So, this is Step 3 of the 7-Step Estate Planning Framework. In case you need to refresh your memory on the other steps, here they are:
Step 1: Ensure Estate Surplus
Step 2: Ensure Estate Liquidity
Step 3: Plan Your Estate Wisely
Step 4: Write Your Will
Step 5: Register Your Will & Keep It Safely
Step 6: Consider Other Tools: Trusts, AMD, LPA & HOTA/MTERA
Step 7: Review Your Estate Plan
In this step, our focus is to review our estate and determine what parts of our estate should be distributed to whom. Sounds simple enough, right? Well, it depends (that's always the correct answer to any question). What does it depend on? This is probably one of the most important steps of your estate planning process. Here are a few things to think about when working through this step:
As you consider the above questions, there is another part of the equation, that is the laws governing how various types of assets can disposed off, given how they where held. In another words, assets owned in a particular way may be constrained by how they can be distributed upon the death of the owner. The following diagram serves to illustrate the potential complexity involved. A detailed description of each box is beyond the scope of this article.
This deals with when the asset is to be disposed off. Inter-Vivos disposition is giving when you are still alive, while testamentary disposition is giving upon death. Here are some examples to illustrate different needs to choose between testamentary versus inter-vivos giving.
For a business owner, he would like to have certainty in his estate planning to ensure that funds are provided for his family. However, as he is exposed to the risk of his business going bad, resulting in potential bankruptcy, such a scenario will put his family's well being at risk. He can put aside various assets into an irrevocable trust and designate his family as beneficiaries. After 5 years (legal requirement of Singapore trust law), the assets he has deposited into this trust are protected against creditors. This provides him peace of mind, knowing that he has provided for his family even if his initial successful business goes belly up resulting in his bankruptcy.
If a father wants to give his daughter an investment property, he can give it now, while he is alive (inter-vivos) or he can choose to give it only upon his death (testamentary). However, if he were to give it now, in the eyes of the law, it would be considered a sale to his daughter and hefty stamp duties would be incurred in such a transaction. To avoid such duties, he can give that property to his daughter in his Will and such giving will avoid stamp (reference).
This deals with whether a person had a valid Will when he passed away. If he has a Will, then most of his estate can be disposed off via his Will. However, there are certain assets that may not be able to be disposed of by him. For example, assets that are jointly held by another person that has rights of survivorship.
On the other hand, if he does not have a Will, the Singapore government has already written a Will for him. This is called the Intestate Succession Act. This Act can be briefly summarised in this table:
However, if the deceased is a Muslim, then a different Act applies to his estate, the Administration of Muslim Law Act (or "AMLA" in short). Briefly, the Muslim testator can only Will up to 1/3 of his estate away while the other 2/3 will have to be distributed to Lawful Heirs. A more detailed explanation of the laws governing Muslim Inheritance can be found here.
So what is the outcome of this step? It should look something like this:
There are other information that you should tabulate that will be quite useful to the personal representative who will be dealing with your estate after your demise. Here are some of them:
Such information will assist the personal representative to more effectively manage your estate and to make sure things move on as smoothly as possible in your absence.
You can refer to this article for a comprehensive list of documents to maintain as part of your estate plan.
In the next article, and armed with the above plans and information, we can begin the process of drafting a Will to make sure our wishes and desires are implemented correctly and accurately. We will explore the components of a Will and consider other issues relating to the drafting of your Will.
