There are many reasons to draft a Will. However, there are also many considerations that require careful planning before you make your Will. Many clients have a misconception that there is no need to make provision for estate planning. Also many assumed that estate planning is only for the rich or it is merely just drafting a Will. However, the Will is merely a tool to ensure that plan works out according to the intended purpose. Like all financial tool, the bulk of the work is in the planning. The tool – or the drafting of the Will – is the outcome of the planning process. Financial advisers do not do much estate planning because there is no commission. Some financial advisers are so lazy that when clients asked how their insurance policy proceeds are going to be distributed to their dependents, these advisers created a Section 73 irrevocable trust without even making an afford to plan for their clients. These advisers did not tell their clients that there are many ways of doing this. Moreover, clients do not care about estate planning because of ignorance. The following are some considerations related to this subject:
|If die without a Will||If die with a Will||Remarks|
|Assets are distributed according to Intestate Succession Act which is usually not suitable. The person is known to die Intestate.||Assets are distributed according to the deceased wishes through careful deliberate planning. This person is known to die Testate.|
|For a person to be recognized to be an administrator of the estate, an application of Letter of Administration is required.||The person called the Executor(s) appointed by the decease in the Will applies for Probate. A Probate is a Court Order authorising the executor(s) appointed by the deceased person under his Will to administer his estate according to the directions contained in his Will.||The Administrator is ultimately decided by the Court. You cannot be absolutely sure who this person will be. Can you trust this potentially unknown person? Will this Administrator “squander” away your assets leaving your beneficiaries with nothing? On the other hand, the Executor(s) is appointed by yourself and should be someone you trust.|
|Two sureties are required if there are minor beneficiaries or if the estate exceeds $250,000. These sureties must have total networth of at least equal to the estate. The sureties are like “guarantors” which can be held liable if the Administrator does manage the assets properly.||N.A.||How to find two sureties who are willing to be held fully liable for the action of the Administrator? Can you imagine the situation in which your wife is unable to find two sureties for your assets just because you have no Will?|
|Courts decide who the Guardian of the surviving children.||You can appoint a Guardian in your Will to take care of your children in the event both parents die simultaneously.||The Guardian has the moral obligation to raise your children up. Do you want an unknown person to take care of your children?|
|The surviving beneficiaries may not have the resources to pay outstanding debts.||You can plan and arrange how debts are to be paid.||For husband & wife who have mortgage borrowed jointly and severally, creditors are not obligated to lodge an interest in the estate but could hold the surviving borrower fully liable. The surviving borrower must have sufficient resources to pay the debt. Also debts such as estate duty only “appears” after death. Estate duty is still applicable if a person invests in certain offshore jurisdiction.|
|As no planning is made, surviving dependents may not get sufficient share of the estate for their own survivor.||Deliberate planning can be made to ensure the surviving dependents have sufficient assets to pay living expenses/education/retirement||Those who have bought insurance for providing assets for their dependents must take note of this.|
|Some of your assets could end up with unintended parties.||To ensure none of your assets are left to unintended parties.||The last thing you want is to leave behind a large amount of money to your enemies.|
|For simultaneous death of both spouses, it is assumed the older one dies.||Provision can be made for different beneficiaries and their share of assets in the event of simultaneous death of both spouses.|
Assets that do not come under the Will are:
- CPF balances. Such assets come under the CPF Act. You must make a CPF nomination to ensure these balances goes to the intended person. Note that investments made under CPFIS are not subjected to CPF nomination but comes under your Will.
- Insurance policies under Section 73. This is an irrevocable trust and you cannot will these policies away.
- Policies with a nomination made under the co-operative act for NTUC Income policy does not come under the Will. (NOTE: there is talk in the industry that the nomination of insurance policies under the Co-operative Act for NTUC Income may not be legally enforcement.)
- For property held in joint tenants, upon the demise of one owner the assets will automatically vest with the surviving owner. This will not come under the Will.
- For joint account similar as (4) except that there were cases in which the joint account were created merely out of convenience and hence for such case it will come under the Will (i.e anything can be contested in courts)
A few other things to note:
- To keep things simple – do not make any nomination in any insurance policies. The worst type of nomination is to create an irrevocable trust under Section 73 unless it was deliberately planned for asset protection against creditors. Do not nominate under NTUC Income Co-operative Act because of the “messy-ness” and the recent thinking in the industry that this could be legally not enforcement.
- It will soon be possible to make nomination on all insurance policies without the creation of irrevocable trust. However, do not do it because it can be very messy and the difficulty in tracking.
- For mortgage insurance bought using joint-lives, it is unclear how this is handled on whether the proceeds automatically vest on the surviving policyholder or the estate of the deceased policyholder. For all my clients, I have never recommended joint-lives mortgage insurance because the premium is almost twice as much as single-lives. So this is a non-issue for all my clients (phew!).
