Where there's a will ...

Business Times - 02 Feb 2009

It's never too late to start one's estate planning early in life, to ensure that one's wealth is passed on to intended beneficiaries smoothly, says BEN TAN KIM LIANG.

ESTATE planning refers to the process of planning for the transfer of a person's estate to the intended recipients before or upon his or her death. A common misconception about estate planning is that it is to be carried out only when one is in the twilight of life.

However estate planning, like other elements of financial planning such as insurance, investment or retirement planning, is best carried out when one is young and healthy.

Estate planning is important as no one knows when he or she will die. It ensures that a person's wealth is passed on to the intended beneficiary or beneficiaries efficiently and smoothly.

Consequences of intestacy

When a person dies without a will, the deceased's property or estate will be distributed according to the Intestate Succession Act that provides rules for the transfer of property.

The Act spells out the rules for distributing the deceased's property to the spouse, children and relatives. The distribution rules under the Act are fixed. If the deceased had wanted to vary the proportion of distribution to certain relatives or to leave his or her assets to charities or non-relatives, such wishes cannot be honoured.

Small estates valued at less than S$50,000 are administered by the Public Trustee, and estates of higher value by application to the courts for grants of letters of administration.

Intestacy could delay the distribution of the estate to the beneficiary or beneficiaries. This delay can create great difficulty if the deceased's family members need the money for immediate needs. The trauma of losing a loved one can be made less painful if there is a will detailing how the deceased's wishes are to be carried out.

Nature of a will

A will is essentially a document by which a testator gives instructions to an executor nominated by the testator to carry out instructions on how his assets are to be distributed upon death. The persons who benefit under the will are called beneficiaries.

Besides specifying the distribution of the deceased's estate among his beneficiaries, the will should appoint guardian(s) for his minor children, if any, in the event that there is no surviving spouse.

When appointing a guardian, it is important to consider the kind of lifestyle desired for the children, such as type of education and religion, which will serve as a valuable guide to both the guardian and the children.

It is common to appoint the surviving spouse as the executor. Sometimes, for reasons such as the intent to minimise possibility of fraud or a need for the executor to possess certain skills, others may be appointed to assume this office.

There is a need to choose a competent and trustworthy executor of an appropriate age (for example, an older person may not survive the testator) who is responsible and willing to administer the estate.

Alternatively, a professional executor may be hired if the administration of the estate is likely to be complicated and to ensure longevity of this office.

Any adult of sound mind can make his own will. The risk is that the will might be rendered ineffective or invalid, causing the beneficiaries to suffer unnecessary expense and uncertainty.
It may be better to consult a lawyer who can provide advice and draft the will according to law. The cost of making one depends on its complexity. The lawyer can provide an estimate of the costs involved before appointment.

Ensure estate liquidity

Estate liquidity refers to the ability of a person's estate to pay taxes and other costs that arise after death, using cash and cash equivalents. Sufficient liquid assets are needed to pay for the deceased's final expenses, medical bills, income and property taxes and related expenses, to prevent the forced sale of assets.

One way to maintain estate liquidity is with life insurance policies. Insurance monies payable in the event of death would be part of the deceased's estate. There is no longer a need to pay estate duty in Singapore, with abolishment of the relevant Act.

Distribution of CPF savings

There is no need to make a CPF nomination if a person wishes to distribute his CPF savings under the intestacy laws. Distribution under the intestacy laws by the Public Trustee ensures that the deceased's family members will receive his CPF savings.

If single, the deceased's CPF savings will be divided equally between his/her parents.

If married with children, half of his CPF savings will be given to the spouse and the remaining half divided equally among the children.

If the deceased is a Muslim, his CPF savings will be distributed by the Public Trustee according to the Inheritance Certificate, which family members can obtain from the Syariah Court (Muslim inheritance law).

A person not wishing to distribute his CPF savings in accordance with the intestacy or Muslim inheritance laws will need to make a CPF nomination.

Safekeeping of documents Make sure that family members know where important documents (such as the will, investment records, insurance policies, bank passbook, loan documents, cheque books, IOUs, etcetera) are kept.

Keep the documents in a centralised location. Having proper records of all the deceased's assets and liabilities will facilitate the administration of the estate and can shorten the probate process.
A person can register information on his will free of charge with the Wills Registry. Information available from the Wills Registry will be useful for beneficiaries or executor(s) in determining whether a will has been prepared or in administering the estate.

Advance Medical Directive (AMD)

By signing an AMD in advance, a person is informing the doctor that, in the event of terminal illness, he does not want any extraordinary life-sustaining treatment to prolong life.

With the AMD, loved ones can be spared the agony of making decisions such as whether or not to switch off the life-supporting machine. Besides, such treatment can be financially crippling, emotionally sapping and physically draining on the family.

Executing an AMD is a serious matter and should be discussed with the family and, if possible, in consultation with a family physician. AMD forms are available at polyclinics and private clinics.

Nothing is certain except death and taxes. The lesson for all is that every one needs to plan early and have a valid will. Even if you don't have pots of money, you can avoid the pain of contests, disputes and heartaches if you make your wishes clear and known in a will.

Estate planning is not about the dying but for the living, especially for those whom we love dearly and who survive after us. We and our loved ones can have peace of mind with comprehensive estate planning in place.