PDF Estate Planning: Key Concepts and Tools | Lorna Tan, NUS Business School

Lorna Tan Department of Finance NUS Business School Estate Planning FIN3719 HOUSEHOLD FINANCE 1  TOPICS/SCHEDULE 2025 Lorna Tan Department of Finance Week 1 (17 Jan) - Personal Financial planning NUS Business Sc...

Lorna Tan Department of Finance NUS Business School Estate Planning FIN3719 HOUSEHOLD FINANCE 1  TOPICS/SCHEDULE 2025 Lorna Tan Department of Finance Week 1 (17 Jan) - Personal Financial planning NUS Business School Week 2 (24 Jan) - Retirement planning & CPF (part 1) Week 3 (31 Jan) - Retirement planning & CPF (part 2) Week 4 (7 Feb) - Estate planning Week 5 (14 Feb) - Insurance planning Week 6 (21 Feb) - Consumer protection (12pm-2pm; 345pm-6pm) 21 Feb - Test 1: SA1: 2-240pm; SA2: 3-340pm Week 7 (7 Mar) - Investment planning Week 8 (14 Mar) - Credit management Week 9 (21 Mar) - Class Presentations Week 10 (28 Mar) – Well-Being Day – no class Week 11 (4 Apr) – Class Presentations Week 12 (11 Apr) Test 2 – SA1: 2-240pm; SA2: 3-340pm) Week 13 (18 Apr) – Good Friday – no class FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School Estate Planning - A pillar of Holistic Financial Planning Credit Management Estate Planning is 1 of 6 key components of a comprehensive financial plan Estate Insurance Planning Executing a holistic financial strategy well can Holistic help you achieve overall financial wellness Financial Plan Retirement Investment Home 3 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance What is Estate Planning? NUS Business School Putting your last wishes in place Includes: Will, Lasting Power of Attorney, CPF nomination, insurance nomination, Trust, Advance Care Plan At your demise: How do you ensure your last wishes will be carried out? How do you ensure that your beneficiaries are provided for with sufficient means? How do you ensure that maximum value of estate will be distributed? FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance Estate Planning Tools NUS Business School Will Distribution and management of your estate Takes effect after death Trust Protects family assets that might other wise CPF Nomination go to beneficiaries who are minors, financially immature or have special needs Cannot be distributed via a will Advance Medical Directive Register in advance your wishes to not have Lasting Power of Attorney extraordinary life-sustaining treatment to prolong life when you suffer from specific (LPA) medical conditions Appoint one or more persons (donees) to take decisions and act on your behalf as a proxy decision- maker if you lose mental capacity Appoint one or more persons to communicate your healthcare preferences if you lose mental capacity 5 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School Why Some Families Avoid Estate Planning I can do it later I will live a long I am too busy The kids can look time after themselves Planning costs It is bad luck to I do not trust the money plan for death children with my assets 1-Feb-25 FIN3719 HOUSEHOLD FINANCE 6  Lorna Tan Department of Finance NUS Business School Key Reasons for Estate Planning Protecting Tax implications Spendthrift Planning for young for children living Marriages children – aged and/or children in high tax and births will too incapacitated or young jurisdictions much wealth be family members spouses harmful to them including oneself Potential Children Risks of divorce Succession and liquidity event may have among continuity from family special future of family business needs generations businesses (e.g. IPO, divestment) Difficulty in Simplify tax dividing illiquid Avoid Foreign tax Ring-fencing reporting assets for potential and legal wealth from and the next delays in implications for creditors regulatory generation probate overseas assets reporting 1-Feb-25 FIN3719 HOUSEHOLD FINANCE 7  Lorna Tan Department of Finance What Happens Upon Death? NUS Business School Assets Insurance CPF Others Upon death, having an estate plan: $ $ $ $ Minimises the distribution costs Value of ‘Gross’ Estate Ensures maximum value of the estate is $ distributed Leakages Debt Ensures sufficient capital for your family Expenses (Legal/Medical) N ET Business Liability ES TA TE Tax FIN3719 HOUSEHOLD FINANCE 8  Lorna Tan Department of Finance Expenses and objectives upon death NUS Business School Expenses Objectives Outstanding taxes Funeral Expenses Income for dependents Estate duty Legal and probate fees Children’s education Liabilities Other admin expenses Cash Legacies Medical expenses Will there be sufficient cash and capital in your estate to provide for all your expenses and objectives? japan has estate duties 9 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance Managing Medical Expenses NUS Business School Ensure you have the right type of “Shield” hospitalisation and surgical plans (with rider in 3 out of 4 deaths in place) to cover medical expenses. Singapore are caused by major illnesses 10 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School When there is NO WILL FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance Intestate Succession Act (Non-Muslim Estate) NUS Business School INDIVIDUAL DIES LEAVING: DISTRIBUTION Spouse, no children, no parents Spouse (100%) Spouse & children Spouse (50%) and children (50% to be shared equally) Children & parents; no spouse ^Children (100% to be shared equally) Spouse & parents; no children Spouse (50%) and parents (50% to be shared equally) Parents; no spouse; no children Parents (100% to be shared equally) Siblings and their children; no spouse, no children, no parents Siblings* (100% to be shared equally) Grandparents; no siblings, no parents, no spouse, no children Grandparents (100% to be shared equally) Uncles & aunts, no grandparents Uncles & aunts (100% to be shared equally) None of the above Government (100%) Notes: ^ If a child has passed away, then the grandchildren can legally represent him/her to claim their parents’ portion of the estate *If a sibling has passed away, his or her children can legally represent their parent to claim their parents’ portion of the estate FIN3719 HOUSEHOLD FINANCE 12  Lorna Tan Department of Finance NUS Business School Will FIN3719 HOUSEHOLD FINANCE 13  Lorna Tan Department of Finance What are the benefits of writing a will? NUS Business School Distribute according Minimise Appoint guardians , to your wishes conflicts executors and trustees Speed up distribution Minimise unnecessary Avoid problems relating process/avoid delay costs to "common disaster” 14 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance What is not covered by the will? NUS Business School Jointly-held assets Joint bank/investment CPF Certain Irrevocable accounts & joint tenancy Savings insurance trusts (versus tenancy-in- nominations common) intestate act joint tenancy: when one die, the other gets the rest 15 tenancy in common: when one die, the other one does not get it (depends on intestate act) FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School Factors to consider in writing a will Appoint your executor(s) and Appoint your children’s trustee guardian(s) Make a list of beneficiary and Make a list of assets and where your gifts to them they are Testator and 2 Witnesses – age 21 & above Review your will periodically Letter of wishes FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance Executing the will NUS Business School With an Executor: Without an Executor or Will: The Executor (person named in Letters of Administration are the Will) applies to court for a granted by a court to appoint Probate or Grant of Probate the appropriate people to deal with a deceased person’s estate When Probate is issued by the where: court, it confers authority to the Executor to deal with the i. Estate will pass under deceased’s estate Intestacy rules OR ii. There are no executors living having been validly appointed under the deceased's will 17 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School Custody of a Will Under your mattress? With your lawyer/best friend/executor? Safe deposit box? Considerations – Will could be: Tampered with Misplaced Inaccessible for some time Destroyed in a fire or flood 18 FIN3719 HOUSEHOLD FINANCE  Lorna Tan Department of Finance NUS Business School Cost of a Will DIY Digital will – free vs