Karen Tang, CFP®: Certified Financial Planner in Singapore

What Is Estate Planning?

Estate planning is the process of planning how you want your estate (i.e. all the assets you have at the point of death) to be distributed after your death.

The term ‘estate’ refers to a person’s net worth during his/her lifetime and extends into the posthumous phase. It includes the aggregation of assets, encompassing legal rights, property interests, and financial entitlements, while accounting for liabilities.

Contrary to what most people think, estate planning is not just for the elderly folks. In fact, it is for anyone who wants to ensure that his or her assets are distributed according to his or her wishes. This includes individuals & families, parents, married couples, singles, individuals with special needs dependents, business owners, high-net-worth individuals and charitable organisations. 

Estate planning endeavors to bring clarity to the administration of probate, optimizing the estate’s value by curbing taxes and other associated expenses. Additionally, it seeks to mitigate potential conflicts and delays in the rightful allocation of assets.

Here are several key estate planning terms worth noting:

  • Bequest: Specific items of property designated for individuals in one’s will.

  • Will: A legally binding document detailing how an individual wishes to apportion his/her property after demise.

  • Beneficiaries: The recipients of assets specified in a will.

  • Heirs: Those individuals entitled to a share of the estate.

  • Residual estate: The remainder after deducting expenses, taxes, and bequests.

  • Probate: The legal documentation that validates a will.

  • Intestate: A state where no valid will exists or an estate not disposed of through a Will.

  • Executor: An appointed individual tasked with ensuring the deceased’s will is executed according to its provisions and legal requirements.

  • Trust: A legal structure for holding property in the interest of designated beneficiaries.

The first step

The first step in estate planning involves a comprehensive assessment of the client’s assets and liabilities. This includes real estate, securities, tangible assets, and even life insurance policies, which are considered part of the estate, regardless of the policy’s beneficiary. Additionally, funds contained in retirement accounts such as the Central Provident Fund (CPF) and pension death benefits are factored into the equation.

While estate planning might seem complex, simpler plans often suffice for the majority of clients. For instance, a well-drafted will can delineate the assets, beneficiaries, distribution proportions, and the appointed executor.

It is imperative to note that estate planning demands the expertise of a qualified professional; it is not a task suited for a DIY approach. Attempting to use generic online planning documents and adapting them for personal use is discouraged.

Estate planning is not a ‘one size fits all’ endeavor. Without a deep comprehension of the legal processes following one’s demise or incapacity, self-made plans could lead to grave errors. Such mistakes may remain undiscovered until it’s too late, leaving loved ones to navigate the complications and burdens created by an ill-prepared estate plan.

Life can be unpredictable. Getting estate planning done early in life is a proactive and responsible approach to ensure that your wishes are met, your loved ones are protected, and your assets are managed according to your intentions. It provides peace of mind and can help mitigate potential legal and financial complications that may arise in the absence of a comprehensive estate plan.

So why wait? Get in touch with me today to kick start your estate planning process.