5 Questions to Ask Yourself When Estate Planning for Your Property  

estate planning singapore

As the cliché goes, the only constant in life is change. While we all know the importance of planning for uncertainties, how many of us have actually got around to doing it?

People tend to avoid dealing with estate planning because facing your own mortality is always a difficult discussion, according to Dharma Sadasivan, director at BR Law Corporation.

“Even though it’s a topic that I discuss with clients, I felt uncomfortable when I was doing my own will because it forces me to crystalize the reality of my own death,” Sadasivan said. “No matter how much time or runway you think you have, it’s important to deal with this early because the risk is that anything can happen anytime.”

The key to having your estate planned properly is to know what questions to ask. And who better to ask than lawyers and experts? For this guide, we’ve partnered with legacy planning marketplace, Immortalize, to compile a list to help you get started.

 

1. Who Should You Give Your Property To?

You want to give your property or assets to someone. But who should you give it to?

The first thing I ask my clients is who is dependent on you. Who are the people you feel are dependent on the legacy that you pass on? How are they dependent on you? That is always where we start with,” according to Chong Yue-En, Managing Director at Bethel Chambers LLC. “Legacy and planning, it’s for those who are left behind.”

 

2. How Will You Give Your Property to Them?

One of the hardest issues to decide on when it comes to giving your property to your loved ones is how you should give it to them. In a will, you can choose to give specific gifts to each beneficiary, divide them up in percentages, or do a combination of both.

We’ll explore the pros, cons, and tips for both in the following section.

Giving in Percentages

Distributing your property in percentages is usually the easiest and what most people think is the fairest.

“If you distribute one property to a particular kid, the value may fluctuate, and your kid might get more or less than you intended as a share of the entire state,” according to Wilson Foo, Senior Associate at Trident Law Corporation. “Another issue is what if you sell your property and then you forget to update your will, the kid might end up with nothing or very little as a result of that sale.”

While being the most convenient, distributing in percentages comes with its own problems.

As mentioned in some of our previous estate planning articles, when several people inherit a property together, there may be issues such as beneficiaries having to pay stamp duty to transfer to one another or dispute may arise when the co-inheritors disagree on how to deal with the property.

Read more here:

 One way to potentially mitigate the issue is the use of clauses in wills.

“You can always include a conversion and/or distribution clause in the will which allows the executor to distribute the property as appropriate,” Foo from Trident Law Corporation explains. “For example, if you have five properties and you distribute your entire estate in five equal shares, there's nothing stopping the executor from saying you take this property, you take that property, but then you compensate whatever is the difference.”

Tip:

If you are giving such wide-reaching powers to an executor, do make sure you appoint someone you trust.

“If the executor is also a beneficiary, this executor might use the power to benefit himself or herself, to the exclusion of the other beneficiaries,” Foo said. “If such an issue is a concern, I would advise the client to get an independent executor, like a trust company.” 

Giving Specific Gifts

There are circumstances where giving specific gifts make more sense. An example would be if you have a child that’s more dependent on your property than others, such as the case of a special needs child.

“There’s one simple solution which is to give the property to the child who needs it the most and take on an insurance policy which pays out an equivalent amount [to another child] when the testator passes away,” according to Alfred Chia, CEO of financial advisory firm SingCapital. “This is one way to achieve a fair distribution.”

Being specific can be useful to help you attain certain goals but there can be issues with being too specific with your wishes.

Chen Yiyang, associate at Tan Kim Seng & Partners, illustrates this with an example:

“There is a famous case where a lady had a lot of properties and she gave all her properties to her son, but with the condition that her son could only sell the properties after her 10th year death anniversary. This means her son had to hold on to the properties for 10 years before he could sell them. In the end, the trustee had an agreement with the beneficiary to revoke this direction. As long as the beneficiary is above 21 years old and mentally capacitated, the beneficiary and the trustee may agree to not follow the arduous clauses in the will so it is best to keep your will simple.”

 

3. Is There Anyone You Want to Exclude?

We have spoken about people you want to include in your estate planning. What about if you want to exclude someone who would normally be a beneficiary to your estate? For example, an estranged child or parent?

While a will allows you to give and not give to anyone you want, it may be useful to consult a lawyer to avoid disputes.

