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Planning your estate: Key considerations

| 12 Oct 2021

Estate planning is one of six key components of having a holistic financial plan, said DBS Bank head of financial planning literacy Lorna Tan at the CPF & Your Retirement EP Forum 2021.

Estate planning is crucial to making sure one’s last wishes are carried out before they die and some tools that help with it include wills, lasting power of attorney, CPF nominations, insurance nominations and trusts.

Will writing – distributing your estate

Writing a will, for example, has several benefits – the first of which is being able to distribute one’s estate according to their wishes.

Firstly, you can have a list of beneficiaries and you can indicate what their gifts are, whether it’s a specific item or a cash amount. “By doing so, you can minimise conflicts,” she said. Writing a will also allows the appointment of guardians, executors and trustees, speeds up distribution of the estate and minimises unnecessary costs.

“If you have a will that dictates who to give to, where your assets are, your estate doesn’t have the extra leakage of having to spend money on looking out for where your assets are and having to secure them,” she said.

It also helps to avoid problems relating to common disaster – situations where more than one person from the same estate dies at roughly the same time, which could result in complications in the distribution of assets should there not be a will in play.

Setting up a trust – distributing CPF savings

In Singapore however, a person’s CPF savings are not considered part of the estate and are excluded from their will.

According to PreceptsGroup International relationship manager Ooi Sen Tee, to specify who CPF savings pass on to in death, one has to make specific nominations. “Upon our passing, the CPF board will distribute the savings according to the nomination made during our lifetime,” she said.

Without a nomination, the CPF board will transfer the savings to the Public Trustee’s Office which then distributes according to Singapore’s Intestate Succession Act or Administration of Muslim Law.

At the same time, Ms Ooi also highlighted some potential concerns even with a CPF nomination. These include young nominees only receiving the pay-out at age 18, pay-out only coming in a lump sum, substitute nominees not being allowed and CPF savings not having protection from creditors’ claims.

She said that many of these issues can be circumvented by setting up a trust and appointing a trustee to distribute the CPF savings.

A person (settlor) may nominate the trustee as the recipient of their CPF savings and sign a trust deed with them that details how the settlor wants their funds to be distributed. Upon death, the funds will pass on to the trustee who is then has a legal obligation to manage the trust fund and distribute it to the beneficiaries of the fund in accordance with the trust deed that was signed.

The CPF & Your Retirement EP Forum 2021 took place online form 25-26 September 2021 and was jointly organised by PreceptsGroup International and EPPL Digital.