Guide to Legacy Planning In Singapore [2021] | SFP
Singapore Financial Planners Log

Guide to Legacy Planning In Singapore

legacy planning singapore

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 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. 

Articles written are independent opinions and are not affiliated/sponsored unless specifically mentioned.

Table of Contents

Table of Contents

What Is Legacy Planning?

Legacy planning is a financial strategy that prepares individuals to pass on their assets to loved ones. The next of kin (your child or grandchildren) can obtain these assets once you pass on.

The wealth that you have today didn’t just magically appear out of the blue. You worked hard for it. You’re living the life that you want while supporting your family at the same time.

Resorting to legacy planning makes sense for the long run as you prepare to retire officially.

You won’t just be spending your golden years peacefully, but you can always rest assured that the future of your loved ones is safe and secure.

Early legacy planning helps in protecting and also expanding your wealth to its highest potential. There won’t be any compromises during your retirement, and you get to decide on the distribution of your wealth to your next generation.

Why Should Legacy Planning Matter?

Legacy planning is all about passing your wealth to your future generation. If you don’t have a legacy plan, then your family members will have a tough time deciding on your asset distribution after you pass on.

Some of the key factors surrounding its importance include:

Preventing Unintended Beneficiaries

Designating an inheritor of your assets is a crucial component when it comes to legacy planning. Here, the assets refer to your property, stock portfolio, and possessions.

In the absence of a proper legacy plan, you won’t have any control over who is receiving these assets. Start designating your assets, so there isn’t any hassle when the situation calls for it.

Preparing for the Unexpected

Legacy planning helps combat unforeseen future events. It stems from the development of an “In Case of Emergency pack (ICE).” An ICE pack is something that your loved ones can turn to during the worst situations.

This way, your family will have access to everything in a proper manner. An ICE pack usually contains various insurances, vital contact information, bank accounts, and your will.

Sparing Your Beneficiaries Excess Tax Returns

Proper legacy planning allows your beneficiaries to garner maximum value from wealth or any passed on assets. You should transfer any wealth that possesses the lowest tax bill.

Also, a portion of your estate might contain hidden assets, which should also be transferred.

Some taxable assets are your estate, specific trusts, and investments. Through appropriate planning, you will find it easy to ascertain your assets’ value and reduce the impact of taxes.

Eradicating Family Mess

With legacy planning, you can easily stop any arguments from happening and escape all the family turmoil. It gives you the power to appoint the finance and assets holder in your family. You can also make personalised plans for every beneficiary present in your estate.

If your child has health issues, then it is advisable to make arrangements. You can also set up a trust for those who may not be fitting for inheriting large sums of wealth. It is all about accurately delivering your wishes in a way that fits your interests.

How Can I Conduct Legacy Planning in Singapore?

There are some tools that you can utilise for conducting legacy planning in Singapore. A will consists of a document that has instructions for distributing a person’s assets after their death. Here are some of the requirements for creating a will in Singapore:

  • You must be 21 years and above.

  • The creation of the will should be in writing.

  • The testator should sign the will at the end. Here, a testator is referring to the person creating the will.

  • The signing of the will should be in the presence of 2+ witnesses.

  • The main witnesses aren’t allowed to be the will beneficiaries, such as your spouse and children.

 

Your CPF Nomination

The savings present in your Central Provident Fund (CPF) account isn’t distributable through your will. You have to ensure that you have made your CPF nomination so that the selected loved ones will obtain your assets after your death.

Life Insurance Policies

These policies refer to the ones that an individual takes out for a dependent’s benefit, such as parents, spouse, or kids. The consideration of life insurance policies come in the form of a trust, and they aren’t a part of the legacy plan.

However, some policies allow you to leave the nomination field empty. During such instances, the policy’s benefits are distributable as per the will of the policyholder.

Lasting Power of Attorney (LPA)

This legal document enables you to appoint a person of 21 years and over to control all of your property and personal affairs. They will manage everything during events connected to your mental capacity loss. Here, the appointed person tends to act and also make important decisions or resolutions on your behalf.

