All You Need to Know About Estate Planning in Singapore

Have you wondered what happens to your estate after your death? What happens to your insurance policies or CPF savings? Are your loved ones familiar with what you have? One of the common misconceptions of estate planning in Singapore is that it’s only for the rich. But really, it’s something that everyone should consider if they want to make what is likely to be a tough time easier on their loved ones.

Estate planning is essentially figuring out how you want your assets to be managed and transferred, and recording it all in one place for greater clarity and efficiency for your loved ones.  

Find out more in this complete guide to estate planning in Singapore, as we share its uses, benefits, and how estate planning tools like wills and CPF can help you take care of your loved ones.

What is estate planning?

In a nutshell, estate planning ensures that your hard-earned savings are distributed according to your wishes after death. To do this, first list down all your assets - whether it’s your bank or CPF savings, investments or property that you own – including your liabilities, then work out how you want them to be managed. 

Estate planning also helps you work out:

• Your medical wishes should you be unable to decide for yourself
• Your net worth and how your assets should be distributed after your death 
• Who you want as your children’s guardian (if any)
• Who to carry out your estate plan

It’s always good to have a plan in place so that you’re prepared for life’s unexpected events. With estate planning, you’re sparing your loved ones the agony of making hard choices, ensuring that your family’s finances are planned for, while also ensuring that your assets are managed according to your wishes, without any delay or disputes. This timeliness becomes even more important when you have dependents like children or elderly parents who are relying on you. 

Estate planning vs legacy planning

What is legacy planning? Is it the same as estate planning? While used interchangeably, they have their differences.

Estate planning focuses more on the tangibles like distributing your assets, while legacy planning takes the intangibles into account, by attaching values and purpose to your estate planning documents. Take for instance, dictating that 10% of what your beneficiaries receive have to go towards a charity of their choice, as part of your philanthropic legacy . 

Estate planning vs will writing

Although both provide instructions on how your assets should be managed after death, they are not the same. Estate planning takes on a more comprehensive view as it includes a living will that outlines your wishes when you’re still alive, as opposed to a will that takes effect only upon your death. 

Estate planning also lets you plan for the distribution of your CPF savings, which cannot be distributed through a will, through a CPF nomination. Will writing and CPF nomination are but just two of the tools that are used in estate planning. 

What are the common estate planning tools?

Estate planning goes beyond will writing and involves a variety of tools that includes CPF nomination, insurance nomination, Inter Vivos trust, Lasting Power of Attorney (LPA) and Advanced Medical Directive (AMD). 

Will

A tool that is more commonly known, the will is a legal document that outlines your wishes regarding asset distribution upon your demise. It also allows you to appoint testamentary guardians for your children if both you and your spouse pass away, set up a trust for your children, as well as choose substitute beneficiaries in the event that your chosen beneficiaries do not survive you. 

The largest benefit of writing a will is the clarity it provides to your loved ones. Here are some examples of how having a will can help. 

1. Decide who gets what from your estate
   Without a will, your assets will be distributed according to the Intestate Succession Act, or Islamic Inheritance Law if you’re a Muslim, which dictates your beneficiaries and how much they’ll receive.
   
   For instance, if you are survived by your spouse, children, and parents, half will go to your spouse and the other half split equally among your children. Meanwhile, your parents will receive nothing.
   
   With a will, you can allocate specific assets or distribute your estate proportionally among your loved ones to ensure that all of them will be taken care of.
   
   
2. Appoint a guardian for children below 21
   By doing so, you’re ensuring that your children will be in the care of a person that you trust.
   
   
3. Decide your executor
   With a will, you can appoint someone you trust to be an executor or joint executor of your estate, who will ensure that your estate is distributed according to your wishes. Without one, the State will appoint an administrator.
   
   
4. Decide on funeral arrangements
   This helps to alleviate the decisions – and stress – that your loved ones have to deal with while grieving. It also provides clarity, especially if members of the same family have different religions.
   
   
5. Greater control on beneficiaries 
   Besides choosing your beneficiaries, a will also allows you to exclude specific family members from inheriting your assets, such as that estranged family member whom you have not contacted in years.
    
6. Saves time and cost
   With a will, your appointed executor just needs to apply for a Grant of Probate, which takes approximately 3-6 months and costs about S$3,500, before they can distribute your estate.
   
   Without a will, your loved one has to apply to the Courts to become an administrator and obtain Letters of Administration, before your estate can be distributed according to the Intestate Succession Act. This process will take about a year and costs at least S$5,000. 

Having a will does have its benefits and contrary to what you might think, writing one doesn’t have to be complicated. 

These are the requirements: 

1. The Will must be in writing.
2. You must specify the gifts and the beneficiaries.
3. You must be at least 21 years of age.
4. You must be mentally sound.
5. Your Will must be witnessed in person by 2 independent witnesses who are at least 21 years of age, of sound mind, and not beneficiaries.

