Estate planning is often a tricky and emotional process. The very thought of situations like one’s own death or being mentally incapacitated is saddening. But death is inevitable, and the misfortune may arise anytime. Thus, planning for what will happen to your assets and belongings after your demise or after the loss of mental incapacity is crucial in order to avoid any confusions, disputes, and loss of assets. Estate planning clearly defines how your assets will be transferred, inherited, and managed.
In order to ensure that the process of estate planning goes on smoothly, you need to get certain things in order beforehand. Listed below are some of the estate planning essentials.
1. Will
The first thing that you need to keep handy before you start off with your estate planning is your will. Even if you don’t have a considerable amount of assets, you still need to create a will. The will not only define who will be the inheritors or beneficiaries of your estate but also mention who the trustee and executor will be. A trustee is a person who presents the will to the court whenever needed. An executor ensures that your assets are transferred and inherited to the said person.
Your trustee and executor must be at least 21 years old at the time the will takes effect, and they can be one of your inheritors as well. In case your inheritor is below 21 years old, you have to define two trustees and executors each. In such a case, you also need to mention who will be the guardian for your minor beneficiaries.
2. Letter of Intent
A letter of intent is a directory and informative document that you hand over to the beneficiary, executor and trustee. Although you mention their names in your will and also sign it in their presence, it is always better to pen down everything and leave an official copy with them. A letter of intent ensures that none of the parties forgets what you wish.
The sole purpose is to define what you want to be done with a particular asset after your death or mental incapacitation. Some letters of intent also provide funeral details or other special requests. In most cases, this letter is an unofficial document, and it may not be valid in the eyes of the law. However, it can also act as proof of your wish to the court if your will is not accepted for any reason.
3. Central Provident Fund Nomination
Whether you are an expat working in Singapore or a permanent resident here, you are eligible for the Central Provident Fund (CPF). In fact, you need to define who the nominee or beneficiary of your CPF will be as well, just like other assets. CPF cannot distribute under a will, and thus, you need to fill the CPF Nomination Form. This form must be signed in the presence of two witnesses above 21 years old.
In case, you do not make a CPF nomination, your CPF will transferring to the Public Trustee’s Office (PTO) for distribution to your family members. The PTO charges your family an administration fee for the distribution of your CPF savings.
4. Insurance Policies
The nomination of the life insurance policies cannot transfer as a person takes a policy on his or her name to insure his or her life. Also, the nomination of the policy cannot be revoked even if the insurer wishes to. Hence, insurance policies are also known as irrevocable trust insurance policies. The nomination can revoke only if all the nominees agree to the same. Some insurance companies allow you to leave the nomination field blank in the form. For such policies, the benefits of the policy are distributed according to the deceased’s will.
In every other case, insurance policies do not form part of the deceased’s estate. In case, you don’t mention a nominee for your policy, the court is left to decide the fate of your funds. Therefore, see to it that you have a nominee for all your insurance policies. Talk to your insurance provider if you wish to change the nomination for whatsoever reasons.
5. Lasting Power of Attorney (LPA)
Some people tend to confuse an LPA with a will. However, both of these are entirely different. As we all know, a will defines the assets and mentions the nominee, trustee, and executor the estate. A will operates only after the death of the donor. On the other hand, an LPA operates after the donor loses their mental capacity and does not deal with the distribution of a person’s assets after their death.
An LPA authorizes another person or other people to make decisions about the business, property, and other crucial affairs. You can select and authorize up to 2 people or donees who can act jointly for your business matters. Thus, you must create a lasting power of attorney so that your business and your assets aren’t put into troubles. With dementia on the rise, the government has been encouraging Singaporean citizens to file an LPA. The Singaporean government is also waiving off S$50 fee payable to the Office of Public Guardian for the execution of an LPA until 31 August 2020.
You can find all details about LPAs here.
6. Holding of Immovable Property
Immovable properties are generally referring to as real estate assets, such as your house. There are two common manners of holding an interest in an immovable property: tenancies-in-common and joint tenancies. A tenancy-in-common is where each owner of a property has a fixed share of the property, and they are only authorized to take decisions of that share of the property. A joint tenancy is where the co-owner of property equally owns 100% of the property.
Therefore, you must decide your ownership and register your immovable asset in one of these two holding manners.
Estate planning can be a daunting task. Make sure you consult your lawyer before taking any decision. A professional will share all the necessary information that you must know and let you plan your estate effectively.
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