COVID-19 has impacted each one of us in different ways with the social distancing orders, safe management measures, and a changed pace of life. On the upside, the pandemic has led us to rethink our priorities and expectations, especially in the financial sense. Some important questions have begun bubbling to the surface: Are my loved ones protected? What if something were to happen to me tomorrow? Should I have a plan in place for the future?
Estate planning is one area that has received a lot of attention, specifically because of the uncertainty associated with the COVID-19 crisis, which has turned many lives upside down. Now, more than ever, it’s the best time to prepare for the unexpected, and what better way than to create an estate plan which is regularly reviewed to ensure it aligns with your goals?
In my opinion, as much as no person is comfortable thinking about death, it’s important to plan your financial future in a way that helps keep your loved ones protected when you are not around. Estate planning ensures that your affairs (assets, liabilities and other financial expenses and arrangements) are handled as per specifically set out legal instructions, in case of your untimely demise.
The lack of an estate plan can actually lead to a huge cost your family members may need to bear. Without a will or estate plan, the Interstate Succession Act dictates how your assets are distributed after your demise. Not only can this be a costly process in many cases, and also a potential source of conflict for our heirs and loved ones, during a time of grieving and sadness. Even with a will, going through the legal probate process to ensure the validity of the will, is in itself a time-consuming and expensive affair which can be avoided by setting up a trust.
Let’s take a look at various estate planning tools that facilitate seamless asset management and transfer to your loved ones, upon your demise1:
Contrary to popular belief, trusts are available to anyone, and not just the rich and famous. Most people who have children or own real estate can benefit from setting up a trust. Establishing a trust allows you to avoid probate and control exactly where your money goes, and how it should be used. Through your trust, you can appoint an executor/ trustee to take control in your absence.
With a will, the executor may merely be an administrator who transfers assets from one person to another. The advantage of a will is that you can identify your assets, and select beneficiaries, executors and trustees. With a trust, on the other hand, your appointed trustees are the decision-makers who stand in your place and make decisions that you would otherwise make, if you were still around.
In Singapore, individuals have the option to name a nominee that will be the recipient of their CPF monies, in case of their demise. CPF cannot be distributed by any other means, or form part of a will or estate.
As a form of trust, life insurance policies are not part of a deceased person’s estate. They are typically obtained in favour of a nominee, such as a spouse or a child, who will be the recipient of the insurance cover in case of the life insurance policyholder’s death.
Through an LPA, a donor can bestow control over a donee, with respect to the donor’s personal property and financial affairs, in case of the donor’s untimely demise, or loss of mental soundness. In Singapore, the government is encouraging its citizens to file and execute LPAs, especially against the backdrop of an increase in dementia and loss of life due to COVID-19.
Used by those that are suffering from terminal illnesses, an advanced medical directive allows an individual to legally take control of their own life in terms of making decisions regarding prolonging one’s lifespan by using life-sustaining treatments.
In Singapore, individuals typically hold interest in immovable property through tenancies-in-common, or joint tenancies. In both cases, ownership of the property is shared. In the tenancies-in-common form, ownership is unequal and may take place at a different time. Tenants in common have no rights of ownership. In the event of death of one of the owners, the share of the deceased person’s property goes into the estate unless otherwise specified in a will or other instruments. In case of joint tenancies, the share of the deceased owner’s property passes to the surviving co-owners.
An inter vivos trust is created during the lifetime of a person (settlor) in favour of a beneficiary, which allows the settlor to appoint a trustee. The trustee helps manage the settlor’s property and finances, leave assets to minors, and/or ensure specific conditions are met, prior to distribution of assets.
Most individuals forget that setting up the estate plan isn’t all – after setting up your estate plan, you also need to review it periodically. A will, a trust, and an estate plan should all be part of a contractually existing document. Marriage, divorce, the purchase of a new house, the birth of a child, or a death in the family are just a few examples of life events that warrant updating your estate plan. From time to time, take stock of your assets and liabilities so that your will dictates your wishes and allows you to handle your financial matters as per your discretion.
Each of us deserves peace of mind – especially when it comes to keeping our loved ones protected when we’re not around. In this regard, estate planning should be inclusive, accessible and affordable for all. Since estate planning can be daunting, many find it helpful to seek assistance from a financial professional, when it comes to evaluating their assets. Proper planning can help your loved ones live their financial future securely.
Eager to undergo a financial health check or looking to start an estate plan? Speak to our Financial Consultants at SG Alliance who are experts in Estate Planning to help you.
Retirement to me means these three things all at once: • no longer having to work for a living •