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Preparing for the inevitable: How to manage your finances before you die

“In this world nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin long ago. While people do pay their taxes every year, preparing for when you are gone is something many people do not even want to consider. The unforeseen can happen any time, though, and preparing well is essential for making sure everything you have earned in your life is distributed the way you wish after you have passed away.

“In this world nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin long ago. While people do pay their taxes every year, preparing for when you are gone is something many people do not even want to consider. The unforeseen can happen any time, though, and preparing well is essential for making sure everything you have earned in your life is distributed the way you wish after you have passed away.

ESTATE PLANNING

The first step is actually to plan how your estate, which includes all of your assets, will be managed after you are gone. The reason is that the choices you make about where your assets will go can have a profound impact on people’s lives. Giving a family member property so they have a place to live, or giving enough money for your relative to attend university, for example, will have decades-long effects.

The key to this planning, Singapore financial consultant Wilfred Ling observed, is to identify the best methods for the holding, transfer and distribution of your estate. What you will need to do, then, is specify who will receive your assets and how they may be used. You may want to require that your children complete their education, for example, before they inherit a large amount.

You can also decide to set up a trust that will manage some of your assets. A trust can allow you to have someone manage the financial needs of young children, for example, or help with tax planning, or give some heirs certain amounts every year — rather than everything at once.

You may also want to write a letter explaining why you gave money in certain ways or expressing other wishes.

CPF

An important part of this planning is to decide how you want funds in your CPF account to be distributed and complete a nomination form stating your preferences. As CPF describes it, a nomination “provides CPF members with the option to specify who will receive their CPF savings, and how much each nominee should receive”. If you do not make a CPF nomination, it adds, “your CPF savings will be transferred to the Public Trustee’s Office (PTO) for distribution”. Without a nomination form, then, your money may go to people you do not want to receive it.

WILLS

To make sure your assets are distributed the way you wish, it is important to write a will. If you do not make a will, everything in your estate will go to your family or relatives according to “intestacy rules”, which are inflexible and may allocate your money differently from what you would prefer.

As national financial education programme MoneySENSE describes it, creating your will is about “arranging your financial matters clearly while you are still around, so that your loved ones will not have to unravel or trace your assets and monies after you are gone. Leaving clear directions about how you want your estate distributed should also ensure that your estate is smoothly handed over to the ones you want to provide for.”

The first step, Goodwins Law Corp advises, is to make a list of everything you own, including property and bank accounts. Next, you will need to decide who will benefit from your estate, how much they will receive, and who will get specific items, such as your house, a rare watch or a favourite piece of jewellery.

While there is nothing to prevent you from drafting your own will,

you may make unintentional errors if you write it yourself, and you will not be around to fix it if anything goes wrong. A young lady whose uncle passed away recently, for example, found that small errors in the will her uncle wrote by himself have resulted in large lawyers’ fees to resolve tiny problems and squabbling among beneficiaries after they found that larger amounts of money than they expected will not be divided the way they want.

Engaging a lawyer who can provide clear guidance and use their legal expertise to prepare the will can help ensure that your instructions can be followed easily and help ensure the will is less likely to be challenged.

You can select a lawyer, preferably one with expertise in wills and trusts, by yourself. Companies such as NTUC Income have negotiated special rates for wills that it says can help you decide on a suitable person to administer your estate, distribute your assets according to your wishes and avoid disputes.

ADVICE FOR THE FAMILY

Along with having a will, it is important to let your family know what you have where. Financial adviser Timothy Thiam noted on DollarsandSense.sg that many Singaporeans have unclaimed monies in insurance companies, for example, simply because family members are not aware of policies bought by their family members.

You should compile a list that shows your bank or brokerage accounts, insurance policies, safe deposit boxes, annuity contracts and other assets or important documents.

PLANNING AHEAD

While you may not want to think about your demise, not planning for the inevitable can have serious negative impacts on your heirs.

It is far better to plan, even if it is a long time away, to make sure that the people you care about receive what you want to give them in the way you intend.

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