When a person dies, all his assets are collectively called the “estate.” However, not all assets in the estate are distributed in the same manner.

For personal owned assets like saving accounts, fixed deposits, unit trusts, shares and properties, SRS balances, investment made via CPFIS, these assets are distributed according to the Intestate Succession Act (if there was no Will) and the Wills Act (if there was a Will).

For CPF Balances, these are distributed according to CPF Nomination (if there was one) and the Intestate Succession Act (if there was no CPF Nomination). This part of the estate is not subjected to any Will even if there was one.

For insurance nomination such as those nominated under Section 73 of CLPA, Co-operative Act, Section 49L / 49M of Insurance Act, these insurance policies are distributed according to the nominated beneficiaries regardless whether was there a Will or not. Note that for third party policies and if there was no vesting chosen, the policy will form part of the estate subjected to Intestate Succession Act (if there was no Will) and the Wills Act (if there was a Will).

Note that the geographical location of the estate is also important. For a Singapore domiciled individual, a Will written in Singapore can cover movable and immovable assets in Singapore and as well as movable assets in overseas. However, a separate Will is required specifically for immovable overseas located in overseas. Potential complication can arise if the overseas assets are not in commonwealth country. If this is the case, other way of distribution (not through Will) may be required to mitigate this risk of complication.

The tools used for estate planning are: Wills, Living Trusts, Testamentary Trust, Lifetime Transfers, Corporate Structures, Buy-Sell Agreements, Insurance Wrappers (or sometime called Portfolio Bonds) and Lasting Power of Attorney (under Mental Capacity Act 2008).

Please note that these are tools. Tools are meant to solve a problem and it is a means, not an end. If tools are used incorrectly, it can be detrimental.

For assets held as joint-tenants, upon the demise of one party, the surviving party inherits the entire asset automatically and thus becoming the sole owner of this asset. Assets held as joint-tenants do not form part of the estate.

For tenancy-in-common, upon the demise of one party, the surviving party do not inherit the demised party’s share of the asset. Also the share of the demise party goes to the estate.

It is very common for husband and wife to hold joint bank accounts. However, it is unclear whether such joint bank accounts are joint-tenants or tenancy-in-common because there is often no such choice when the account is opened. Normally the joint account type is either “Joint OR” or “Joint AND”. However, this is related to how the account is to be operated when both parties are still alive. It is a different scenario when one party has died. One particular bank in Singapore practices tenancy-in-common for its joint-accounts for saving deposits. Most people learn the hard way to find it out. It is better to get in writing from the bank whether such joint-accounts are tenancy-in-common or joint-tenancy. The manner which you ask the bank is important because bank staff may not even know the difference between both. If you wish to ask the bank, it is better to ask in this way: “For this joint account, if one party dies, will the bank allow the surviving account holder to withdraw the entire money without Letters of Administrations or Grand of Probate?” Also, get all answers in writing.

Frankly speaking you are already doing some sort of estate planning yourself. When you hold joint accounts with your spouse, you are already doing estate planning. When you buy a house jointly with your wife, you are already doing some estate planning. When you buy insurance to provide for your dependents’ needs, you are already doing estate planning. The problem is that this way of doing estate planning is based on random and ad-hoc manner which could be wrong.

To do estate planning yourself, you’ll need to be familiar with Insurance Act, Intestate Succession Act, Wills Act, CPF Act, Guardianship of Infants Act, Trustees Act and Inheritance (Family Provision) Act.

Many do estate planning in a rather primitive way. For example, they think that by having a joint-account with their spouse, assets can be transferred to their spouse seamlessly. This is the wrong way of doing estate planning due to two reasons: The joint-account may not be in joint-tenancy (one bank in Singapore practices tenancy-in-common for their joint bank account) and secondly – what happens if two parties have a common accident?

Related question: Is it true that only lawyers can advice and write Wills?

You do not need to engage a lawyer to write your Will. In fact, by my experience, that is probably not advisable.

