Will and Estate Planning

[d.o.g.]

But we have a bit of problem with how we should space out the release of the rest of the inheritance to our children e.g. at 21 years of age, on entry into University, on graduating from University, on marriage, on having a grandchild, or at a more matured age say 40 years old?

As is usually the case, some of the kids are mature, some are spendthrift but treating them differently w.r.t. their respective inheritance is a strict no-no from our perspective.

IMHO giving the kids all the money at once is a very bad idea as it will enable the ones who are not mature to destroy themselves. They can overdose on drugs/alcohol, die in a fast car or blow the money on hookers, bad investments, get cheated etc.

Releasing enough money to pay for university plus a small living allowance while they are studying would be a good idea, this is your responsibility as a parent anyway - to give them the best education you can. This would also mean they only need to concentrate on getting into the university of their choice, they don't have to stress over tuition (which can be very expensive for overseas universities). And since there is a fixed pot of money, if they go to an expensive university there will be less for them to inherit later. They will get an early lesson on delayed gratification! Some will deliberately make that choice e.g. they may decide that a Harvard education and a smaller inheritance is better than going to NUS and inheriting more money. (Personally I would applaud such a decision).

After they start working, you could release some money to help with key life events e.g. when they decide to get married, buy their first house, have their first child etc you can pay 50% of the costs. If you pay for it all they may not learn how to manage their money, which could be disastrous when they do get the rest of the money. 50% is a ballpark, you can tweak it however you want.

Finally you could release all the remaining money when they turn 35-40. If they haven't grown up by then they probably never will, and you can't hold back the money forever.

You should also talk to friends in similar situations. Undoubtedly some of your friends are facing the same issues. Even if you do not follow what they did, it is good to understand why they made those choices so that you can make a good choice for your family.

As usual, YMMV.

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Should I separate the role of guardians for the children (in the unfortunate event of the demise of both my wife and myself) from the executor and trustee of our estate? Should we get a professional for the latter? The guardians are already identified and decided on but they are not investors and have already agreed to take on a great deal of responsibility. On the other hand, as most of us appreciate, it is very hard to find a competent professional who will have the family interest at heart.

One way to deal with this is to invest the bulk of the money now, either by yourself or with the help of a professional you can trust. If you cannot find a worthy investment professional, then consider buying a portfolio of dividend-paying blue-chip companies that you are sure will continue to be around when your children inherit the money. When the children receive their inheritance the shares can be distributed to them pro-rata, for them to sell or keep as they wish.

Since the time horizon is very long and big losses are unacceptable, the primary focus should be on financial strength and dividend history, rather than growth prospects. You need not confine the investments to those listed in Singapore - feel free to buy Procter & Gamble or PetroChina, for example.

With the portfolio invested, the estate would then only require a trustee with very limited responsibility, primarily to disburse money for authorized purposes (university fees, wedding, house, childbirth etc). Such a checklist approach is simple and cheap. There are several trust companies licensed to operate in Singapore, they should be happy to help with setting up the trust. They are listed on the MAS website under Financial Institutions.