The Gen XY Lifestyle

What is estate planning all about?

By  |  0 Comments

In recent years, there has been a growing demand for the setup of trusts, to be used as part of the estate planning and inheritance management process.

A well thought out estate plan is one not done merely from order taking, but one that identifies and solves potential asset leakages.

So, what exactly is estate planning all about?

Estate Planning involves setting up a plan that clearly instructs who will eventually receive your assets and how it is going to be managed and distributed.

It also makes it clear as to how you would like your affairs to be managed, in the event you are unable to handle them on your own due to mental incapacity.

Estate duty taxes on overseas properties and stocks, unplanned divorce from adult children and creditors from business loans and potential bankruptcy claims are some of the common asset leakages.

Certain important values such as filial piety, family harmony, determination, philanthropy and hard work can and should also be instilled in the trust to build clarity in family values for generations to come.

Pitfalls of not doing estate planning

Upon one’s passing on, as long as you have loans, income taxes or debts that is not covered or paid off, and your estate may have insufficient cash to settle the debts, the legal representative may be forced to sell your estate assets such as property to raise the funds to pay off.

This might leaves very little funds left or there might even be NOTHING left to distribute to the beneficiaries.

As such, it is a sensible responsibility to ensure that proper planning is done to avoid costly and complicated legal implications for the beneficiaries later on.

With proper planning, you can achieve the following:

  1. First, ensuring that you would have sufficient funds for your retirement.
  2. There must be sufficient funds to take care of your beneficiaries, especially if it includes minors or special needs children
  3. Most of the time, people skip a step and settle for a simple Will, without taking account of the financial planning aspect.
  4. Any potential assets risks and leakages can be identified and addressed in advance

Is Estate planning exclusively for the rich and wealthy?

Estate planning is something that every responsible adult should consider.
With the right financial planning solutions included in estate planning, it can ensure that the beneficiaries’ interest are protected.

For example, let’s take an ordinary Singaporean living in a HDB. He owns a HDB, has cash savings, stocks and some insurance policies, with a net worth of at least SGD 800k to SGD 1 million upon death.

So effectively, when a person passes on, the next generation will be looking at an average of SGD 1 million worth of assets to receive.

Is it important for every adult to do estate planning?

The last thing that any parent would want to do is to put money in their children’s hands when they are not prepared to handle it.

Just imagine a young adult suddenly receiving an inheritance of SGD 3 million in cash.

What would a young adult do with the inheritance funds?

Will they splurge the money or use the money wisely?

What about the possibility of scammers coming into the picture?

How can the beneficiaries’ interest be protected?

In most cases, apart from property and investments. other estate planning instruments such as insurance, a will and a trust are powerful tools that a person can use to protect their families.

For example, parents can take up a financial instrument such as an insurance policy, and place it into their trust, and set instructions in the Trust for the beneficiaries to receive a periodic monthly or annual income payout to fund their living expenses, education and medical needs.

What considerations does one need to have when it comes to matrimonial asset planning in estate planning?

Matrimonial assets often include assets that are acquired and used by either or both parties or children during the marriage.

In recent years, we have seen quite a number of high profile court cases of marriage that has gone wrong. For exampe, there was a recent case where a SGD 1 Million angbao became the focal point for contest when the marriage broke down.

Before marriage, if you have some spare funds or have received some inheritance and you do not wish it to be part of matrimonial assets, one suggestion is park these funds separately into a different savings account which will not be used for communal family consumption such as family travel, fixing a leaking pipe for your matrimonial home or putting an inherited painting at your matrimonial home to be admired for display,

In the case of parents who already have married children, and want to protect their assets from outsiders, they can consider using financial planning steps which involve setting up instruments such as insurance and investment plans, a will and trust.

Given the range of scenarios, financial planning is important for married couple as well as for newly formed families, or those that have reached crossed different life milestones.

Article contributed by Jovin Yeo.

estate planning

Jovin is a financially trained and experienced estate planner who works with Trust companies, Will writers and lawyers. She is recognised as the top 1 percent practitioner globally. She is often referred to as the go-to specialist for the well-heeled working professionals and families. Her special forte lies in retirement and estate planning, restructuring risk & investments. Known for her practical insights and sincerity, her clients range from families, business owners to Chairman from different industries.

Photo by Scott Graham on Unsplash