Anyone can write their own Will provided they know how to do it. It is better to engage professional Will writers who specialised in writing Wills. A lawyer does not necessarily possess the specialized skill to write a Will.

I have ceased recommending my clients to lawyers to have their Wills written unless it is a very straightforward simple Will. Such simple Wills are only appropriate for persons without dependents. I have found that all lawyers I referred my clients to do not do a thorough fact find. I was dismayed to know that they were primarily instruction takers. I do not consider taking mere instructions from clients as advice because an advice must always be accompanied by a thorough fact find. If clients already know exactly what they want, they can write their own Will as there is no law prohibiting anyone from writing their own. Moreover, mere taking instruction from clients provides no value-add as one can input these instructions into online software to generate a Will at NO cost. There are many internet website that can do that. Of course, nobody can be sure of the legality of these free Wills being generated but if a client already know exactly what he wants, he should already know what is legal and what is not. To me, any advice given to a person without a thorough fact find will not be useful since it does not take into account of the client’s situation. A client situation can only be uncovered thorough a systematic through fact find. Also, asking the client a few questions in an ad-hoc manner is unprofessional. The fact find must be systematic and adhere to industry’s standards.

As I already do a systematic fact find for comprehensive financial planning case, I’ll takeover the formal process of Will writing. I’ll deal directly with my legal counsel on behalf of the client to have the Will drafted in accordance with the financial plan developed with the client. This is to ensure that the Will meets the client’s needs exactly. In contrast to lawyers' common practice, the client has plenty of chance and time to amend his Will before the attestation date as draft softcopies are available prior to that. A number of lawyers do not provide the draft copy before the attestation date and only allows the content to be amended on the day of attestation. This time pressure imposed on the client is not in client’s favour. Quite often, the actual Will is only seen by the client on the a day of attestation. This is just ridiculous.

You can read my bad experience dealing with lawyers who did not do fact find in this article here: HERE

For those with dies with no Will, assets are distributed according to Intestate Succession Act (ISA). If you like how the assets are distributed according to ISA, you are in trouble because the ISA hardly does anything for you other than to ruin your family. Why?

The ISA only take cares of how your assets are distributed into percentages. But the problems are:

1. Some of your assets have no market value. How to distribute?

2. Your third party policies have no market value. How to distribute?

3. Implied in the ISA is that your residential property must be sold and distributed. Your property would have to be force-sold at a distressed price.

4. There is no provision as to who should be your Personal Representative. For ISA, the Administrator is your Personal Representative. You are giving your Administrator a big headache because he or she needs the consents of all persons entitled to be the Administrator and have their rights renounced in writing. If anyone refuses to renounce his or her rights, the Letters of Administrations cannot be done.

5. The Administrator holds huge powers. How much will the Administrator get? Theoretically it is in accordance to the ISA but practically it may be 100% of your entire estate because the Administrator can just take the assets and leave the country.

6. The ISA does not make provision for the guardian of your minor children. While the guardian is always the biological parent of your children, what happens if your spouse is already dead? Can you be sure that this unknown guardian will not take advantage of your children?

This is easy part. Distribute your assets based on needs-based analysis:

1. You should have already done a survivor-needs analysis which identify the amount each dependents should have. This analysis is done as part of the Protection Planning. Thus, each of these dependents must have at minimum this amount of money.

2. Since dependents must have a roof over their head, you should ensure that the residential property is held in a testamentary trust. If you are holding a joint-tenant with your spouse, the house will automatically go to spouse. However, if spouse is already predeceased you, you become the sole owner and thus you must ensure the house is catered for in the Will. I would suggest holding the house in a testamentary trust so that your dependents can stay in it until they have grown up. Remember to appoint a trusted trustee for the house otherwise there is no guarantee that trustee will liquidate and run away with the sale proceeds. If you cannot find a trusted trustee, you can always appoint a corporate trustee.

3. If there are any (a) children who are disabled (b) sons below aged 21 (c) unmarried daughters, you must make provision for them otherwise the Will can be contested. Also your spouse should also inherit some monies from you otherwise it can be contested too.