I like all my clients’ financial situation to be kept as simple as possible. Thus, the Will should be the only place which requires updating if there is a change in financial situation. However, the CPF Nomination is still required to be made.
The following are some examples of a relatively simple Will:
- I wish to leave ALL my assets to my spouse and appoint him/her as the Sole Executor.
- I wish to leave ALL my assets to my spouse and appoint him/her as Sole Executor. I do not have any children.
- I wish to leave ALL my assets to my spouse, and if my spouse dies before me, to my adult children in equal shares, and appoint my spouse as Sole Executor and another person as my Alternate Executor (if my spouse dies before me).
- I wish to leave ALL my assets to my spouse, and if my spouse dies before me, to third parties (parents, relatives, etc) in equal shares.
- I wish to leave ALL my assets to my spouse, and if my spouse dies before me, to third parties (parents, relatives, etc) in unequal shares.
- I wish to leave ALL my assets to my spouse, and if my spouse dies before me, to my children (including minors) in equal shares, and appoint my spouse as Sole Executor and another person as my Alternate Executor (if my spouse dies before me).
- I wish to leave HALF of my assets to my spouse, and HALF to my adult children in equal shares. I wish to appoint my spouse as my Sole Executor.
- I wish to leave HALF of my assets to my spouse, and HALF to my children (including minors) in equal shares. I wish to appoint my spouse as my Sole Executor.
- I wish to leave HALF of my assets to my spouse, and HALF to my adult children in equal shares. I wish to appoint my spouse and another person as my Executors.
- I wish to leave HALF of my assets to my spouse, and HALF to my children (including minors) in equal shares. I wish to appoint my spouse and another person as my Executors.
- I wish to leave ALL my assets to my spouse and my adult children in equal shares. I wish to appoint my spouse or my child/children as my Sole Executor or Executors.
- I wish to leave ALL my assets to my spouse and my adult children in unequal shares. I wish to appoint my spouse or my child/children as my Sole Executor or Executors.
- I wish to leave ALL my assets to my spouse and my children (including minors) in equal shares. I wish to appoint my spouse and another person as my Executors.
- I wish to leave ALL my assets to my spouse and my children (including minors) in unequal shares. I wish to appoint my spouse and another person as my Executors.
The following was a question posed to me by a client X:
“Hi wilfred, I indicated my interest in the will writing earlier. May I ask for your frank opinion: do I need to have my will written? Sounds silly and funny because my husband insisted on that since our case is rather simple ie money goes to our only girl and possibly parents, there is no need to get a will done. - X”
My reply as follows:
“Dear X, Consider this scenario: Both you & your husband dies simutaneously assuming both of you do not have a Will, and having one daughter.
1) Can you be very sure that your daughter will inherit enough assets for her own survivor? Will any assets goes to unintended parties? You can be specific as to how much your girl must have if you have a Will.
2) If both you & husband pass on simultaneously, your girl's Guardian is a court appointed person whom you do not know neither can you be sure your girl will be in good hands. You cannot be assured that she will be safe emotionally, physically and financially. What happens if the Guardian is a man whom you do not trust? You can appoint a Guardian whom you know in your Will.
3) If there is a minor beneficiary (applicable for your case) or if the estate is at least worth $250,000 , the Administrators are required to get two sureties (guarantors) whose combine assets is at least equal to estate. How to get two suerties to guarantee the good behavior of the Administrators? No surety is required if there is a Will.
4) The Administrators is a court appointed person whom you do not know in advanced and you cannot be assured that the Administrators will have the assets distributed to the legal beneficiaries. In fact, the Adminstrators can just take the money and run away. Your girl is left to sue the Administrators and the sureties. Thus need to pay lawyers $$$ to get some of her money back. Can a school girl know how to sue? How much those lawyers going to charge your girl for suing? What happens if she loses her case? Eat grass?
5) A Will is a dead man's voice. Do not let your family guess what was your thoughts when you were living. It will be agonizing trying to guess a dead man's thoughts.”
I have made available the Will writing service at a very affordable price. Some clients will get it free too. However, you will need to think of the following before you see the lawyer:
* Who will be the Executor?
* Who will be the replacement Executor if the main one dies?
* Who will be the Guardian of my children if both me and spouse are not around?
* What is the amount of money that I need to leave behind to my dependents so that they can survive after my demise? [If you do not have enough assets for this, you need to create an estate by insurance]
* How much money should I leave to the Executor to compensate him/her for the work to be done?
* Do I have a centralised document that list out the whereabout of my assets?
* Does the Executor know who is my financial adviser?
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