Understanding estate planning

What is estate planning?

Estate planning is about how you want your estate — the money and savings you worked hard for — distributed after your death. It is about making sure that the people and causes you care about receive what you want to give them.

Some people think estate planning is only for the rich. Actually, estate planning benefits everyone.

If you have young or disabled children, or elderly parents who rely on you financially, you want to make sure their lives are not disrupted, and they are provided for even when you're not around.

Estate planning helps you work out:

• What you're worth

• Who gets what after your death

• Who you want as your children's guardian

• How you want your assets managed

• Who to trust to carry out your estate plan

Why do people avoid it?

Many people are too busy living to think about end-of-life planning. Some common reasons are:

• "It's too morbid. I don't want to think about it."

• "I'm still young. I have plenty of time to give final instructions."

• "It's too much work and takes up too much of my time."

• "Not me. Not interested."

• "I've nothing much to plan or give away."

It's not a happy topic to think about, but what if we don't have a plan?

Here are three things that could happen:

• Delay — A delay in distribution means that your family can't get the money when they need it most

• Disputes — Tensions may arise if it's not clear who receives what

• Intestacy — Without a will, the estate may not be distributed as you wish; a judge will appoint someone to handle your assets and affairs

CPF savings (balances left in a deceased member's Ordinary, Medisave and Special/Retirement Accounts) are not covered by a will. If you don't make a CPF nomination, your CPF savings would be transferred to the Public Trustee's Office (PTO) for distribution to your family under the Intestate Succession Act or the Inheritance Certificate (for Muslims). PTO charges an administrative fee for the service.

You should make a CPF nomination if you want your CPF savings to be distributed accordng to your wishes.

What is your estate?

Think about what you have that's valuable — your money, property and possessions. These are the assets that form your estate.

Types of assets include:

• Liquid assets: Cash, savings, fixed deposits, current accounts, time deposits, currency deposits

• Investments: Unit trusts, shares, bonds and investment property

• Personal assets: Cars, jewellery, home, club membership, antiques

• Insurance policies: Such as endowment, whole life, term, investment-linked, group term life plans and Dependants’ Protection Scheme

• CPF savings: Your Ordinary Account, Special Account, Medisave and Retirement Account balances

Do you own your property with someone?

If you own your property with someone else, it's important to look at the nature of ownership. It will determine the portion of the asset you're legally able to transfer.

There are three types of ownership:

• Sole ownership – You have the authority and the right to decide how the asset can be transferred

• Tenancy-in-common – You have the right to transfer only the portion of the asset owned by you. The remaining portion of the asset remains with the joint owner

• Joint tenancy – Ownership and control of the asset are automatically transferred to the surviving owner. You therefore cannot will your share of the property to another person

Calculate your estate's net value

Your liquid assets, investments and insurance payouts, and personal assets all add up to make the gross value of your estate.

The net value of your estate takes into account your assets, liabilities, fees and expenses, and the nature of ownership.

Liabilities include credit card arrears, housing, car, and education loans; plus funeral expenses, probate fees, income taxes and family needs.

When to review your estate plan

You should review your estate plan at least once a year, and also when circumstances change.

Review your plan when there are major changes in your life, such as:

• Marriage

• Birth of a child

• Significant changes in the value of your assets

• If you legally change your name

• Other changes in life stage and circumstances, e.g. divorce, your child is no longer a minor

You will also need to review your estate plan in these situations:

• Where a beneficiary passes away

• If a named executor or trustee is unable to carry out their duties

• If anyone mentioned in the Will legally changes their name

• Death of your child's appointed guardian