Guide to Estate Planning In Singapore: A Definitive 2021 Guide | SFP
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Guide to Estate Planning In Singapore

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estate planning singapore

What is Estate Planning?

Estate planning is a secure and legal way to transfer your assets to a nominee or nominees after you pass away or become powerless. People follow this process worldwide, and it is one of the best ways to secure the lives of your loved ones after your death.

Often inheritance of assets through estate planning follows up with inheritance tax. But you need not worry about such taxes because, in Singapore, these taxes are not payable for those who have died on or after February 15, 2008.

Terms in Estate Planning That You Should Know

Some terms to keep in mind to understand estate planning are:

Trusts

Singapore is a great financial place for people who want to set up their trusts. This is because the country has a good business environment, a well-legalised system, a competitive setting, a good location, and a strong set of laws in the finance area.

Alternate beneficiary

This is an individual who acts as a substitute for the primary beneficiary if the latter dies.

Co-Trustees

Co-trustees are those people who manage the assets of the trust.

Gross estate

The gross estate is the total value of your estate before you pay any debts.

Will

A will is a written substantiate or document which holds all the instructions and directions written by the owner, which comes into effect after his/her death.

What happens after you pass away?

After a person passes away, his/her assets will be handed down to the family. Suppose a person does not have any will or a plan regarding what will happen to their assets after they pass away.

In that case, it will result in arguments and turmoil within the family regarding who will inherit the assets. To prevent such mishaps, we should make an estate plan and secure our loved one’s future.

Why is Estate Planning important?

We can never predict what might happen to our loved ones after we pass away, so it is best to prepare and ensure that things are sorted and set in place for the future.

There might be a thought that estate planning is only for the rich, but no, estate planning is for everyone. It is a planner that contains your decisions about how you want your estate to be managed and who will inherit it (nominees).

There are many cases where families fight over assets after the owner of the estate dies. This is due to the result of a lack of planning by the owner.

With the lack of planning, your properties and insurance payouts might also go to unintended beneficiaries.

To avoid such a mess, you should make an estate plan. You can choose an “heir” to take care of your assets after you die or if you become mentally ill. In doing so, all your assets will be handled as per your desire, and it can prevent any such family turmoil.

Through estate planning, you have the power to –

Ensure your preferred beneficiary

It means that you will be able to ensure benefit for your loved ones when you face death.

Often an intestacy statute has a default will, which will be incorporated after your death. And often, such distribution does not satisfy the nominees as required and usually leads to conflict.

Therefore, it is necessary to make your own will so that it overrides the default one. Both of these wills have their pros and cons. Thus, it is an excellent advantage to have an attorney who can review your will and estate distribution.

Protect your loved ones and children

This is uncertain, and indeed, we all wish the best future for our loved ones. When you pass away, having an estate plan ensures that all your assets are accounted for and your debts are paid accordingly.

Having a well-planned will guarantees your loved ones better security than if the court were to decide for them. You definitely do not want to burden your family with the debt that you have.

Not only young ones, but even adults can be beneficiaries. If you wish to give aid to people who are bad at financial matters, a secure estate plan is useful as it can help through specific instructions that you make.

Future-proofing

Future-proofing is guaranteed when making estate plans. It helps to assure that your beneficiaries stay secure from any future liabilities, and it further remains to aid their livelihood, academic needs, life-sustenance, etc.

How to Start Estate Planning in Singapore?

Take note of all your assets

Check and make a register of all the assets you own. It can include your investments, Central Provision Fund (CPF) savings, insurance policies, bank accounts, and anything that can be of value.

Always make sure to update the register regularly.

For many Singaporean citizens, their CPF savings are a vital asset. But the CPF funds cannot be covered in a will. Hence it would be best if you create a different nomination with the CPF board.

Write a Will

Remember to write a will where you include all your important decisions. It is a legally binding document that will clarify and prevent needless delays in the transfer of your assets.

If you do not have a will, Singapore’s intestacy laws will decide who gets what. You must include some key decisions when writing a will, like:

  • Who to pass on your assets to;
  • What sort of instructions you want to convey;
  • Whom you appoint as the executor or trustee

 

Make an Estate Plan

For every person, whether wealthy or poor, we can never escape death and departure, but we can at least ensure that the people who matter to us do not face unnecessary troubles after our passing.

