How to plan your estate to protect your family

In a city that is as expensive as Singapore, planning your financial future is especially important. It’s also an aspect that’s often overlooked. Estate planning is the preparation process in which you determine how your assets will be preserved, managed and allocated in the event of death or incapacitation.

Estate planning helps to ensure the financial security of your loved ones, and a comprehensive plan can provide for your family’s needs.

While the task of estate planning may seem intimidating, it is not as difficult as you might think. Approach it with these 5 steps to guide you along:

1. Figure out all your personal assets

Start by making a list, stating all your physical and intangible possessions that are valuable. Examples include your home, investments, insurance plans, bank savings, CPF savings, antiques, jewellery, vehicles, computer or laptops and so forth.

This list could be longer than you expect, and you may wish to include notes of your intended recipients to inherit the item following your demise.

Pro-tip: Your assets are likely to accumulate overtime, so be sure to keep this list updated regularly. Make it a habit to track your intangible assets like bank accounts, insurance and digital investments. You can easily do this with your Planner Bee app.

2. Identify your liabilities

Your estate’s net value factors in your assets, liabilities, expenses and fees, as well as the nature of property ownership.

As such, don’t forget to consider your liabilities, detailing all your obligations. This should include your outstanding credit card bills, mortgages, car loans and any other debts you may have incurred.

Be as precise as you can and note your bank account numbers, the contact information of the companies holding the debt and the location of your signed agreements.

As an added precaution, you may also wish to note down your regularly used credit cards and differentiate from the ones that are relatively untouched in a drawer.

If your liabilities are huge, consider getting insured.

At least once a year, run a free credit report to consolidate your outstanding balances so as to make sure you’ve not overlooked any bill payments.

If the liabilities are huge, consider getting insured for proper protection to counter life’s unexpected events. For instance, mortgage insurance makes sure that you are able to service your mortgage repayment for your entire home loan tenure in unforeseen circumstances such as total permanent disability or death.

In other words, mortgage insurance ensures that your loved ones will always have a roof over their heads and not be debt-ridden should anything unfortunate occur. In the event of your demise, mortgage insurance will cover the balance of your mortgage.

3. Draft your will

This step may seem premature to many, but is imperative to ensure clarity and timely transfer of your estate. A will is legally binding and clearly reflects your wishes in the allocation of your assets, preventing any future misinterpretation and reducing stress for your loved ones during a difficult period.

In the absence of a will, Singapore’s intestacy laws will dictate who gets what, and the allocation may not be what you wished for.

(Read more: The Basics of Financial Planning: The Last Step is Key)

When drafting your will, note down key decisions including:

  • Your list of beneficiaries
  • The proportion of your assets
  • Your executors and trustees who will fulfill your wishes

4. Make your CPF nominations

In Singapore, CPF savings form a major part of our assets. However, CPF funds are excluded from your estate and therefore cannot be covered under a will. As a result, you will have to make a separate nomination with the CPF board.

This ensures a smooth administrative process, and your beneficiaries can also save the fees that would otherwise be made to the Public Trustee’s Office.

To make your nomination, you can either fill up a form through CPF’s online portal, or enquire in person at your nearest CPF Service Centre.

In the absence of a CPF nomination, Singapore’s Intestacy Laws (or Islamic Inheritance Law) will distribute your savings to the legally entitled beneficiaries (who are usually your family members and next-of-kin), with a fee that has to be paid to the Public Trustee’s Office.

When you’re making your CPF nomination, be sure to include the following:

  • Your list of nominees
  • The proportion of your assets
  • How your nominees should receive the funds (also known as the Nomination Payment Options)
    • Default method: One-time Cash payout for your nominees to receive the CPF funds in either cash, cheque or GIRO.
    • Through CPF account: If you choose the Enhanced Nomination Scheme (ENS), your nominees will receive your CPF savings through their own CPF accounts.
    • Monthly payouts: If you have dependents with special needs, consider choosing the Special Needs Savings Scheme (SNSS), which ensures a regular monthly payout of your CPF funds.

5. Make sure your family is well-insured

Protect your family from life’s unexpected moments. Insurance policies can provide a financial safety net and cushion your loved ones against major financial burden should anything untoward happen to you.

(READ MORE: How to make a nomination for your life insurance in Singapore)

A well-rounded protection plan relieves the immediate bills and defray the everyday expenses in unfavourable situations.

Here are the key insurance policies you should consider:

  • Ensure your family is well protected with general protection, term, or life insurance
  • Protect your family against rising healthcare costs with health insurance, or even private medical insurance

After purchasing these insurance policies, you should also make an insurance nomination. Bear in mind that your insurance benefits and CPF assets are not included in your will, so an insurance nomination helps to ensure that the proceeds from your policy go to the people you want it to.

In a nutshell, estate planning is crucial in caring for your loved one’s financial future when you are no longer around. Estate planning also gives both you and your family peace of mind, knowing how these logistical and administrative matters will eventually be handled.

If you have more questions about estate planning, simply contact us at ask@plannerbee.co!

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