Life is inherently impermanent. Legacy planning however, isn’t.
It may be a morbid thought, but it is an imperative subject to think about, nonetheless. How can we best take care of our loved ones, those who mean so much to us, when we depart from this physical realm?
It is never too early to begin your legacy plan. But with it comes a myriad of complex legal jargon, processes and options that may befuddle and daunt the uninitiated. We speak to Kevin Toh, a Personal Wealth Manager with AIA, who provides a comprehensive summary of everything fundamental to legacy planning.
Q: What are some misconceptions about legacy planning?
Kevin: “I am too young for estate planning”. Always prepare for the unexpected as you will never know when something untoward may happen and it may be too late when it happens.
Some assume estate planning to be a legal recourse intended only for the wealthy. Despite its moniker, legacy planning isn’t purely financial. In the event that you are debilitated, when you can no longer perform everyday functions, having the forethought to put in place a concrete framework will ensure that your finances and medical care are well thought out. Your condition notwithstanding, your loved ones can still be well taken care of, and you can retain that invaluable sense of autonomy.
Of course, there’s also the matter of leaving such arrangements to the state. While that route may seem more straightforward, it does open the door to potentially contentious disputes should some beneficiaries feel that the state’s administration of your assets is unfair. Moreover, involving the Public Trustee Office (a division of Ministry of Law) will entail a legal process that will span a considerable amount of time before reaching a final verdict.
Q: What are some fundamentals of legacy planning that everyone should know?
Kevin: In addition to a will, there is also the Advance Medical Directive (AMD) and the designation of Lasting Power of Attorney (LPA) .
Also known as “a living will”, an AMD essentially allows you to dictate the medical response and treatment you’ll receive if you do find yourself in an incapacitated state. You’ll also have a say on matters like organ donation, palliative care, life support, body deposition, religious preferences and more.
Establishing a Lasting Power of Attorney (LPA) enables you to appoint one or more trusted individuals (donee) to act as personal executors of your intents. They will be empowered to make authoritative decisions regarding your welfare and affairs should you become terminally ill or unconscious. A good gauge of your donee’s ability to competently carry out your wishes is how they approach their own affairs – are they able to manage their finances and medical care in a manner that is both prudent and thoughtful? Have they ever declared bankruptcy? If you are unsure, you can always appoint separate donees, and give each selective authority to handle specific aspects of your legacy plan. Naturally, your donee should also be someone that you trust.
Ideally, you should have these arrangements set in stone as early as possible, especially if you have dependents like children or elderly parents.
Q: How does one establish a LPA?
Kevin: Firstly, one should first understand the two different types of LPA:
Type 1: You (the donor) wish to grant your donee(s) general powers to make decisions on your behalf, whether it is regarding your personal affairs and/or the distribution of property, should you lose your basic cognitive functions.
Type 2: You (the donor) wish to grant your donee specific or customised authorities. In this case, you will need to engage a lawyer to assist you in drafting the LPA.
The process of setting up an LPA is, otherwise, rather straightforward. At the Office of the Public Guardian (OPG), you can appoint your trusted persons once you have reviewed the details of the LPA and have verified your particulars. After which, you visit the certificate issuer and make payment upon the submission of the LPA form.
Q: On the topic of a trust fund, how can one best approach its setup and trustee selection?
Kevin: A trust is, in a nutshell, a legal arrangement that grants an appointed gatekeeper (the trustee) administrative power to manage your assets in the best interests of your intended beneficiaries. Typically, people utilise trusts to safeguard the interests of beneficiaries who are minors, and protect your assets from creditors or divorce proceedings. Given that assets in a trust are not categorised as personal property, a probate is not required and as such, disputes can be avoided.
There is, however, a caveat to trusts – they come with a hefty price tag. The setup alone can set you back anywhere from a few thousand dollars to even tens of thousands of dollars, not to mention the annual maintenance fees.
If you have intended to set up a trust, the next thing to consider is your selection of trustee(s), who can be an individual or a professional trust company. If you prefer an individual, it is advisable to have a contingent trustee in the event the primary trustee cannot fulfill the duties for whatever reasons. It is important to discuss with the trustee(s) and ensure your wishes are clearly communicated, understood, and documented.
Before you set up a trust, find out more on how to achieve financial fitness in your life.
Q: How can one properly safeguard their family’s well-being in the case of unforeseen circumstances?
Kevin: Just like investing, you always want to start early. That few hours or days that you commit to legacy and estate planning will translate to years and even decades of care and comfort for you and your family.
It is imperative that you regularly update your existing legacy plan to align with your beneficiaries’ as well as your own evolving needs. Advancements in medical treatments and changes in your financial situation may also necessitate a thorough review of your legal arrangements.
Useful links:
Setting up your Lasting Power of Attorney (LPA): The Office of the Public Guardian
Legacy planning processes: mylegacy@LifeSG
Quick access to over 100 digital government services: LifeSG app
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