- Assets held as joint tenants (e.g. real estate, joint bank accounts, joint investments)
- Central Provident Fund (CPF) monies
- Insurance trust policies of which the deceased was the trustee
2. Can Your Insurance Payouts Be Distributed Via A Will?
In our last video, we talked about there are two ways to die in Singapore. The first way is to die testate, and that is to die with a will. And the second way to die is, of course, to die without a will and we call that intestate. And we discussed that if one dies without a will in Singapore, our assets will be distributed via the Intestate Succession Act. And that might not be a good thing. Because not only it takes a long time, it is costly and you might not distribute your assets according to your own wishes. So it is better to at least write a will.
But do you know that there are some assets that cannot be distributed via a will? What are some of these assets that cannot be distributed via the will?
Firstly, all our joint accounts, joint tenancy, that means properties under joint tenancies cannot be distributed via a will. Secondly, our CPF monies, they cannot be distributed via a will. It has to be done via the CPF Nomination Form. And last but not least, certain insurance nominations, certain insurance policies cannot be distributed via a will. So let’s take a look at each one accordingly.
So what happens to our assets that are under joint account or properties that are under joint tenancy? Now, by law, these assets, upon your demise, cannot be distributed by the will. What happened is that if one dies, the surviving joint account holder or the surviving joint tenant will get 100% of the asset. Now, that is fine if that’s according to your wish. But if it is not, then it is a problem.
And sometimes, even if this is your wish, it can create problems that you do not foresee. Let me give you an example.
For example, a husband and wife own property under joint tenancy. And upon the demise of, say, the wife, the husband gets 100% of that property. And let’s say the husband subsequently remarries and then go into a joint tenancy with the new wife. If the husband subsequently dies, then the new wife, because of the new marriage, gets 100% of that property.
And that might not be something that the first wife, which is now deceased, wants. Because maybe what she really wants is that upon her demise and upon her husband’s demise, she wants the property to be left behind for their children. And so there must be something that can be done to prevent something like that to happen. And so in your estate planning, you do have to consider this.
So what happens to your CPF monies? Your CPF balances together with, for example, your Singtel shares will be distributed via your CPF nomination. Now, if you have invested your money out of your CPF using the CPF Investment Scheme, that’s fine. Because that can be distributed via the will.
With that as a background, how then do you best nominate your CPF monies? Now, the one thing that we need to take note is that if you nominate a nominee that is below 18 years old, it is not going to go to him, but it’s going to go to the Public Trustee first until this nominee reaches 18 years old. Unless this nominee is a widow.
So, most people would then do this: They will give their spouse 50% and then they will give the remaining 50% to their kids. Let’s say two kids and so one child will get 25% and the other child will get 25% as well.
But the problem is that if both of these children, they are below 18 years old, then the monies, 50% of it, it’s going to be stuck with the Public Trustee and the surviving spouse may not like it.
So some people will say then that, “I will leave behind 100% of my CPF monies to my spouse and both my children will not get anything. And if I pass on, my spouse would then take the money to take care of my children”. But the problem with this is that if both husband and wife die together, then there is a question on where or how much or where these assets and who will get these assets.
So a better way than we usually would advise our clients to nominate their CPF is that they can, for example, give their spouse say 97%, give the first child say 2%, assuming that you want to give the first child more and then the second child 1%.
So in the event of your demise, your spouse gets the bulk of it, 97%, and then she can or he can use this money to take care of the children. But if the spouse dies together with you, then the 97% that you have given to your spouse will go in the proportion of how you give to your two children. And in this example, two-third to the first child and one-third to the second child.
So how about certain insurance policies with certain nominations that cannot be distributed via the will? Now, as the topic is pretty complex, I’ll discuss this in more details in our next video.
But in the meantime, if you are planning for your estate, do consider some of these points with regard to joint accounts, joint tenancies as well as CPF monies, when you are planning for your estate.
So I hope you found this video to be helpful. And if there are any questions that you might have or if you need some advice, please feel free to reach out to us.
We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.