How To Plan Ahead & Protect Your Family’s Wealth

What you should know about creating a will and a trust, and why legacy planning is important for everyone, no matter your financial status.

By Melissa Wong        16 February 2024

This year marks 40 years of Total Defence for our country. Total Defence involves every Singaporean playing a part, individually and collectively, to build a strong, secure and cohesive nation. After all, when we are strong, we are able to deal with any crisis.

Economic Defence is one of the six pillars of Total Defence. Economic Defence is about strengthening the competitiveness and attractiveness of Singapore’s economy so that we are special and relevant to the world. When we’re economically strong and resilient, we can carry on and recover quickly should we be confronted by any challenge or crisis in the future, such as a global downturn or economic strangulation that could shake investor confidence in Singapore. 

Just as important as building Singapore’s economic power is protecting our own family’s assets and wealth. We all want the best for our family, and that includes after we have passed on – which is why it’s important to plug any gaps in our wealth protection strategies. Even if you are not a high-net worth individual and don’t have masses of family wealth, you’re still entitled to peace of mind to know that your family will be protected in case something unexpected happens and you’re no longer around to take care of them. 

There are many ways to guard your wealth and ensure that whatever you leave behind goes to the people you care about the most, but how do the various legacy planning instruments differ, how do you know which is best for your family, and what should you consider when deciding on the distribution of your cash and assets? 

Shawn Yap, Financial Services Associate Director at SingCapital, answers these and other questions.

Difference between will and trust

Q: What’s the difference between a will and a trust?

Shawn: The major difference between the two is that a will cannot hold and own any assets. A will is typically used to distribute one’s estate based on the instructions written in the will. On the other hand, a trust can hold and manage assets, and make pay-outs to the beneficiaries. 

How do you know which one is most suitable for your family? It really depends on the size of your estate value and your family’s needs. 

high net-worth individuals

Q: Is it true that you need to be a high net-worth individual or have immense family wealth to create a will and/or a trust?

Shawn: Regardless of wealth, it’s important to write a will. You shouldn’t leave it to the default distribution because the decision may not be what you like. 

Let’s look at one example of a couple who has not written a will: John and Mary are happily married with no children. They decided to own everything jointly, including a fully paid condo. 

But a few years later, both John and Mary pass away at the same time in a road accident. Who do you think will get their condo and other assets? 

Mary is older than John by a few weeks, so, by law, she is deemed to have passed away first. All her assets will then be passed to John, but John is survived by his parents who will inherit all the assets. Is this a fair outcome? 

Many people belong to the “sandwich” generation – these are middle-aged adults who care for both their ageing parents and their own children. By law, if someone in this sandwich generation passes away, 50% of their assets would go to their spouse and 50% to their children equally. Their parents get nothing. Is this acceptable? 

By writing a will, you can decide who gets what after you pass away rather than have the law decide for you. 

legacy planning - hand on calculator in background

Q: Why is legacy planning important for families? And what might happen if the family breadwinner passes away without any wealth protection?

Shawn: The purpose of legacy planning is to ensure that the right amount of money goes to the right people, in the right way and at the right time. 

For instance, if you’re a homeowner with an outstanding mortgage, you should ask yourself if the joint owner is able and eligible to take over the entire outstanding loan if you were to pass away. If not, does the joint owner have sufficient funds to pay off the loan? 

Even if you have mortgage insurance, will it pay out in time before the bank seizes the home? 

Not sure where to begin with legacy planning? Read more about it here.

creating a will - hands writing on paper

Q: What should one consider when creating their will? And can someone draw up their own will or must they hire a lawyer to do it for them?

Shawn: As a licensed financial practitioner and lecturer teaching legacy planning, I have never attempted to write my own will.

Every family is special and there is no standard template when it comes to creating a will. It can be challenging for someone to do their own legacy planning, especially if their financial and family circumstances are quite complex. My advice is to get help from a professional who is familiar with both the financial and legal frameworks of legacy planning.

joining hands

Q: What should you consider if you decide to create a family trust?

Shawn: By default, our children will get their hands on their inheritance when they turn 21 years old. When creating a family trust, you should ask yourself if your children are capable enough to handle large sums of money at that age, whether the money will be used wisely, and so on. If your elderly parents are beneficiaries, you should also ask if they’re capable of handling large sums of money. Will they be scammed? What if they pass on before the full sum is used up? Would you want your siblings to inherit the remaining sums by default?

Before you set up a trust, find out more on how to achieve financial fitness in your life.

protect your family assets - hands around a dollar sign

Q: Besides wills and trusts, how else can we protect our family wealth?

Shawn: A will is but one instrument used in legacy planning. I advise you to plan for your desired outcome by taking a holistic view of the wealth distribution process, because when death occurs, your wealth can and will be distributed through different platforms. 

Let’s look at monies in your Central Provident Fund (CPF), for instance. These monies cannot be distributed via a will; it can only be done through a CPF nomination. 

Another way to protect your wealth is through Lasting Power of Attorney (LPA). This is useful in case you become mentally incapacitated, such as if you were to meet with an accident, fall into a coma, become disabled or develop dementia, for example.  

a sign with life insurance

Q: Can life insurance be used as a form of wealth protection?

Shawn: Life insurance can be an effective way to:

  • Clear debts, especially in the case of a home mortgage.
  • Replace the pay cheque of the income earner: This will allow your family members to maintain the same lifestyle without any compromise, as if you were still alive. It’ll allow your children to still afford to go to their preferred university. And it will allow your spouse to still be a stay-at-home parent and/or to retire without any financial worries.

Life insurance is the ultimate promise of love as it provides an income for your family to continue their lives with dignity even when you are not around.

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