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.

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. 

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. 

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.

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.

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.

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.  

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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The post How To Plan Ahead & Protect Your Family’s Wealth appeared first on eNSMAN.

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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The post Your Questions About Legacy Planning Answered appeared first on eNSMAN.

Estate or legacy planning is the act of preparing how you will pass down your assets and property to your loved ones after your death. Samuel Dickson Tan, legal counsel and founding member of the Asia Estate Planning Association, explains what you need to know about it, from how to prepare your will to estate planning and completing your lasting power of attorney.   

Q. Why is estate planning important and why should we do it?

Samuel: Estate planning is one of the most important things you can do for your loved ones. It provides directions for them on what to do with your assets, thus giving them peace of mind and preventing any infighting over your estate.

Q. Is estate planning only for elderly or wealthy people or people with dependents?

Samuel: It is recommended for anyone with assets that belong to them and the people they love. This should cover just about everyone, regardless of whether they are high net-worth individuals or not.

Q. What does estate planning entail, and should you engage a professional to help you with it?

Samuel: A professional can help you execute your wishes, define your beneficiaries, and determine your assets and transfer them in the most effective manner, using legal instruments like wills and trusts. You can always do your will yourself but it’s a good idea to get help from an experienced professional who can help you uncover any blind spots.   

Q. What is a will?

Samuel: This is a legal document that sets out your instructions and final wishes for your executors, guardians and beneficiaries. You have to be 21 years old and of sound mind to be able to do your will.

Q. What is a trust?

Samuel: This is a legal arrangement giving a trustee the authority to manage assets for the benefit of the beneficiaries. Many families have trusts so that they can continue to provide for minor children, elderly parents and vulnerable family members over an extended period of time.

According to a report published in 2012, a total of US$40 trillion will be passed down to the next generation. We are witnessing the greatest transfer of financial wealth in human history and the majority of that wealth will go to our children, whether they’re ready or not. I therefore recommend that parents with young children consider getting their wills or trusts done to ensure that their kids receive their assets at an appropriate time, when they’re mature enough to manage these assets themselves.

Q. What is a lasting power of attorney (LPA) and why is it important to have one?

Samuel: This is a legal document that appoints persons (called donees) to make decisions on behalf of the donor (the person doing the LPA).

If you lose your mental capacity, you’ll need someone to make decisions on your behalf with regards to your personal welfare and financial matters. The LPA empowers your donee to protect your interests during your lifetime. Whom you choose as your donee is up to you but it should be someone you trust with your life and monies. In the absence of an LPA, your family would need to get a court order to empower a deputy to make these decisions on your behalf. This could potentially be time-consuming, stressful and expensive, which is why the Office of the Public Guardian has been encouraging Singaporeans to complete our LPAs while waiving the LPA registration fees for us.

Q. How might a family be affected when their main breadwinner passes away without a will or any plan for how their estate will be distributed?

Samuel: This is an unfortunate but very real situation for many families, and it can leave them feeling helpless and confused. Leaving a will provides much-needed clarity on what needs to be done and the probate process may be faster, simpler and cheaper. If you pass away without a will, the rules of intestate succession will determine who should inherit your estate. If you were to go down the list, your estate could potentially be “inherited” by the government (although this is very rare). Not having a will may also result in administrative issues, delays, increased legal costs and even long-term family infighting and resentment.

Have you done your legacy planning? Share your experience with us at magnsman@sph.com.sg!

The post If Something Happens To You, What Happens To Your Assets? appeared first on eNSMAN.