To ensure that your loved ones receive your possessions exactly how you want them to, you should plan ahead. Here’s how to get started.
In case of an emergency, are your finances sorted? Reflecting on what-ifs can be scary, which is why some people avoid thinking about falling sick, losing their mental capacity, or passing on. However, you’ll feel better knowing that you have done what you can to ensure that your loved ones – especially those who depend on you financially – will be cared for, in various unforeseen circumstances.
Estate planning is for everyone, and not just the rich. It is about setting out how you want your estate, or your assets, to be managed and transferred. In particular, writing a Will is an important part of the plan, which should be done earlier rather than later, for your peace of mind. For those with aged parents, understanding estate planning will enable you to guide them in the process, too. All this may seem daunting at first, but it need not be difficult if you approach it systematically.
When planning your estate, you may take the following steps:
- Take stock of all the assets you own.
- Write your Will for the smooth distribution of your estate, and review it regularly.
- Make your Central Provident Fund (CPF) nomination to specify who will receive your savings, and how much.
- Ensure your family’s well-being with general protection, term or life insurance, and cover potentially high medical costs with health insurance.
Taking stock of your estate
A crucial first step in estate planning is taking stock of what you own. Make a list of all your assets which can include your home, bank accounts, CPF savings, investments, insurance plans, jewellery, antiques, and anything of monetary value. Be sure to update the list regularly.
For many Singaporeans and Permanent Residents, our CPF savings are a major asset. CPF funds are not covered by a Will, so remember to make a separate nomination with the CPF board.
Finally, you should also consider your liabilities, which include everything that you owe, such as property and car loans, credit card debts, and so on. The net value of your estate takes into account your assets, liabilities, fees and expenses, and the nature of ownership (for owned property).
Writing your Will
Perhaps you wonder: Why write a Will when you can simply relay your wishes to your loved ones?
The main benefits of writing a Will are that it provides clarity and prevents unnecessary delays in the transfer of your estate. A Will is a legally binding document that lets you state in certain terms how and to whom you wish to distribute your assets.
This will not only prevent misinterpretation but also reduce stress for your family at a difficult time. If you do not have a Will, Singapore’s intestacy laws (or for Muslims, Islamic inheritance law) will determine who gets what. The asset distribution may then not be aligned to your wishes, and the settlement could be a long-drawn process.
When writing a Will, the key decisions include who to distribute your assets to, and in what proportion, as well as who to appoint as executors (who will present the Will in court) and trustees (who will distribute the estate according to instructions in the Will). You can approach a lawyer to help you draft a Will, after you have thought through the following:
1. Decide who gets what and how much
Make a list of beneficiaries, that is, the people (or even charities) receiving your estate. Next, decide what and how much to allocate to each beneficiary. You might wish to distribute your estate by proportion or allocate specific assets.
In planning how to distribute your assets, think about how you wish them to be used. You might, for instance, want your home to be kept for your spouse’s use, instead of being sold off. You might also dedicate a sum of money for a child’s university education, and a separate sum for supporting an elderly parent. You might set aside a larger share of assets for vulnerable dependents, or choose to be fair to all your beneficiaries by allocating different assets of similar value to everyone. These intentions will guide you in the decision-making process.
2. Decide who will care for your dependents
Is there someone you trust to handle your assets on your behalf? If you have a child aged under 21 years, you should appoint a legal guardian for him/her in your Will to ensure your little one will be under good and responsible care. If you’re single, you may wish to ensure that your parents, siblings and/or pets will be cared for.
Review your Will regularly
Don’t worry about the finality of your decisions. You can and should review your Will regularly, especially when your life status changes. Did you know that marriage revokes a Will that you made while you were single? However, having children has no effect on the validity of the Will. Still, many people revise their Wills after the arrival of a new baby, to include him or her in their estate plan. Changes can be made at any time, as long as you have the mental capacity to do so. Remember to also review your CPF nomination.
Look ahead confidently
Estate planning is ultimately about ensuring that the people you love get what you wish to give them. If you’re not sure how to evaluate your assets, seek help from a financial advisor. Make sure your Will is valid by checking with a lawyer. You might also want to look into other legal arrangements concerning your estate, such as setting up a trust or lasting power of attorney.