Have you read our previous article on what differentiates a will from a trust? If you haven’t already, you can read more about it here. Now that you have a clearer understanding of how a will and a trust work, as well as their purposes and benefits, let’s find out more about estate planning in this article.
What you need to know about estate planning
While you may think that estate planning is only for the wealthy, anybody who has money in their bank account, a life insurance policy, or a property can get started with estate planning. Estate planning is determining how you want your estate to be managed and distributed after your passing. If you want to distribute your assets to your family, friends, and loved ones, you can do so via estate planning.
5 Key elements of a good estate plan
A will is a legal document in writing that is signed by you, the testator, and the executor to distribute your property and determine the guardian to care for minor children after your passing. However, if you pass away without a will, Singapore’s rules of the Intestate Succession Act will determine how your assets will be distributed to the next of kin. And when this happens, you will have no say in this matter. Find out more about will writing here.
Since there is no capital gains tax or estate duty in Singapore, many Singaporeans do not set up their trusts. However, if you want to protect and preserve your wealth after your passing, a trust enables you to manage your assets through appointed trustees. In the event that your beneficiaries are too young, you can set up a trust and have your investments managed with your children as beneficiaries.
3) Lasting Power of Attorney (LPA)
If one day, you find yourself losing the mental capacity to make your own decisions, you may want to appoint someone to make those decisions for you through the Lasting Power of Attorney or LPA. The person you wish to appoint should be someone you can trust to act in your best interests. And the application to get an LPA certificate costs about $75 for Singapore citizens and $200 for PRs and foreigners.
4) Life insurance policies
If you pass away while having insurance with death benefits or a life insurance policy, your beneficiaries will receive a payout. Although it is not compulsory, to determine who gets what, you must make a beneficiary nomination before your passing. And this nomination can only be revoked with all nominees’ consent. You can also choose to skip beneficiary nominations but distribute your insurance proceeds through writing a will instead.
5) CPF nomination
While you can distribute your insurance proceeds via a will, it does not work for your CPF money. To distribute the money that you have in your CPF accounts, you will need to make a CPF nomination. You can choose to nominate up to eight people to distribute your CPF savings and this can be done online on the CPF website. All you have to do is to log in using your SingPass and get two people with valid SingPasses to act as your witnesses. However, you can also nominate in person at a CPF Service Centre.
Estate planning can be a daunting task if you lack the knowledge and awareness on the topic. But estate planning is nevertheless extremely important as it ensures the well-being of your loved ones after you have passed away. It is crucial to do your research and make early preparations for life after death if you wish to avoid any future family feuds, hassles, and broken relationships. To get legal advice on any of the tools mentioned above, it is recommended that you seek professional advice from our team at Probate Enterprise.