Estate Planning: It’s Not Just for the Wealthy—It’s for Everyone

November 11, 2024

For the average Singaporean, a single HDB flat is often their largest asset, with most 4-room flats now valued at over $500,000¹. Beyond that, many also have CPF savings and some cash, all of which contribute to their overall financial picture.

In fact, the mean net worth per adult in Singapore is $516,991 which is a significant sum.² Despite this, many still mistakenly believe that estate planning is only needed if they own multiple properties or a business, which isn’t the case.

What Is Estate Planning and Who Is It For?

Estate planning is about organising your finances and personal matters to ensure everything is taken care of if you become unable to manage them or pass away. It means deciding who will receive your assets, how your debts and taxes will be handled, and making arrangements for the care of minor children or pets. Most people work with a lawyer and/or estate planner to make sure their plans are thorough and legally sound. 

Estate planning is important for anyone who has assets—whether it’s property, investments, or even insurance payouts. It ensures that your entire estate—the sum of everything you own—is distributed according to your wishes.

The Importance of Estate Planning for Middle-Income Earners

Estate planning is often thought of as something only the wealthy need to worry about, but in reality, it’s essential for everyone—including middle-income earners.

The truth is whether you own a home, have savings, or are building investments, planning for the future ensures your hard-earned assets are protected and distributed according to your wishes. 

Here’s why estate planning could work in your favour : 

Secures Your Family’s Future

Estate planning goes beyond simply passing on assets; it’s about safeguarding your family’s future and minimising financial stress.

Let’s consider a hypothetical scenario: 

Mr. Tan left behind a wife, who is less financially savvy, and two young children. Although he had built a modest financial portfolio, including their home and savings, he knew his wife might struggle to manage the money if something happened to him. 

To protect his family, Mr. Tan had set up a trust with the help of a financial advisor. Instead of leaving a lump sum to his wife, the trust provided a monthly allowance for living expenses, allowing his wife to meet daily needs without the burden of managing a large sum all at once.

Without this careful planning, his wife might have faced significant financial challenges, potentially leading to the mismanagement of the inheritance. Instead, the structured monthly support offered stability and peace of mind, making sure the family was taken care of long after his passing. 

Preserves Your Children's Inheritance

When a parent of young children passes on without clear instructions, it can create issues around the child's inheritance. 

Although the law may appoint a guardian to manage the child’s assets, this doesn’t always protect the child’s best interests. 

In 2020, two women were named co-executrices and guardians of a child after his mother died. The deceased left behind an HDB flat and around $148,000 in assets for her son. Unfortunately, they failed to fulfil their duties. The son, now an adult, sued them for mismanaging his inheritance, resulting in a court order for them to pay him $87,000.³

With proper estate planning, you can sidestep such problems and ensure your children are cared for, such as, by setting up a trust with a professional trustee to manage the inheritance until they are old enough to handle it themselves.

Ensures Your Will and Nominations Reflect Your Wishes

A key reason estate planning is crucial is to ensure your assets and liabilities are distributed and settled according to your wishes when you're no longer around. 

A clear will and proper nominations for your CPF savings and insurance can safeguard your legacy. 

For instance, if you haven't set up a CPF nomination, your hard-earned savings might end up with someone you didn’t intend to benefit. It's important to note that CPF savings are distributed based on the CPF nomination scheme, not through a will. Without a nomination, your savings may automatically go to your next of kin⁴, even if you prefer them to go to a partner, close friend, or charity instead of a well-to-do sibling. 

With a clear will and proper nominations in place, your assets—whether properties, CPF savings, or insurance payouts—can bypass intestacy laws and ensure your loved ones receive the support you intend.

Protects Your Family Harmony

Estate disputes can cause significant strain on family relationships, even among those who were once very close. It’s not uncommon to hear about disagreements over asset inheritance, especially when multiple beneficiaries are involved.

Picture this: a parent leaves a single property to their three children. One might want to keep it as a family home, while another prefers to sell it for cash. 

Without clear instructions and planning, this situation can lead to tension and arguments during an already emotional time.

By outlining your wishes, you can help mitigate conflicts among your beneficiaries, whether they’re your siblings, children, or spouse. You can specify how an asset should be managed or sold, alleviating the burden on loved ones and preserving family harmony.

Prepares for Life’s Uncertainties

Many people may not anticipate that life’s challenges, like illness or ageing, can leave them unable to manage their affairs. Conditions such as dementia or Alzheimer’s can make everyday tasks—like handling property or finances—overwhelming.

This is where estate planning becomes crucial. It not only involves deciding how to distribute your assets after you pass on but also includes preparing for situations where you might be unable to make decisions for yourself. 

One key tool in estate planning is the Lasting Power of Attorney (LPA). An LPA allows you to designate a trusted person to make decisions on your behalf if you cannot.⁵ 

With an LPA in place, your trusted person can step in and handle these responsibilities without needing court approval or causing family conflict. This proactive measure ensures that your affairs are managed according to your wishes, even when you can no longer do so yourself.

Bottom Line

Estate planning is important for everyone, not just the wealthy or business owners. Whether you own an HDB flat, or private property, or have some savings and shares, estate planning makes sure your loved ones are taken care of and your assets go where you want them to. 

By working with experts like lawyers, estate planners and financial advisors, you can create a solid plan to protect your family’s future and your financial legacy.

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References: 

1. Just 14% Of 4-Room HDB Flats Under $500K Now: The Shocking Shift In HDB Prices Since 2000 | Stacked
2. Average Net Worth (Wealth) in Singapore | Smart Wealth
3. Executors of woman's will liable to pay son $87k | The Straits Times
4. What happens to my CPF savings if I do not make a CPF nomination? | Central Provident Fund Board
5. Roles of a Will and LPA in Estate Planning (and Why You Need Both) | Singapore Legal Advice

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_{Estate planning services is provided by PFP Legacy Singapore, a sister company of PFPFA Pte Ltd. Estate planning and/or will-writing services are non-financial advisory services and thus are not regulated under the Financial Advisers Act.}

_{The views expressed in this media do not necessarily reflect the views of PFPFA Pte Ltd (“PFPFA”). The information provided herein is intended for general circulation and not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use will be contrary to local laws or regulation. You should also note that the information presented does not have regard to the specific investment objectives, financial situation or the particular needs of any specific individuals; and therefore, may not be appropriate to your individual needs. You should seek the advice of your financial adviser representative or a professional before making any commitment to purchase or invest in any investment product.}