People who are the sole breadwinners of the family or those suffering from health problems will need LPAs the most. It is super important and relevant to their situation to ensure that the right decisions are made.

Advance Medical Directives (AMDs)

The Advance Medical Directive (AMD) document requires you to sign in advance. It informs the doctor who is treating you to know that, should you become unconscious, terminally ill, or disabled, and is unable to execute rational judgments, that you don’t want your life to be extended.

The two witnesses will then need to sign the AMD. People who don’t have any vested interest concerning your demise shouldn’t sign the document, including the doctor.

Seeking Professional Help

The transfer of wealth from the estate to the beneficiary isn’t simple at all. The probate process tends to take months and even years at times. Many legacy plans mostly rely on trusts to avoid the probate process.

You can utilise different trust types for filling in most of your specific needs. Regardless of your strategy, we think it’s best to partner with an attorney that deals with estate planning.

They will help you in the preparation of documents like trusts and wills. Legacy planning consists of a holistic procedure, so it is advisable to engage a financial advisor too.

The advisor will help you arrange your investments and create a financial plan, which helps ensure a safe financial legacy for your loved ones, especially your grandchildren.

What Assets Can I Use for Legacy Planning?

The majority of the people possess a wide mixture of assets, and these are the most common:

Cash

Cash is one of the most common assets that the majority of the population leaves behind. Also, when it comes to money, there are very few restrictions on utilising and receiving cash.

There are both dangerous risks and benefits associated with this. Why? Because it encourages overspending of assets by your beneficiaries when you leave a fat lump of cash behind.

This sudden inheritance of overflowing cash tends to leave behind a pitiful legacy of unattractive money habits. Here, cash refers to CPF, bank accounts, and life insurance policies.

Investments

Investments tend to potentially generate returns for yourself and your beneficiaries.

But there are some risks associated with leaving it when your loved ones are still teenagers or financially unsavvy to handle investments in harsh market conditions. It will only cause undue stress when you let them manage it.

The worst-case scenario would be them making a great investment mistake, which goes on to destroy the investments that you have carefully planned on leaving behind. Here, the investments relate to unit trusts, bonds, stocks, and shares.

Property

A typical gift that the majority of the people leave behind for their legacy planning consists of property. They do so because of the high rate of property ownership in Singapore.

It can also help generate a ton of continuing income from rental and potential capital appreciation. Leaving behind property doesn’t just serve its wealth preserving purpose, but it also helps expand your wealth left behind.

But here are some of the challenges that you may face with leaving the property as an asset:

  • There will be issues in dividing your property among your beneficiaries that leads to disagreements.

  • The inherited property adds to your beneficiary’s individual property ownership. Plus, the Additional Buyer Stamp Duty (ABSD) tends to be imposed if your beneficiary wants to buy a 2nd property.

  • There are costs involved for maintaining the property or the mortgage loan’s servicing in the absence of rental income.

  • In certain situations, beneficiaries are incapable of agreeing on the use of the property. It will cause unhappiness and dissatisfaction. For instance, to sell or to rent.

 

Conclusion

Many people believe that leaving something behind is better than leaving nothing at all. This statement is true – to some extent, but you have to look at the bigger picture here.

You should make it a priority to leave behind the correct asset type with proper allocation. The asset that you are leaving behind should complement the aspiration and future objectives of your beneficiaries.

It will help them and also assist in prolonging your legacy for benefitting your future bloodline.

Estate or legacy planning helps in combating future uncertainties. It does the needful of protecting your beneficiaries from future complications.

Also, you get to have full control over how and who should be the one managing your assets. You will have peace of mind and remain equipped over possible unforeseen uncertainties. Get started with legacy planning by engaging a financial advisor today.

Share this article with your friends

Share on facebook
Share on whatsapp
Share on twitter
Share on linkedin
Share on telegram

Other Useful Reads