4. If there is nothing much left to distribute, you stop here and start contacting the Will writer. If you still have some assets left, you will need to have a residual clause otherwise the Will will be partially intestate. In the residual clause, you can put your dependents. It is important to have substitute beneficiaries. Worst case scenario you can put charity or the name of your financial adviser!

A Living Trust is a trust setup when the settlor (the person who setup the trust) is still alive. A testamentary trust is a trust setup by a Will and after the testator dies. Note that a testamentary trust is only setup after the Grant of Probate and when all debts are paid by the Executor. If the estate is insolvent after all debts are paid, the testamentary trust is as good as an empty shell. Therefore, if protection from creditors’ claim is important, a living irrevocable trust is required. Both testamentary trust and living trust are known as expressed trust.

An implicit trust is created when for example monies are given to minors. Since minors cannot legally own assets, an implicit trust is created. Many Wills written create such implicit trust. Implicit trust is not bad by itself but those who DIY their own Will or engage incompetent Will writers and lawyers may not fully understood the implication of creating an implicit trust.

Do note that transfer of property to a living trust incurs a hefty 3% stamp duty (at this point of writing). On the other hand, transfer of property to a testamentary trust only incurs $10 stamp duty.

The most common usage of testamentary trust are:

Example 1: To hold the residential property of the testator so that dependents can stay in the house until they are financial independent or dies. This is to prevent the property from being sold prematurely. The property can be sold and proceed given to stated beneficiaries when the trust ends.

Example 2: Instead of giving a lump sum to beneficiaries, a testamentary trust can be used to give them a monthly allowance over a period of time. This is a popular method because beneficiaries may be too immature or gullible to receive a lump sum benefit. Giving them a lump sum introduces the risk of being a target of scams, get-quick-rich schemes and unethical financial salespersons. If the testator so desires, he can also insist that the trustee appoint an investment adviser to advice how the assets should be managed so as to help grow the assets more effectively.

Example 3: A testamentary trust can be used to control how monies are distributed based on certain preset conditions. For example, the testator can specify that a certain lump sum of say $100,000 to the child’s education if they managed to go to a recognized university (not just any university). Another way is to give a monthly allowance based on say 20% of the children’s own monthly income. In this way, the trust motivates and creates an incentive for them to work hard.

Example 4: With the introduction of casinos at the country’s door step, there is a danger of beneficiaries squandering their inheritance at the gambling den. A testamentary trust can be setup to provide maintenance and allowance for the beneficiaries based on a discretionary basis. Unlike a fixed monthly allowance, the trustee has to exercise discretion.

An individual trustee can manage a testamentary trust. However, the time and effect to maintain such a trust over a long period of time usually make it impractical for individuals to do it. Therefore, a testamentary trust is only practical if a corporate trustee is appointed as the trustee especially if the testamentary trust last for an extended period. In Singapore, a trust is permitted to be setup for 100 years. However, there are ways to “get-around” this limitation and thus extending the live of a trust perpetually.

When comes to Will writing, some people either do a DIY Will or get a lawyer to do it. Most of the time the Will is either invalid or is valid but practically useless. Why? A Will is merely a tool. If the tool is used wrongly, it is a rubbish tool. An analogy is like buying an insurance product:

Estate planning is critically important for a family person especially those who have young children.

An estate plan determines the manner in which your assets are to be distributed on death of either spouses. Since the probably of death is 100%, estate planning is not optional. If you don’t plan, the State has a default plan for you which are pampered with flaws:

A person who dies without a Will is known as dying intestate. The Personal Representative will have to apply to obtain the Letters of Administration (LA). Note that for a person who dies with a Will but with no Executor (e.g. dies, resign, disabled, missing), the process is the same for obtaining the LA but it is called Letters of Administration with Will Annexed.

The process of LA as follows:

Of course not! But it is true that it is very difficult to find a trust company willing to take in small business although I know of one that is willing to take in a trust size as small as $1000! However, I will only be able to introduce the trust company to clients who did they financial planning with me as I have no wish to make any recommendations unless I have done a comprehensive due diligent.

