It’s crucial to get your affairs in order while you’re still financially stable and mentally sharp, regardless of whether you’re a billionaire or not.
First and foremost, you’ll have peace of mind knowing that you’ve done all that you could to protect your loved ones. Not just that, setting up your estate plan as early as now can make it easier for you to just re-assess it later and make the adjustments as needed.
For this reason, estate planning is not something exclusive only for the wealthy but for everyone.
When you plan your estate, you decide how you want your assets to be distributed and managed after your death.
The first step you should do is to create an asset list. In other words, you need to assess and list down all of your assets or anything with a monetary worth, such as your house, money in the bank, Central Provident Fund (CPF), stocks and bonds, and life insurance policies, should be considered. Make sure to keep the list updated.
You should also take into account your liabilities, which include everything you owe, such as home and auto loans, credit card debts, and so on. The net worth of your estate is the sum of your assets, liabilities, fees, and expenses, as well as the type of ownership you have in your assets (if you have owned property).
Here are six of the most used estate planning tools in Singapore
Will
Your assets can be distributed and managed more efficiently when you have a will. It goes into effect upon your demise.
You could ask: Why bother making a will when you can just tell your loved ones what you want?
The major advantages are that it clarifies your intentions and avoids needless delays in the distribution of your wealth. When you create a Will, you can specify in writing how and to whom you want your possessions distributed after your death.
This will help avoid misunderstandings and make things easier on your loved ones while they grieve and face such a difficult situation. In the absence of a Will, assets in Singapore will be distributed in accordance with intestacy laws (or, for Muslims, Islamic inheritance law). It could take a long time to settle, and the allocation of assets might not reflect your preferences.
Here are some of the most important considerations while making a Will:
- Who are your beneficiaries
- How much portion would you want to share
- and who will see to it that your intentions are carried out when it comes to the distribution of your assets (executors and trustees)
If you are confused and don’t know how to write a will, you may ask help from a lawyer or from any online will writing service that can assist you in drafting a Will.
Take in mind the following things:
Find out who gets what and how much
In order to ensure that you leave a generous legacy for those you care about, it is important to create a list of beneficiaries. Next, pick what to give each recipient and how much to give them. You may want to divide your estate into equal halves, or you may prefer to give away certain assets.
Give some thoughts about how you want to distribute your wealth and the purpose for which you want your assets to be used as you make your estate distribution plans. For instance, you may wish not to sell your house but instead be used by your surviving spouse. Additionally, you may prefer to keep a separate account for your aging parents and allot some college funds for your children. Making decisions based on your intentions is a great way to stay focused and on track.
Assign someone to take care of your dependents
Is there someone in your life you can rely on to look after your financial interests?
A legal guardian must be appointed in your will if your beneficiary(ies) include any children under the age of 21 so that they will be taken care of properly in the event of your death.
If you’re a single person, you may want to ensure that your parents, siblings, and/or pets are taken care of in the event of your death.
When major changes occur in your life, like marriage, it’s important to re-evaluate your Will. Did you realize, for instance, that if you get married, any Will you created when you were single will be null and void? However, neither having children nor being divorced will invalidate the will.
But don’t worry, you can make adjustments to your will whenever you like, as long as you have a sound mind.
The CPF (Central Provident Fund) nomination
It’s very important to know that though you already have a will; you will still need to make a CPF nomination before you get to distribute your estate. Furthermore, you may have certain beneficiaries in mind that you intend to leave some portion of your CPF Savings behind. In this way, the Public Trustee’s Office won’t charge your estate a fee for handling unnominated CPF funds and avoid any administrative delay.
Nominations can be made online or in person at any CPF Service Center by filling out a nomination form. When submitting a CPF nomination, the following are important considerations:
- Whom should you distribute your CPF funds to
- The nomination payment options describe how you want the money to be distributed to your beneficiaries.
- Default setting: A one-time payment in cash.Cash, cheque, or GIRO are the most common ways for your beneficiaries to get their CPF benefits. The money will be given to you all at once.
- Through a CPF account. CPF funds can be sent directly to your beneficiaries’ CPF accounts if you choose the Enhanced Nomination Scheme (ENS).
- Monthly payments. Consider the Special Needs Funds Scheme (SNSS) if you have children with special needs, which pays out CPF savings on a monthly basis.
Your CPF nomination, like a will, should be reviewed regularly, especially if your life situation changes. When you marry, for example, your CPF nomination as a single person is void. However, divorce does not affect the legitimacy of the CPF nomination, as you may still choose to provide for your ex-spouse and children even though you have separated.
Your CPF nomination can be updated as long as you are mentally capable of doing so. Here are a few reasons why you should nominate a new CPF:
- In the passing of one of your nominees,
- You get married, divorced, or remarried
- You become a parent after being nominated
- You want to add a new nominee
Nomination for Insurance
There are numerous reasons to be prepared for life’s unanticipated surprises in this uncertain world we live in. An insurance policy functions as a safety net, preventing your loved ones from inheriting a mountain of debt in the event of your death.
In most cases, policyholders are not required to nominate beneficiaries for their insurance policies. Even so, you have the option of designating beneficiaries to receive the proceeds of your insurance policy, if you so desire. This may be useful if the probate process for your Will is delayed.
Policyholders of life insurance or accident and health insurance plans with death benefits have two alternatives under the Insurance Nomination statute: Revocable and trust nominations.
It is only possible to withdraw the loss of entitlement rights to a policy by the primary policyholder if it has been agreed by all of the nominees. This form of nomination can be a useful avenue if you wish to protect your estate from falling into the hands of your creditors. Only your spouse and children can be designated as beneficiaries in a trust nomination. Revocable nominations allow the policyholder to edit, add, or remove nominees at any time without the consent of the nominees.
Lasting Power of Attorney for Property (LPA)
In the event of your incapacity to make decisions for yourself (the donor), an LPA can be used to designate someone who will take care of you and make decisions on your behalf. There are two parts to caregiving: the well-being of the patient and their possessions, and the management of their financial resources.
No matter how good the their intentions are, family members have no inherent “right” to make decisions for a loved one. Families who don’t have an LPA run the risk of being dragged into expensive and time-consuming legal battles over bank accounts and other assets, such as insurance payouts.
A LPA also helps protect your estate from being wasted by caretakers who are not acting responsibly should you suffer from any mental disabilities. For this reason, it is often done in tandem with a Will.
A LPA is not legally effective unless it has been registered with the Office of the Public Guardian (OPG). The OPG has extended the application for LPA Form 1 application fee applicable to all Singaporean citizens until March 31, 2023. Hopefully, this will prompt more Singaporeans to file for an LPA in advance.
Trust
The purpose of a trust is to safeguard family assets from passing to heirs who are either too young or financially inexperienced to handle large bequests.
To ensure that they receive their inheritance at a specified age or maturity, the final payouts should be held back for a predetermined period of time.
Advance Medical Directive (AMD)
In the event that you are diagnosed with a terminal illness and are rendered unconscious or unable to make logical decisions due to the effects of your sickness, an AMD indicates your desire to refrain from receiving any extraordinary life-sustaining treatment.
In this way, your loved ones won’t be forced to weigh the pros and cons of life-saving procedures, which could lead to a great deal of shame and financial hardship.
Face the future with optimism
Making sure your loved ones receive the gifts you intend to leave them is at the heart of estate planning. Consult a financial counselor if you’re unsure how to value your possessions.
You may not be rich at all but regardless of where you reside, it is essential to keep your affairs in order.
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