Estate planning is a crucial step in securing your financial legacy and ensuring that your loved ones are taken care of after your passing. However, many individuals in Singapore make common mistakes that can lead to disputes, unnecessary legal complications, or unintended outcomes. By being aware of these pitfalls, you can take proactive steps to avoid them and ensure that your wishes are carried out effectively.
1. Not Having a Will
One of the most significant mistakes people make is failing to write a Will. In Singapore, if you die intestate (without a Will), your assets will be distributed according to the Intestate Succession Act (Cap. 146). This means:
- Your estate will be distributed based on a fixed hierarchy (spouse, children, parents, siblings, etc.), not according to your personal wishes.
- If you are unmarried and have no immediate family, your assets could go to distant relatives or even to the government.
- Your dependents may face delays in accessing funds, causing financial strain.
How to Avoid This:
- Draft a legally valid Will with clear instructions on asset distribution.
- Appoint an executor who can manage your estate efficiently.
- Regularly review and update your Will to reflect changes in your assets or family situation.
2. Not Appointing Guardians for Minor Children
If you have young children, it is critical to appoint a legal guardian in your Will. Without a designated guardian, the court will decide who takes care of your children if both parents pass away. This could lead to custody battles among family members.
How to Avoid This:
- Clearly state in your Will who should become the guardian of your children.
- Discuss your decision with the chosen guardian to ensure they are willing and prepared.
3. Overlooking CPF Nomination
Many people assume that their Central Provident Fund (CPF) savings will be covered by their Will. However, CPF savings do not form part of your estate and cannot be distributed through a Will. Instead, they are governed by the CPF Act (Cap. 36) and will be distributed based on your CPF nomination or, if no nomination is made, according to intestacy laws.
How to Avoid This:
- Make a CPF nomination to ensure your CPF savings go to your intended beneficiaries.
- Review your nomination periodically, especially after major life events (marriage, divorce, or the birth of a child).
4. Failing to Update Estate Plans After Major Life Events
Life changes such as marriage, divorce, childbirth, or acquiring new assets can affect your estate plan. Failing to update your Will or Power of Attorney could lead to unintended consequences. For instance:
- If you get married, your previous Will is automatically revoked unless it was made in contemplation of marriage.
- If you divorce, your ex-spouse may still inherit assets if you don’t update your Will.
- If you acquire new property or investments, they may not be included in your existing Will.
How to Avoid This:
- Review your estate plan at least every 3-5 years or after significant life events.
- Ensure that new assets and changes in relationships are reflected in your Will and nominations.
5. Choosing the Wrong Executor or Trustee
An executor is responsible for carrying out your Will and ensuring that your assets are distributed as instructed. Many people appoint family members or close friends without considering whether they are capable of handling legal and financial matters. A poor choice can result in delays, conflicts, or even mismanagement of assets.
How to Avoid This:
- Choose someone who is trustworthy, organized, and knowledgeable about financial matters.
- If no suitable person is available, consider appointing a professional executor (such as a lawyer or trust company).
6. Ignoring Estate Taxes and Debts
Although Singapore does not have inheritance tax, outstanding debts must still be settled before distributing assets. Many people forget to account for liabilities such as:
- Mortgage loans.
- Credit card debt.
- Business liabilities.
- Hospital bills.
If there are insufficient assets to cover these debts, your beneficiaries may receive much less than expected.
How to Avoid This:
- Keep track of all outstanding liabilities.
- Consider life insurance to provide liquidity for estate settlement.
- Ensure your Will accounts for debt repayment.
7. Relying Only on Verbal Promises
Many people assume that making verbal commitments to family members is sufficient. However, in Singapore, a Will must be legally documented to be valid. Verbal promises hold no legal weight and can lead to disputes among family members.
How to Avoid This:
- Ensure all asset distributions and instructions are clearly written in a legally valid Will.
- Seek professional legal advice when drafting your estate plan.
8. Not Making a Lasting Power of Attorney (LPA)
Many people focus on planning for what happens after death but fail to plan for what happens if they become mentally incapacitated due to illness, accident, or aging. Without an LPA, your family may need to apply to the court for deputyship, which is costly and time-consuming.
How to Avoid This:
- Make an LPA under the Mental Capacity Act to appoint someone you trust to manage your affairs if you become unable to do so.
- Ensure your appointed donee understands their responsibilities.
Estate planning is not just about writing a Will—it involves making informed decisions to protect your loved ones and assets. By avoiding these common mistakes, you can ensure that your wishes are honored, reduce the risk of disputes, and provide financial security for your family. Proper estate planning requires periodic reviews and professional guidance to adapt to life’s changes.