5 Reasons Why Everyone Needs Estate Planning

“Estate planning? What’s that? Real Estate?”That’s the most frequent question I get.

Another common misconception on Estate Planning is that it’s only for the rich.

Well the truth is estate planning has nothing to do with property and you do not have to be rich to plan for your estate.

Let’s start with the basics.

What is An Estate?

Your estate consists of everything that you own. This includes your:

  • Home
  • Personal Property
  • Investments
  • Cash in your bank account
  • Business

What is Estate Planning?

Estate planning is a process of how and whom you wish to distribute your estate to when you pass on. This can be accomplished by several estate planning tools such as:

  • Writing a will;
  • Setting up a trust;
  • Making a Lasting Power of Attorney (LPA);
  • Nominating your CPF monies and Insurance benefits.

So why do you need to do estate planning?

Here are 5 reasons.

1. Ensure Business Is Not Affected 

​Business succession planning is part of estate planning. If you own a business and you pass on, usually your spouse will take your share of the company and these could result in various problems such as:

  • your spouse may not know how to run the company;
  • your spouse could have differing views and objectives on your business;
  • your spouse could become a sleeping partner which would be unfair to your working partners.

All these could result in conflicts and distrust with your other business partners. 

2. Control Over Your Finances

If you don’t plan to distribute your own assets, someone else will.

Without a will, your assets will be distributed by the Court, according to Singapore’s Intestate Succession Act (ISA).

This means that your estate may not be distributed according to who you intended to give and your dependents may not receive what they desire.

This could sometimes lead to conflicts and disputes within the family.

3. Avoid Probate & Maintain Privacy

Probate is a legal process by which a will is proved to be valid or invalid.

During the process of a probate, an executor or administrator will collect the deceased’s assets and pay the claims of creditors and distribute the remaining assets to the deceased’s beneficiaries.

This process can be very troublesome, time consuming and costly for your loved ones. Going through a probate will also mean that your assets will become public information when you pass away.

Note that having a will written is not enough to avoid a probate, it is only to avoid your assets being distributed by the court according to the ISA.

By setting up a revocable trust, you can avoid probate. Your appointed trustee is already in place to transfer assets to your beneficiaries as directed in the trust deed. This allows the estate to be transferred without the court’s interference, saving costs, legal fees and maintaining your privacy.

4. Reduce Estate Taxes

Fortunately, in Singapore, Estate Duty is removed since 15 Feb 2008.

​However, if the Inland Revenue Authority of Singapore (IRAS) were to impose estate duty again, it is possible to reduce or eliminate estate taxes through estate planning tools such as setting up trusts.

5. Protect Assets from Creditors

Some tools such as an irrevocable living trust is creditor proof. This means that your estate in there is protected from both business and personal creditors.

Trusts can also protect assets from potential creditors of your beneficiaries of the trust.

The extent to which a beneficiary’s creditors can reach the assets of the trust depends on how much access the beneficiary has to the trust assets. The more access the beneficiary has to the assets, the more access the beneficiary’s creditors will have.

In Summary

​Estate planning is an often neglected portion but nevertheless important part of Financial Planning. It gives your loved ones less stress and provides a smoother transition when distributing your assets. 

If you have not plan for the distribution of your estate, you can consult a Financial Advisor or a lawyer that has knowledge and experience with estate planning.

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