Estate Planning – Not Just For The Rich

Many people have the misconception that estate planning is solely for the rich. 

To put it simply, estate planning is about how you distribute your hard–earned assets according to your wishes after your death.

In general, your assets can be divided into 2 distinguished classes:

Without proper estate planning, you may end up leaving valuable assets to someone undesirable or not of your choice.   Sometimes, you may have outstanding financial matters that may even become a burden for your loved ones.
 
Do you wish to pass on your assets to the beloved beneficiaries without hassle?  Do you want to ensure that your business continues even after your death?

Estate Planning is the answer. 

Here are some useful tips on estate planning.

Transfers before death

When you transfer a particular asset during your lifetime, the transfer is termed an inter vivos transfer and you can do it in one of the following ways:

• Gift
You may give an asset to any person of your choice by ways of physical delivery or by a Deed of Gift, preferably executed through professionals. When the gift involves immovable property, lawyers need to be involved to see through the formalities of the transfer.

• Trust  
You can create a trust and appoint a trustee to hold the legal title of the asset and to manage it for your named beneficiaries.  The trustee is the legal owner and owes the beneficiaries a duty of care under the laws.  The named beneficiaries hold collectively the beneficial interest pertaining to the asset.  The trustee can be any individual or a professional corporate which, under the statutory provision, would have stricter responsibilities in its management of the trust.

There are many types of trust to suit different purposes:

o Revocable Trust gives you a power to revoke the trust
o Irrevocable Trust offers no right for you to take the ownership of the underlying assets
o Discretionary Trust allows the trustee to have full power in the management of the underlying trust assets and the determination of the beneficiaries
o Non-discretionary Trust does not give the trustee full power in the management of assets

To set up a trust, it is advisable to seek professional help so that your interests are protected and you can get objective comments on the legality of the trust documents.

Transfers upon death – Where there is a Will

Your properties can be transferred under the law of succession either by way of testamentary succession (where you have a Will) or intestate succession (where you do not have a Will).

A Will is a written document setting out how your assets will be distributed when you pass away.  It will only take effect upon death and can be amended during the lifetime. Seeking legal advice in preparing the Will is preferred in order to minimize the possibility of your Will being challenged after your passing.

The following are some advantages of having a Will:

• it states how, when and to whom your properties are distributed upon death
• it allows appointment of guardians and trustees to care for your children below 21 years old and to manage the assets until they come of age
• it states how you would like your funeral to be arranged – whether you want to be cremated or buried

Transfers upon death – Where there is no Will

If there is no Will, the asset distribution may not be in line with your wishes. In this situation, the person most entitled and willing to be the administrator to distribute your estate will have to apply to the Court to be the Administrator. There may be cases where family members compete to be the Administrator.  Furthermore, the application takes time and could delay the time for your estate to be distributed. Alternatively, family members can apply to the Public Trustee to administer a deceased’s estate if the value of the estate is below $50,000.

Once the Court appoints the Administrator through the Probate, the Administrator has to gather all assets and then distribute the net assets according to the Intestate Succession Act.

Here are some examples of how the estate will be distributed in the absence of a Will under the intestacy laws:

1. If you leave behind a spouse and children, your spouse will be entitled to half the estate while the other half will be distributed equally among the children; in the event the child pre-deceases you, leaving behind his/her children (i.e. your grandchildren), your grandchildren will take the share of your child;
2. If you leave behind a spouse and your parents, your spouse will be entitled to half the estate with the other half going to your parents in equal shares;
3. If you leave behind children and your parents, the children will get the whole estate in equal shares;
4. In the absence of any surviving spouse, children or parents, your siblings will be entitled to the entire estate in equal shares. If you do not have any sibling, then your grandparents will share the estate;
5. In the absence of any spouse, children, parents, siblings or grandparents, your uncles and aunts will share the estate; and
6. If you die without having any persons falling into the above, the Government will be entitled to your whole estate.

If you do not want your loved ones to encounter financial hardship or suffer any inconvenience, it would be wise to leave behind a Will.  With more families traveling together frequently, the absence of a Will can lead to unnecessary family feuds. For example, when a childless couple dies at the same time, their respective estate may end up entirely with one spouse’s family, to the exclusion of the other spouse’s family.   The elder one would be assumed to have died before the younger one.   Hence, leaving behind a Will helps prevent inequitable situation.

Transfers after death – CPF savings with No CPF Nomination

In the absence of a CPF nomination, the CPF Board will transfer your CPF savings to the Public Trustee for distribution in accordance with the laws relating to intestacy.

For non-Muslims, the Public Trustee will distribute your CPF savings in accordance with the Intestate Succession Act (Cap 146).  For Muslims, your CPF savings will be distributed in accordance with the Inheritance Certificate. Your family can obtain the certificate from the Syariah Court, 512 Thomson Road, MCYS Building, Singapore 298136.

You do not need to make a CPF nomination if you intend to leave your CPF savings to your family members. 

Transfers after death – CPF savings with CPF Nomination

If you have made a valid CPF nomination, CPF Board will transfer the following CPF assets to your nominee(s) regardless of what is stated in your Will:

• CPF Ordinary Account balance
• CPF Special Account balance
• CPF Medisave Account balance
• CPF Retirement Account balance (if you are age 55 and above)
• Discounted Singapore Telecom shares

The following are not covered under CPF nomination:

(a) Cash and investments held in the CPF Investment Scheme - Ordinary Account (CPFIS-OA)
(b) Investments held under the CPF Investment Scheme - Special Account (CPFIS-SA)
(c) The insurance pay-out under the Dependants’ Protection Scheme (DPS)*
(d) Properties bought with CPF savings**

Assets marked (a) and (b) will form part of the deceased’s estate.

*For DPS claim proceeds payable by NTUC Income, if a nomination has been made under the Co-Operative Societies Act, it would then be distributed according to the nomination under the Co-Operative Societies Act.

**These will be distributed according to the manner of holding. If the property is held as joint tenancy, the deceased's share of the
property will pass by operation of law to the remaining surviving owner(s). Otherwise, the deceased's share of the property will form
part of the deceased's estate.

This information is provided by the Central Provident Fund Board, Financial Planning Association of Singapore (FPAS) and the Monetary Authority of Singapore as part of the MoneySENSE national financial education programme.