Will and Estate Planning

[nsengkia]

Dear All,

Just retired and getting round to doing my Will and Estate Planning. Married with three kids, all currently minors. Have a lot of questions about what we should reflect in the Will and will (no pun intended) greatly appreciate advice from fellow forum members on their own experiences and best practices (usual caveats of course apply i.e. these are very personal decisions, it depends on circumstances and personalities of those involved etc etc).

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.

We have roughly decided on how much to allocate to the potential guardian to cover the yearly expenses for the children until they finish university. 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.

[wsreader]

I came across a book "Estate planning made easy" co-authored by Christopher Tan, available in our public libraries. It is written in our local context. For the interested forumers' info only.
(not vested)

[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.

[swakoo]

Also, another book (that is on my procrastinated to-buy list)...

[Image: Money%2CDeath%2CYou.jpg]

Financial planning does not end with death. And if you, like countless others, believe that writing your will (perhaps filling in the standard forms) means that your affairs are left in order, consider these questions:

What happens if your will is challenged? Is it really watertight against the claims of money-grubbing relations whom you do not wish to benefit?
How can you protect young children or helpless dependants from incompetant (if well-intentioned) guardians?
How can you provide for someone and keep this a secret from others (since the contents of wills can be made public)?
Is a joint account a neat way to transfer your wealth to the other account holder? (You wish!)
If you donate money to your favourite charity in your will, would it be tax-dedictable?
Are your assets overseas safe from heavy foreign taxes?
Will your beneficiaries get their legacies quickly, or have you left them wallowing in red tape while your assets shrink in value?

Money, Death and You addresses all these issues and much more. Simply and concisely, the book provides an overall perspective of the legal issues related to death and the estate, to give readers the answers they need when they embark on their estate of succession plan - or simply want to know where the problems lie. The book includes horrendous real-life scenarios that you can avoid with some thoughtful planning.

http://www.stpressbooks.com.sg/Money-Death-And-You.html

[Contrarian]

1. Agree with D.O.G, don't give them everything on a platter

2. I teach my kids compare prices... house-brand vs non house brand... use her favourite potato chip snack...

3. My girl likes monopoly game... buying and renting

4. Next get them do holiday work

[Temperament]

Yes, it is very important to train our children about the "management and therefore the value of money" at a very young age. Not every thing he asks or wants he gets it. Not even due to his peer's pressure (when he was a teenager) playing the game of "keeping up with the Ah Kow and Ah Seng" especially on the latest hand-phones, he got it. Don't get me wrong. i always tell him he can have anything provided he really need to use it and not for showing off. Another words use money not let money use you. Now he is 24+ and he is O. K. with handling money matters.

[nsengkia]

Thanks for all the feedback guys.

wsreader - Thanks for the lead. I have borrowed the book "Estate Planning Made Easy" from the library. Will go through it over the next two weeks.

swakoo - Thanks for the lead as well. I will keep a lookout for the book "Money, Death and You" and read it next.

d.o.g. - Thanks for the long post. I greatly appreciate it.

On the question of an overseas university education, our family policy is to fully fund a local education. However, the kids are welcome to borrow the additional funding required for an overseas education at the CPF interest rate of 2.5%. Tweaking this to tie into a later lesser share of the inheritance for the kid concerned is a good idea - we will seriously consider it.

50% for a life event is quite high and a percentage may encourage over consumption. We will most probably go with a fixed quantum amount per event instead.

Giving for life events is also quite tricky as it may result in some unfairness as some of the kids may choose not to marry and those that do get married may choose to have more or fewer kids. But I think this can be overcome if the inheritance is split three ways from the very beginning rather than at the end.

35 seems a bit young to me to come into inheritance. I have noticed some of my younger colleagues of that age still relatively immature. We will most likely consider something closer to 40.

Difficult to find friends who are in similar situations who are willing to talk about this. Many of them seem to have emotional difficulties planning for death.

The blue chip idea is a good one. We will most likely go with something close to it i.e. conversion over a period of one year of our entire estate split three ways into STI ETF. One year because some of my portfolio is relatively illiquid. STI ETF because may not be able to select blue chips that last forever - AT&T for widows and orphans come to mind. And local stocks only because we were CLOBed once before. May be very far fetch but I can envision an extreme situation where the US imposes capital controls to prevent capital flight. But if the kids do migrate overseas, then maybe an ETF of the country they migrate to maybe a suitable substitute for the STI ETF.

[CityFarmer]

The topic seem remote to me, since it will take me probably 10-20 years before i start considering it.

But the suggestions and views are very useful, even to a person like me. I am sure i will gain from it years later.

Thanks for nsengkia to ask the question and all those replying to it.