Most financial advisers do not know anything about trust and so they do not recommend it. Even if they do know about it, they will not recommend it because the commissions for setting a trust pales in comparison to selling say an ILP that can generate a commission of more than $12,000 upfront. The commission for setting up a trust is relatively smaller compared with an ILP and is not worth the time explaining. Many not-so-rich individuals have been denied of suitable products and services all because of that silly commission. I am not rich at all but my wife & I do have a rather complex testamentary trust and it did not cause me to go bankrupt.

A Trustee can be an individual or a trust company. It is better not to entrust your assets to individual trustees because such an individual can die (and you could end up having your assets commingled with his or her) or embezzle the money to the detriment of the beneficiaries.

It is better to look for a trust company regulated by Monetary Authority of Singapore. In Singapore, all trust companies must be regulated by the MAS.

Frankly speaking, nobody and no company can be fully trusted. Having a regulator to be a watchdog is the best you can do.

A testamentary trust is an express trust that is written into a Will but will only be setup after the testator dies and when the Grant of Probate is granted. If the estate is insolvent after all debts are paid, the testamentary trust cannot be setup.

Majority of the Wills written are already creating implicit trust. For example, if you give $X to your children who are still minors, this money has to be held by the Executor/Trustee until they are of legal age. Thus, an implicit trust is created. Take for another example if you give $Y to your elderly parents but if they are already suffering say from severe dementia, they are not able to hold the assets. Hence, the Executor/Trustee has to hold on their behalf and thus an implicit trust is created. Many simple Wills that people use will have the tendency to create numerous implicit trusts. To me, having an implicit trust created – while technically is not wrong – is practically unwise. As a financial practitioner, my opinion is that this increases the risk of monies being mismanaged because the Executor/Trustee does not have any guideline as to how to manage such implicit trust. The worst case scenario could happen is to see the Executor/Trustee squandering the money away or having to be cheated by unethical financial salesperson to buy into another Lehman Brother Minibond. Now that there is a casino next door, the Executor/Trustee could try his luck to “invest” some monies on the gambling den – with YOUR money meant for your young children.

To counter the creation of implicit trusts – unintentionally or intentionally – it is better to explicitly spelt out the exact guidelines which the trustee must follow under a testamentary trust. And for goodness sake, never appoint a human being to be a trustee. That human could simply just ignore the entire testamentary trust and still be able to gamble it away at the casino next door.

As Trustee holds significant responsibility, it is important that the settlor is satisfied that Trustee is able to fulfill its responsibilities. Some important considerations are:

1. Is the Trustee a regulated entity by the Monetary Authority of Singapore or is the Trustee located in some offshore island with unfamiliar laws? Using a locally regulated Trustee is very useful as the settlor and beneficiaries would not want to fly to a remote island to deal with the trustee in the event of conflict.
2. Does the Trustee has any conflict interest? For example, if the Trustee is also the investment adviser, there is a conflict of interest as the Trustee also earns commissions and trailers for placing trust assets into financial products.

To safeguard the interest of the beneficiaries, the settlor can consider doing the following:

1. Appoint a Protector of the Trust. Also appoint successor Protectors as well. The power of the Protector is to ability to replace the Trustee with another one.
2. Mandate that the Trustee seeks the advice of an independent investment adviser with regard to how the assets are to be managed. The investment adviser should not be related to the Trustee and the Trustee should not be receiving any “kickbacks” from the investment adviser.
3. Insists that the investment adviser to the Trustee writes an Investment Policy Statement (IPS) so as to avoid any misunderstanding and dispute.
4. If there are special consideration such as the trust having a beneficiary who is physically impaired, it is important to ensure that the Trustee has the expert skill to cater for such situation.
5. It is important to know what are the Trustee’s restrictions. For example, if the Trustee cannot hold properties, the settlor has to be prepared for all properties to be sold and thus subjecting to market risk.