While you can get a lawyer to draft one out for you, there are many tools found online, like WillCraft, that allow you to create a will at affordable prices. You can amend your will anytime as long as you have the mental capacity to do so, and you are encouraged to review this regularly especially when there are changes to your assets or life status, such as when you get married, divorced or become a parent.

CPF Nomination

Did you know your CPF savings cannot be distributed under a will or a trust? To bequeath your CPF savings to specific beneficiaries, you’ll need to make a CPF nomination. 

Like a will, a CPF nomination prevents administrative delays or your estate will not have to pay a fee to administer your un-nominated CPF money. Without a CPF nomination, your CPF savings will be distributed according to Singapore’s intestacy laws.

For instance, the money will go to your spouse and children, and if you have neither, then to your surviving parents. If you have no surviving family members, it’ll go to the Government. For Muslims, it’ll be distributed according to the Inheritance Certificate from the Syariah Court. 

Making a CPF nomination is easy. You can make your nomination online, or at any CPF Service Centre. Before doing so, think about: 

• Who your beneficiaries are
• What proportion of your CPF funds should they be receiving
• Nomination Payment Options: Should your beneficiaries receive the funds via a one-time cash payout, through their CPF accounts, or in the form of monthly payouts via the Special Needs Savings Scheme for children with special needs?

Similarly, review your CPF nomination regularly, especially after life events. Did you know that the CPF nomination you made when single becomes invalid after you get married, but doesn’t change when you get divorced? 

Insurance nomination

Insurance is a key tenet of financial planning and most of us would have some of it to protect ourselves and loved ones from unexpected surprises in life. 

While not compulsory, it’s always good to make insurance nominations so that the proceeds from your policy can be distributed according to your wishes without any delays. Policy owners of life plans or accident and health insurance with death benefits have two options: making an irrevocable nomination or a revocable nomination. 

Otherwise known as a trust, an irrevocable nomination is usually seen in life insurance policies where the beneficiaries are the policy owners’ spouse and children. This is a rather serious undertaking because the nomination is quite permanent and any changes to the policy can only be made with the written consent of all beneficiaries. Consent is also required if you want to revoke your trust nomination. However, it comes in handy if you want to protect your estate against creditors. 

For revocable nominations, the policy owner can add or remove nominees at any time, without their consent. You will also have the rights to your policy and living benefits, as opposed to an irrevocable nomination.

Without an insurance nomination, the policy benefits will be given to any person considered as the proper claimant, such as your spouse or children. However, it will take a longer time for your family to receive the proceeds as they will need a Grant of Probate or Grant of Letters of Administration before they can receive the payout. 

For this reason, it’s good to regularly review your insurance nominations especially when you achieve various life milestones that result in a change in dependents. To make an insurance nomination, simply reach out to your insurer for a nomination form. Income Insurance policyholders can find the various nomination forms here.

Inter Vivos Trust

An Inter Vivos Trust is essentially placing your assets under the care of a trustee, to be managed on behalf of a beneficiary. You can specify how you want this to be distributed or whether certain conditions have to be met, which makes it useful for ensuring your assets are used according to your instructions. 

For instance, you can set up an Inter Vivos Trust to ensure that your assets are used for your parents’ medical needs, or for your children’s educational needs. It can also be used for leaving assets in a will for any of your children who are below 21 years. 

Lasting Power of Attorney (LPA)

An LPA allows you to appoint someone you trust, otherwise known as a done, to make decisions on your property, financial affairs and personal welfare should you, the donor, lose the mental capacity to do so. You can choose up to two donees. 

Having an LPA avoids disputes and tension within the family and also protects your estate against irresponsible caregivers. With the rising rates of dementia in Singapore, it’s important that you file an LPA earlier than later. 

Advanced Medical Directive (AMD)

An AMD is a legal document that lets you inform your doctors in advance of your medical wishes. For instance, do you wish to receive extraordinary life-sustaining treatment should you become terminally ill, unconscious, or incapable of exercising rational judgement? This relieves your loved ones from having to make a difficult decision should the time come.

To make an AMD, you have to be mentally sound, at least 21 years old, and have the AMD signed by 2 witnesses – one of which being your doctor – who have no vested interest in your death. 

Estate planning is an important component of financial planning

Don’t take estate planning in Singapore lightly. Just as how you should manage and review your finances regularly, the same should be applied to estate planning. The earlier you start, the better as it is a living document that will only be useful when it is aligned to your life and planned according to your current wishes. 

Got married or became a parent recently? Or have you expanded your portfolio? Review your estate plan and update it to ensure that your loved ones are well accounted for. 

Whether it’s writing a will or making your CPF and insurance nominations, it’s good to have those documents in place because you never know when life might hit you with a curveball. And if that happens, you’ll be well-prepared knowing you have done everything you can to ensure your family will be well taken care of.