“Some of my clients may say ‘I don't want to give this particular son or daughter’ or ‘I'm not going to give equal shares; and I will ask them for the reasons,” Ivan Tay, Director at Robertson Chambers LLC said. “A person is free to give whatever they want, but we need to put it in specific wording, probably their reason as well to avoid any chance of dispute in the future.”

 

4. Who Will You Appoint As Executors?

When writing your will, there will be a section where you can appoint executors (people who will execute your will). You can choose to include backup executors and usually, you can appoint up to four executors. How should you decide who to be executors? Here are some considerations from lawyers.

“If you only appoint one person in your Will, the good thing is that this person can obtain a Grant of Probate and execute the Will quickly as opposed to appointing many executors and trustees, where they all have to agree on matters concerning the estate,” Chen Yiyang, associate at Tan Kim Seng & Partners said. “The bad thing is that maybe this one executor may not necessarily have the beneficiaries’ best interests at heart.”

“I have a previous case where there were four executors. In terms of administration, it was a nightmare. Four is extremely difficult especially when an executor is located overseas,” Hazell Ng, equity director and head of private wealth & matrimonial practice at WMH Law Corporation, said. “When administering estates, there are lots of signatures, forms, and all those have to be sent overseas for them to sign, sometimes in front of a notary public. So, I would say typically one to two executors is an optimal number, with replacement executors.”

 

5. How Will You Write Your Will?

With the rise of digital adoption, the use of online wills is becoming more prevalent. Online wills are generally a cheaper alternative for do-it-yourself people but going to a lawyer remains the choice for people with more complicated affairs.  

Related article: Pros and cons of going to a lawyer versus using an online will

"It’s not that online generators are bad, but these online generators are structured in a way that you can only do things in a certain way,” Lee Shen Han, lawyer at Bonsai Law Corporation said. “A layperson might end up churning out a will that goes against his/her actual intentions.”

Lee illustrates with an example:

“In one of the cases that I have encountered, the will generator states, ‘I give my immovable property at XYZ address to my daughter absolutely’ before going on to state ‘I give my immovable property at XYZ address to my son absolutely’. You can’t give away the same property to more than one person absolutely but because of how some of these online platforms are structured, the generator doesn't allow for the will to gift the property in percentages. A layperson who is not familiar with the law surrounding wills may then end up using the online will generator to give a property to one person, absolutely, and then accidentally give the same property to another person, absolutely.”

Lee added that in such situations, the probate process may turn out to be more expensive because the probate judges may flag out these discrepancies and ask the lawyer handling the probate to address these issues.

Related article: How To Find The Right Lawyer For My Will?

 

Find Ways to Make Your Distribution More Efficient

After you have decided on the above – i.e., what you want to give, to whom and how – you should consider ways to make the distribution more efficient. One way to avoid paying ABSD while being able to gift properties to their kids is the use of trust.

“When you put a property into a trust, you have created a legal relationship between the property and the trust. You lose control of the property as it doesn’t belong to you anymore,” Chong Yue-En from Bethel Chambers LLC explains. “Trustees can be family members. Trustees can also be professional trustees who manage the trust for you in return for remuneration and manage the property on behalf of the beneficiaries.”

Here’s an example from Alfred Chia at SingCapital on how trust can help make distributions more efficient:

“Let’s use an example where the parents have $1 million. They want to set aside this $1 million for their 10-year-old girl. This $1 million, they can use it to buy an insurance plan, invest in the stock market, or invest in property. Since the girl is only 10 years old, she does not own any property. The parents can set up a trust, buy the property under the trust and have the trust hold it for the girl until she turns 21 years old. In this way, the parents, who already own a home, don’t need to pay additional buyer’s stamp duty. The downside is that in future, if the girl wants to buy another home, it will be deemed as her buying a second property.”

If like us, you’re thinking, maybe I can give my child now and then take it back later. No, it doesn’t work (we’ve asked).

Here’s an explanation from Edmund Leow, senior partner and head of the tax and trust, estates and wealth preservation practice at Dentons Rodyk & Davidson LLP:

“If you're using your child’s name to buy a property, you need to remember that you are only a trustee. The property belongs to the child and not you. You can’t take back the property one day when you feel like it. There is a type of trust that you can take back, called a revocable trust. But for this kind of trust, you can’t avoid ABSD. The whole idea of ABSD is that the property belongs to the child and it’s your child’s first home. If it belongs to you, then that will be your second property and it will attract ABSD.”

