Estate Planning refers to the process of planning for distribution of a person's estate to the intended beneficiaries before or upon his/her demise. A common misconception is that it is to be carried out only when a person has a sizable estate or when one is in the twilight of life.
Like other elements of financial planning such as investment or retirement planning, estate planning should be carried out when one is young and healthy. As long as you have someone that you care about, estate planning is of utmost importance to you.
Estate planning has a few elements to consider: a thorough estate analysis to ensure there is a surplus in an estate, a Will, for some people; Trusts and in time to come, assigning Lasting Power of Attorney.
Your estate (assets) includes your investments, retirement savings, insurance policies, real estate, business interests or CPF moneys (if there's no nomination). Try asking yourself 3 questions: Whom do you wan to inherit your assets? Who do you want handling your financial affairs if you are ever incapacitated? Who do you want to be your children's guardian if you are not around?
In Singapore, the Mental capacity bill was passed in september 2008. Those who wish to make advance plans for themselves can do through a new statutory mechanism called the Lasting Power of Attorney by appointing a proxy in the event of mental incapacitation. The proxy can make decisions for the former on property and financial affairs, personal welfare and healthcare.
As no one knows when he/she will pass away so, estate planning should be an immediate task. It ensures that a person's assets are passed on to the intended beneficiary or beneficiaries efficiently and smoothly.
To find out more about what do estate planners do, click here.
| Intestacy | Will | CPF | Liquidity in Estate |
Intestacy
When a person passes away without a valid will, he/her estate will be distributed according to the Intestate Succession Act (Cap 146). This Act follows a standard distribution rule. If the deceased wanted to vary the propotion to certain relatives or to distribute to non-relatives/charities, such wished cannot be fulfil under this Act. The rules of this Act are fixed. There's no flexibility.
Estates with a value less than S$50,000 are administered by the Public Trustee. Whereas estates of higher value need to apply to the courts for letters of administration in order for distribution of estate. In cases where estates are of a sizeable value, administration bonds have to be put up with the courts in order for the grant of letters of administration. This application could be a tedious and lengthy affair that not many people know of.
Intestacy delays the distribution of the estate to the beneficiaries. If the family is in need for money for immediate use, this could create great difficulty. The trauma of losing a loved one can be made less painful if the deceased left behind a will detailing how his assets should be distributed.
| Intestacy | Will | CPF | Liquidity in Estate |
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Will
A will is a document in which a testator appoints his executor/s and beneficiaries. Executors are nominated by the testator to carry out the instructions given in his/her will.
Executors have a great responsibility in the whole estate distribution process. Therefore, choosing a competent and trustworthy executor of appropriate age (try not to nominate a person of much older age), who is willing to administer the estate is not easy. It is common to appoint your next closest kin as the executor however, in recent years, there is a trend of appointing corporate executors.
People who benefit from the estate are called beneficiaries. In a will, a testator can name any beneficiay that he/she wants. It need not be a relative. Percentage of distribution can be included in the will too.
If there is minor children left behind, appointment of guardians is important. Especially so if there is no surviving spouse. Do take into consideration the lifestyle and type of education desired for the children.
Any adult of sound mind can make a will. They can write their own will but it's important that the will is written according to the law. Most home-made wills end up invalid and thus intestacy come into place again. It is always better to consult professionals to draft your will for you. The cost of a will depends on the complexity of it.
A person can register information on his/her will at the Wills Registry. Executors or beneficiaries can do a check with the Wills Registry to find out if a deceased has a will in place. This will make the preparation and administration of the estate easier.
| Intestacy | Will | CPF | Liquidity in Estate |
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CPF
It's important to know that money in the CPF cannot be willed away in a will. CPF money will be distributed according to the nomination made with them. To find out more, click here.
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Liquidity in Estate
A Professional Estate Planner will go through your wishes with you and help you draft up your will. They will also look into ensuring that there is a surplus in your estate. Last but not least, liquidity of an estate.
Estate liquidity refers to the ability of one's estate to pay taxes and other costs incurred after a person's demise, using cash or cahs equivalent. Sufficient liquid assets are often needed to pay for a deceased's medical bills, last rite cost, income and property taxes as well as related expenses so that forced sale of assets can be avoided.
Estate duty have been abolished from Singapore. However, if you do have assets in foreign countries, you need to find out more about the governing law in that country.
One of the most common way of maintaining liquidity in estate is with life insurance policies. Insurance money payable in the event of a death falls under the deceased's estate.
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IPTO - Public Trustee
Singapore Statutes Online
The Subordinate Courts of Singapore
Supreme Court Singapore
ThirdAge.com
Law Society of Singapore
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