Not a lot of people like to think about dying, let alone plan for your death. But that’s exactly what estate planning is.
It might seem morbid to make preparations while you’re still very much alive. But planning what will happen to your financial assets and doing the paperwork now can save your family members a whole lot of hassle, pain and broken relationships in the future.
We break down the concept of estate planning into 7 simple steps.
What is estate planning?
The word “estate” sounds like it only applies to people who own ranches or haciendas, but it actually refers to any amount of assets someone has when they die. This might include cash in a bank account, a property or a life insurance policy.
Estate planning involves managing your assets and affairs for when you die or become incapacitated, such as by deciding who gets what and (if you’re still alive but incapacitated) who gets to make decisions on your behalf.
1. Will writing
A will indicates how you want your assets to be distributed with you die, and can also include other details such as conditions for distribution (eg. your child will only receive his/her inheritance upon reaching a certain age) and handling (eg. a trust is to be set up in your name).
If you have children, you can also appoint a guardian for them in the event of your and your spouse’s death.
Technically, anyone over the age of 21 can write a will without hiring a lawyer or using a will-writing service. But the tricky part is making sure your will is valid and that your desires are clearly and unambiguously expressed in the wording of the will.
In order for your will to be valid, it must be put in writing and signed by two witnesses aged at least 21 in your presence. Neither of these witnesses must be beneficiaries of your will.
Hiring a lawyer to write a simple will usually costs about $200 to $400. These days, some companies like NTUC Income, SimplyWills and MoneyOwl also offer will-writing services.
What happens if you die without a will? Your assets will be distributed according to the Intestate Succession Act, under which your spouse and children are usually the first in line to receive your assets.
2. CPF nomination
The money in your CPF accounts cannot be distributed through a will. In order to decide who gets it when you die, you will need to make a CPF nomination. You can nominate up to 8 people to receive your CPF savings.
A CPF nomination can be made online on the CPF website after logging in with your SingPass. You will need to get two witnesses with valid SingPasses to act as your witnesses through the website.
Alternatively, you can also make a nomination in person at a CPF Service Centre. Don’t forget to bring along your NRIC or passport as well as the name and identification numbers of the people you wish to nominate.
3. Life insurance
In order to determine who gets the payouts of your insurance policy when you die, you must make a beneficiary nomination. This is not compulsory, so it’s possible you did not make one when you signed up.
In most cases, you can distribute your insurance proceeds through your will without having to make a nomination. However, if you wish to make a trust nomination, which is an irrevocable nomination electing your spouse and/or kids as beneficiaries, this takes precedence over your will.
So, how do you make a nomination? Simply ask your insurance company or agent for the necessary form, fill it in, get the signatures of two witnesses aged 21 and submit.
4. Other types of insurance
Some types of insurance policies, such as savings plans or retirement annuities, will accumulate cash value that doesn’t dissipate when you die.
Instead, the cash value will be transferred to your beneficiaries. Since these policies typically come with life insurance protection, you can distribute your returns in the same way as you would any other life insurance policy.
Contact your insurer or agent for a nomination form, indicate your desired beneficiaries, get two witnesses to sign and submit the form to your insurer.
5. Lasting Power of Attorney (LPA)
One day in the distant future, you might lose mental capacity to the point where you are no longer able to make decisions for yourself.
Not saying that will definitely happen, but just in case, you might want to appoint someone to make those decisions on your behalf through an LPA, or Lasting Power of Attorney.
The person you appoint should be someone you can trust will truly act in your best interests. This is particularly important if there are family members in your midst who you suspect will let their own interests take precedence over yours.
If you wouldn’t trust them with the TV remote control, let alone with our life, you want to prevent these people from having power over you should the worst happen.
You can get an LPA certificate from a doctor, lawyer or psychiatrist, after which you can submit an LPA application form to the Office of the Public Guardian. The application costs $75 for Singapore citizens and $200 for PRs and foreigners.
6. Advance Medical Directive (AMD)
An Advance Medical Directive or AMD is a legal document which prevents your family from prolonging your life using extraordinary life-sustaining treatment.
For instance, if you fall into a coma or become terminally ill, your family won’t be able to keep you alive for an extended period by hooking you up to certain types of machines.
You can get the AMD application form on the Ministry of Health website linked above. Alternatively, get your form at medical clinics, polyclinics and hospitals, or speak to your doctor directly.
Your next step is to make a doctor’s appointment and sign the form in the presence of the doctor and another witness over the age of 21, who can be a nurse or other employee at the clinic. You then submit the completed form to the Registrar of Advance Medical Directives. You will receive an acknowledgement when the AMD has been successfully registered.
Most Singaporeans don’t set up trusts, since there is no capital gains tax or estate duty in Singapore. But if you’ve got assets across jurisdictions or are rich enough to worry about your wealth being protected and preserved after you die, then you should see a lawyer about setting up a trust.
A trust enables you to manage your assets and investments from beyond the grave (through appointed trustees, not ouija boards), to ensure greater longevity and tax savings for your wealth.
For instance, if you pass away before your children become adults, you can have your investments managed in a trust, with the kids as beneficiaries.
Private trusts are confidential, which is why some people use them to hide any wealth they’re bequeathing to a second family or secret lover. They can thus be a good way to keep tongues from wagging or rifts from forming in the family when you’re gone.
Trust planning is not something you can do by yourself, so definitely consult a lawyer.
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