FPAS Article – Wills and Lasting Power of Attorney

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When there is a Will, there is a Way

In the movie “My Life”, Michael Keaton starred as a successful corporate high-roller with his wife (Nicole Kidman) expecting their first child. Suddenly, their lives ground to a stop when he was diagnosed with terminal illness and was dying. After picking himself up, Keaton then focused not just on sorting out his own financial plans for the family but also on a series of “home videos” to leave on and guide his unborn child. That process impacted the young couple in ways they never expected.

Keaton’s legacy inevitably requires writing a will, coupled with a sound mind and with only a few final months of his life to execute. What if Keaton was killed in a motor accident or landed into a coma? They are many learning points from this story and how they may help us achieve the legacy plans we really want.

Why should I write a Will?

Although estate planning is the whole aspect of planning for our assets after death, the will is an integral part of every estate plan. Yet, perhaps only about 10 percent of Singaporeans have written their will. Among the many reasons for not writing a will, they may say it is only for the wealthy with substantial assets or for someone who is dying. These are misconceptions. The purpose of writing a will is to minimise the three ‘C’s.

 

  • Conflict. By default, all of us already have a will that the state writes for us – the Interstate Succession Act. This Act determines who gets a share of our estate (assets after death) based on our legal relationships.  In actual fact, many have wishes based on unique personal relationships and circumstances. When personal wishes and legal relationships clash, conflicts arise. We hear of many such family feuds in the newspapers.

 

  • Cost. The combined cost of writing the will and subsequent legal process to execute the instructions in the will is usually lower than the legal cost of processing a deceased’s estate without one. It is also much faster for the estate to be cleared. A will typically costs a few hundred dollars to prepare and filing the probate costs another $2,000 and takes around three months. By contrast, the administration process (without a will) can take one to two years and the filing and associated legal fees can be in excess of $3,000.

 

  • Confusion. Writing a will is to make certain wishes are clear to the living, not to be ambiguous and subject to the family or relatives’ interpretations. These may include specifying the funeral rituals, guardianship for young children and sales of investment assets. Such decisions may be difficult to make especially at the point of grief and when family members disagree.

 

“Estate Planning is never about yourself, or how much you have. It is about love and commitment towards the people around us.”

 

How do I do up my will?

Traditionally, wills are written by lawyers, although the law allows self-written wills. Nowadays, will-writing firms, financial advisors and estate planning professionals have entered the scene to advise clients in the practice of estate planning. There are many important factors when considering a service provider.

 

  • Made to fit. If everyone’s circumstances and personal wishes are unique, then the will has to be tailor-made to suit individual needs. Does your estate planner seek to understand the special circumstances of your family in order to draft your will? A good indicator is the time spent discussing your wishes. Thorough planning and execution of an estate plan can take up to 2 sessions of 3 hours each.

 

  • Expertise in Will-Trust. The will enforces a one-time distribution of assets to your beneficiaries. Thereafter, there is no more legal recourse or governance over the use of assets. This may not meet the need of couples with young children, aged parents who may not be able to handle large inheritances or those with members with special needs. A family trust embedded in the will provides a legal vehicle for a more effective and assured distribution to these family members over a long span of time. Choosing a will writer with the expertise of dealing with a trust is important in order to offer an estate solution that can meet these needs.

 

“Do you love your family as long as you live, or as long as they live?

 

How do I know the will I have is well-drafted?

It is said a badly-drafted will may create more issues. Your will can only be as well-drafted as you have thought about your wishes. Therefore, with a few exceptions, a 2-3 page will may reflect the lack of in-depth thinking during the planning process. Silence is not golden in estate planning as it creates unnecessary confusion and conflict among the living. Some examples of commonly missed out provisions in a simple will are listed, although not comprehensive.

–       Substitute executors, guardians or beneficiaries. Very commonly, only one set of these important stakeholders are listed in the will. That is highly problematic if they were to pass on before you. For example, if the executor pre-deceases you, the estate falls into grant of letters of administration with will annexed. This falls back to the complications and time-consuming process of appointing an administrator.

 

–       Final substitute. Similarly, without substitute beneficiaries, when one of them is no longer around, then it is not clear how his/her entitlement is to be passed on. In a worse-case scenario, your entire family on vacation meets with an accident. Your estate may pass on to a distant relative or even to the government. Perhaps you find more meaning and purpose to name in your will a final beneficiary of a religious body or a charity of your choice, when you immediate family is no longer around.