Trust is A Good Way to Impart Values

You have worked hard your entire life and want to make sure that the assets you leave behind are going to be used properly. Trust could be a way to impart values.

“I would always remind my clients to find a reliable trustee and consider setting up things like an education fund, an emergency fund and others, especially when young beneficiaries (children) are concerned,” Hazell Ng from WMH Law Corporation said. “Some of my clients built their wealth from scratch and they want to teach their values to their children as well. It’s not whatever they want, they can just ask for it, and the trustee will release the money to them. There must be a purpose to why you need this sum for.”

Mental Capacity

Mental capacity is an issue that is highly relevant in Singapore but many may not have planned or even considered it. If you lose mental capacity, in simple terms, that is when you cannot make decisions for yourself. Some people are born with it while others acquire it, for example, through accidents or simply ageing and getting disabilities like dementia. 

If you already own a property and later loses mental capacity, you will not be able to manage, sell, rent or make official decisions for your property, according to Low Seow Ling, associate director from Eden Law Corporation. The family needs to apply to the court to be appointed a deputy, unless the mentally incapacitated person already has a lasting power of attorney in place.

In the following section, we will explore more about giving your property to a mentally incapacitated person.

“If you plan to give a property to a mental incapacitated person, for example, a special needs child, the key issue is to ensure that the person’s interest is protected,” according to Chong Yue-En, Managing Director at Bethel Chambers LLC. “What are your options to ensure that your special needs loved one won’t be defrauded of your gift to him/her?”

“One common thing a lot of people tell me is that they don’t have much assets, only a HDB flat and some cash so they don’t need a will,” Low Seow Ling, associate director from Eden Law Corporation said. “But they do not realize that if there are complications in their situation like a beneficiary with special needs, then the family members may end up spending more money in order to get things done properly.”

Low explains with an example:

“Assume parents passed away and under intestacy law, the two children, one neurotypical daughter and one son with special needs, gets 50% of the house each. In the best-case scenario where the daughter is nice, she gives the flat to her brother so that he can have a place to stay. By doing this transaction, just because the parents did not arrange for this in advance, the children end up wasting money on stamp duty and other conveyancing fees. In a bad scenario, the daughter doesn’t care about her brother, sells the house to get her share and the brother has to find alternative accommodation.”

With proper planning, the financial interest of both the parents and the child with special needs can be enhanced. One such example is buying a private property or HDB flat for a special needs child when the child turns 35.

“This way, the family would save on ABSD and use it to earn rental income (subject to HDB rules for HDB flat)”, Low said. “If the child cannot work to earn an income, the property can be used as a source of income. The issue here is, if the child has no income and cannot secure a mortgage loan, the parents essentially have to pay in full for the property.”

Special needs and mental capacity issues are complicated. It’s recommended to consult a lawyer for advice. You can find lawyers who do mental capacity advisory on Immortalize legacy planning marketplace.

 

Estate Planning Isn’t Always Easy, But It Is Necessary

Doing your estate planning isn’t an easy task. There are a lot of points to consider, and the journey can be arduous if you have a complicated situation.

You have to think about practical difficulties that your beneficiaries or executors might face at the time of administering these assets and properties. You know your children best, you know their behaviours, characters and lifestyles,” Hazell Ng from WMH Law Corporation said. “Once you have drawn up a will, it's not fixed. Circumstances can change and you can always update your will.”

You spent your whole life building up your legacy. Why not take a little time to make sure that legacy gets passed on well?

 

More FAQs on Estate Planning

What is Estate Planning?

Estate planning is the preparation of transfer of your assets to beneficiaries after you pass away.

When Should You Do Estate Planning?

When you are 21 years old but more commonly, people do it when they have significant assets (eg. first property) and/or when they have a child.

What is a Will?

A legal document that sets out how you want to distribute your assets after you pass away.

Is It Better to Have A Will or a Trust?

Will and trust are tools to get to your objective. Which one is better, or having both, will depend on what you are trying to achieve.

 

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This guide was written in collaboration with Immortalize, a legacy planning marketplace where you can find out more and compare lawyers and their rates and services. 

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