate plan. It serves as a legally binding document that outlines how your assets should be distributed.
Your will can include specific conditions—like when your children can access their inheritance—or establish trusts to manage assets over time. If you have young children, it’s essential to appoint a guardian in case both parents are no longer around.
Do you need a lawyer to draft your will?
While technically, anyone aged 21 and above can draft a will, ensuring its validity can be tricky. A poorly worded will or one that doesn’t meet legal requirements could lead to disputes. Engaging a lawyer or will-writing service ensures your intentions are clear and legally binding.
What happens if you die without a will?
If you pass away intestate (without a will), your assets will be distributed according to Singapore’s Intestate Succession Act. This may not align with your wishes, and assets could go to relatives you didn’t intend to benefit—or even to the government if no relatives are found.
2. Make a CPF Nomination
Your CPF savings are not automatically distributed according to your will. To decide who will inherit your CPF funds, you need to make a CPF nomination.
This can be done online via the CPF website using your Singpass. You’ll need two witnesses with valid Singpasses to complete the process. You can nominate up to 15 beneficiaries, allocating the percentages as you see fit.
Without a nomination, your CPF savings will be distributed under intestacy laws.
3. Nominate Beneficiaries for Life Insurance Policies
Life insurance provides a financial safety net for your loved ones. However, the payouts will only reach your intended recipients if you’ve made proper beneficiary nominations.
Most insurance policies allow you to distribute proceeds through a will, but you can also make an irrevocable trust nomination if you want greater certainty. This is particularly useful for securing your spouse or children’s future.
4. Consider Other Insurance Policies
Beyond life insurance, policies like savings plans or retirement annuities often accumulate cash value. This value doesn’t vanish when you pass on—it’s transferred to beneficiaries.
Ensure you’ve made the necessary nominations with your insurer to avoid disputes.
5. Create a Lasting Power of Attorney (LPA)
An LPA is a critical document that grants someone you trust the authority to make decisions on your behalf if you lose mental capacity.
How to make an LPA:
- Choose a trusted donee who will act in your best interests.
- Draft your LPA online through the Office of the Public Guardian Online (OPGO) using Singpass.
- Have your LPA certified by a doctor, lawyer, or psychiatrist.
- Submit it for registration.
There are two types of LPAs:
- LPA Form 1: Grants general powers.
- LPA Form 2: Grants customized powers but requires a lawyer.
6. Sign an Advance Medical Directive (AMD)
An AMD ensures that extraordinary life-sustaining treatments, like being kept alive on a ventilator, are not administered against your wishes if you’re terminally ill or in a coma.
To create an AMD, visit a doctor, sign the form in their presence, and submit it to the Registrar of Advance Medical Directives. This ensures your loved ones are spared from making emotionally difficult decisions.
7. Plan for Taxes and Debts
While Singapore doesn’t impose inheritance taxes, debts such as mortgages, credit card balances, or loans will still need to be paid off after you pass.
Ensure your estate has enough liquidity to cover outstanding debts. You can also set up trusts to manage tax implications on assets in foreign jurisdictions.
8. Establish a Trust
A trust is a versatile tool for managing your assets. It allows you to distribute wealth according to your wishes while keeping details confidential.
Trusts are especially useful for:
- Managing assets for young children until they come of age.
- Protecting wealth from creditors or disputes.
- Ensuring long-term care for loved ones with special needs.
Setting up a trust requires legal expertise, so consult a lawyer to ensure it’s structured correctly.
9. Organize Your Financial Documents
To make things easier for your loved ones, organize your financial documents. Include:
- Bank account details
- Insurance policies
- Property deeds
- Investments and retirement accounts
Create a master file and inform your executor or trusted family member of its location.
10. Communicate Your Wishes
Finally, have open conversations with your family about your estate plan. While these discussions can be uncomfortable, they prevent misunderstandings and provide clarity on your decisions.
Take Control of Your Legacy
Estate planning isn’t just about dividing assets—it’s about protecting your loved ones and ensuring your legacy reflects your values. By taking these 10 steps, you can provide peace of mind to your family and prevent unnecessary complications.
Start today. The best time to plan is when life is still predictable, and your mind is clear.
Ready to take control of your financial future?
Consider scheduling a financial health check with a Financial Advisor. Whether you’re just starting your financial journey or looking to optimize your existing plan, a Financial Advisor can provide personalized guidance tailored to your unique goals and circumstances.
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