Therefore, you need to make an estate plan to set up legal management of the assets that you own and pass it down to your beneficiaries. This will help you to be secure that your loved ones will have aid, even without your presence.

Things to Take Note Of When Estate Planning

There are plenty of ways to prepare your assets, and the following are some of the most common ways you can start planning your own estate:

Your Will

Start by preparing a will or testament which gives clear instructions about your estate and to whom it will go to.

While drafting your will, always remember to identify what assets you have, who will be your beneficiary/beneficiaries, and pick a good executor or trustee if required.

The executor/trustee should be 21 years old minimum where the will is taken into effect.

Writing a will would be your best option because if you don’t, the intestate succession act will cover your assets and distribute them according to its rules.

Your CPF Nomination

Next, you must be aware of the Central Provision Fund (CPF), the compulsory savings for social security. This fund has many contributions from many employers/employees.

Although this is not considered part of your personal estate, such accounts contain trusts awarded to whoever is kept as the nominee.

You can also change your nominee/nominees if required by signing a Central Provident Fund Nomination Form (CPFNF).

Your Real Estate

In matters concerning real estate, there are mainly two ways to hold interest.

One is tenancy-in-common, where the owners of a property own different portions of it. Thus, each owner can do what they wish with their share, and they can also give it in a will.

The other way is joint tenancy, where all the owners own the entire property jointly. In such a case, these properties cannot be given in a will because once an owner dies, the other owner gets complete ownership of the property.

This is due to the right of survivorship, where the share of the deceased is withdrawn from the joint ownership of a property.

Thus, while planning for an estate, it is crucial to think over whether you want your real estate property to be a joint tenancy or tenancy-in-common.

We can also change from a tenancy-in-common to a joint tenancy and vice versa.

Your Insurance Policies

Another important aspect is having a good life insurance policy. These are considered irrevocable policies because it is tough to remove the chosen nominees.

Such policies are not considered as part of your estate because it is more of a trust benefit. By having well-planned life insurance, people have the security of insuring benefits to their family/nominees even after they pass away.

Don’t just think of life insurance policies as your term and whole life plan. Endowment plans, annuities, and even investment-linked policies are considered life insurance policies.

Lasting Power of Attorney

For Singaporeans, a Lasting Power of Attorney (LPA) is close to mandatory due to the rise of mental illness like dementia.

Through the filing of a Lasting Power Attorney, we as the ‘donor’ can appoint a ‘donee’ (maximum of two) who will gain the power to manage our welfare and/or estate and properties if we (the ‘donor’) become mentally incapable or lose sanity.

This instrument is a legally safe way to secure our aspects to the people we trust.

Advance Medical Directive

There is also the option of taking up an Advance Medical Directive (AMD), which will allow your doctor to refrain from any extreme life-sustaining treatment that can make your life longer.

This is a step taken voluntarily by a person to ensure that if he/she becomes mentally incapable or faces a terminal illness that renders them unconscious, the doctor will be informed to avoid extra life-sustaining aid.

People who have attained the minimum age of 21 years and are mentally stable are eligible to make this directive under the witness of his/her doctor and another person.

Inter Vivos Trusts

The creation of Inter Vivos trusts is also another useful way to make sure that your property is safely managed and utilised by your beneficiary according to your instructions.

In such cases, the settlor appoints a ‘trustee’ who will then manage the property included in the ‘trust.’ This instrument is ideal for those who have nominees younger than 21 years of age.

It is usually in the form of a written and signed deed, which the Inland Revenue Authority of Singapore (IRAS) will collect and stamp for $10.

For Muslims

For estates owned by Muslims, there is a Muslim Law of Inheritance in Singapore. The distribution of these properties is regulated through the Muslim Law Act.

Conclusion

Estate planning is a great way to secure your assets for the future. For many who do not undergo this, their families might face more liabilities after their passing.

By planning your asset distribution, you gain the power to efficiently allocate your properties and possessions to your selected choice of nominees.

Estate planning is not only for people who are nearing their retirement. It can be for any person of mature age who wishes to maintain and secure a good future.

It is through estate planning that we can assure ourselves and our loved ones of future savings.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Singapore Financial Planners and its affiliated parties is not meant to be construed as financial advice. Singapore Financial Planners shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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