 

–       Specific gift. Most estates are usually sold before distributing to the beneficiaries. If you want certain items of sentimental value to be passed on, heirlooms such as jewelry, diamonds, art pieces or cars, then you need to specify this in your will.

 

–       Common disaster clause. If a beneficiary were to pass on within a short moment of you, it may not be your intention for your inheritance to be passed to him, only for him to distribute your estate with his own will. A 30-day common disaster (or survivorship) clause ensures your beneficiaries {Derek, not sure what you are trying to say here; do you mean: “A 30-day common disaster (or survivorship) clause requires your beneficiaries to survive at least 30 days before they can benefit from your estate”????] survive only when they can benefit from your estate.

 

–       Guardian allowances/provision. What if as a parent of two young children, you are entrusted as guardian with your niece and nephew? While you are obliged to look after them, you may face financial strains or even an over-crowded house. Catering for guardian allowances and also housing arrangement are therefore important considerations.

 

–       Lay Trustee. You may appoint a trusted family member as trustee to hold custodian of your estate for your minor children or aged parents. However, if the trustee passes on before he can finish discharging to your dependents, then the trusteeship is passes on to his beneficiaries. For example, if you appoint your sister as trustee over your estate to provide for your children, then if your sister passes on subsequently, it is very likely your brother-in-law is now entrusted with your estate to take care of your children. If this is an issue, then you can consider appointing a corporate trustee who will never die or fall sick.

 

–       Funeral arrangements. Does your family knows of your faith or preferred funeral rites? Specifying these in your will can avoid unnecessary second-guessing from your family members of different faiths.

 

–       Terms of Endearment. In the movie above, Keaton left a series of home videos for his unborn child. Writing a will is after all about love and responsibility for our family. So besides the estate distribution, leaving a love letter or last instructions to be read to your family can be a greater legacy than your estate.

 

–       Conditional Gifts. In another inspiring movie “The Ultimate Gift”, a well-thought out estate plan allows grandpa Howard Stevens to put his reckless, selfish and unimpressive playboy grandson, Jason, through a series of life lessons. Each lesson unlocks a gift. Through these conditional gifts, Jason changes his perspective of life and becomes a much better person. Unconditional gifts and inheritance, on the other hand, possess the powerful temptation that can cause immature beneficiaries to quit upon the many challenges of lives.

 

“Planning for death is planning for the happiness of the living”

 

What is Lasting Power of Attorney (LPA)

A Lasting Power of Attorney is akin to a living will. It gets activated not by death, but upon mental incapacity or unsound mind resulted from a bad bout of illness, coma from accident or dementia. In the event of mental incapacity, a LPA appoints a property and affairs donee (similar to the executor in a will) to carry out your pre-determined wishes of how your assets should be utilized for yourself and your loved one. It also appoints a personal welfare donee, to look after your daily care, similar to the role of the guardian.

Why do I need to do my LPA?

Perhaps less than 1 in 1,000 Singaporeans have done their LPA, due to lack of awareness or motivation to understand the issues. Just as investing time to think through your estate plan offers assurance, clarity and peace-of-mind, so a well thought-through LPA offers quality of life, assurance and clarity to yourself, your family and your care-giver. More than the issues of death, in planning your LPA, you have to be confronted with tough choices on your own daily living, such as where to stay, who to live with, even how you prefer to be dressed, what to eat and what activities to engage in. Mental incapacity is not lifetime imprisonment behind bars and there is a chance you will regain mental capacity and your normal lifestyle.

How do I do up a LPA?

The Lasting Power of Attorney is administered by the Office of Public Guardian[1] () in Singapore.  Anyone can do a simplified LPA for a small fee by completing Form 1 with OPG. If you need more provisions in your LPA for a wider scope, then you need to consult a qualified lawyer or LPA planner (Form 2).

 

“You may have lost your mental capacity, but you need not lose your dignity and relationships”

 

By Derek Liang,
Affiliate of STEP™, CFP ®, B.Eng(1st class Hons)
Derek.liang@finexis.com.sg

 

[1]  More information on LPA can be found from https://www.publicguardian.gov.sg/

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