Protect your family’s future through estate planning
One way of ensuring that your loved ones receive assets is to pass them on while you’re still alive. However, this needs careful thought, given that you may not want to relinquish control and you need to make sure you keep enough for yourself to live off. It’s a difficult balancing act.
The first stage of estate planning
Before you take advice you need to value your estate. Your estate includes your home, other property, shares and investments, money and savings, business assets, cars, jewellery and other personal possessions. From this, deduct debts and liabilities, including your mortgage, bills, loans, credit cards, overdrafts, and funeral expenses.
Make your wishes known
In addition to having a valid will in place, successful estate planning includes establishing trusts that can hold and manage money or other assets on behalf of your beneficiaries. Trusts can also give you control over who receives what and when.
Often missed, it’s also important to set up Powers of Attorney covering ‘health and welfare’ and ‘property and financial affairs’ at an early stage.
A Power of Attorney is a legal document created by one person who authorises another person to act on his or her behalf. In the context of Singapore, the creator of the document is known as the ‘donor’ and the person being entrusted to act is called the ‘donee’.
Your Power of Attorney is a crucial document when a crisis occurs after an accident or illness. When the donor is incapacitated to sign legal documents, the donee has decision-making powers over the donor’s property and financial affairs.
Inheritance Tax (IHT)
Effective estate planning can also reduce the amount of estate taxes payable, enabling you to pass on more of your assets after taxes have been paid.
For example, for UK-domiciled individuals, the current Inheritance Tax (IHT) nil-rate band (the amount that can pass without Inheritance Tax being paid) is £325,000 for individuals and £650,000 for a married couple or civil partners. Any unused portion of the nil-rate band can be passed to a surviving spouse or civil partner on death. IHT is usually payable at a rate of 40% beyond these thresholds. A main residence nil-rate band (currently £175,000) may also apply if you want to pass your main residence to a direct descendant.
It’s important to note that where a UK domiciled individual leaves their assets to a non-UK-domiciled spouse there are limits to the amount that can pass without IHT being payable.
If you have surplus income, you could consider gifting money to the next generation. Professional advice on the rules that apply is recommended, to ensure such gifts are made in the right way to qualify for relevant exemptions, so that UK IHT is not chargeable on them later unless the rules change.
Temporary guardianship
As an expatriate, it’s possible that your nominated legal guardians for your children, named in your will, do not live in Singapore. If your children are suddenly orphaned, a delay will occur until the legal guardians arrive in the country and are able to take up their responsibility.
The Singapore authorities have a duty to take children into social care from day one, if something happens to both parents. They will remain there until a legal guardian is approved.
It’s possible to put in place temporary guardianship to ensure that your children can remain in the care of someone they know and trust until their legal guardian can take over.
Temporary guardians are usually close neighbours or friends and can be nominated by way of a simple signed authority, a copy of which should be left with the nominated temporary guardian.
Help with your estate planning
Contact AAM Advisory today to discuss your estate planning needs or for help in drafting temporary guardianship for your children.
Important information
This article is intended for general circulation and for information purposes only. It may not be published, circulated, reproduced or distributed in whole or part to any other person without prior consent of AAM. This document/article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed wealth manager regarding the suitability of the investment product before making a commitment to purchase the investment product. Whilst we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this document is subject to change without notice. The above report may contain data obtained from third parties and as such we cannot guarantee the accuracy of this data. AAM Advisory Pte Ltd is licensed by the Monetary Authority of Singapore, FA Licence no 100032.
Read this article if you’ want to know how to save for your children’s education, and how much you will need.
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