One way of ensuring that your loved ones receive assets is to pass them over while you’re still alive. It is important to remember however that this needs careful thought, given that you may not want to relinquish control and that you need to make sure you keep enough for yourself to live off – a difficult balancing act.
The first stage
Before you take advice, as a starting point you need to value your estate. Your estate includes your home, other property, shares and investments, money and savings, business assets, cars, jewellery and other personal possessions. From this, deduct debts and liabilities, including your mortgage, bills, loans, credit cards, overdrafts, and funeral expenses.
Make your wishes known
In addition to having a valid Will in place, successful estate planning includes establishing trusts which can hold and manage money or other assets on behalf of your beneficiaries. Trusts can also give you control over who receives what and when.
Often missed, it is also important to set up Powers of Attorney, covering ‘health and welfare’ and ‘property and financial affairs’ at an early stage.
A Power of Attorney is a legal document created by one person who authorises another person to act on his/her behalf. In the context of Singapore, the creator of the document is known as the Donor and the person being entrusted to act is called the Donee.
Your Power of Attorney is a crucial document when a crisis occurs after an accident or illness. When the donor is incapacitated to sign legal documents, the donee has decision-making powers over the donor’s property and financial affairs.
Inheritance Tax (IHT)
Effective estate planning can also reduce the amount of estate taxes payable, enabling you to pass on more of your assets after taxes have been paid.
For example, for UK domiciled individuals the current Inheritance Tax (IHT) nil-rate band, the amount which can pass without Inheritance Tax being paid, is £325,000 for individuals and £650,000 for a married couple or civil partners. Any unused portion of the nil-rate band can be passed to a surviving spouse or civil partner on death. IHT is usually payable at a rate of 40% beyond these thresholds. A main residence nil-rate band (currently £175,000) may also apply if you want to pass your main residence to a direct descendant.
It is important to note that where a UK domiciled individual leaves their assets to a non-UK Domiciled spouse there are limits to the amount which can pass without IHT being payable.
If you have surplus income, you could consider gifting money to the next generation. Professional advice on the rules which apply is recommended, to ensure gifts are made in the right way to qualify for relevant exemptions, so that UK IHT is not chargeable on them later unless the rules change.
As an expatriate, it is possible that your nominated legal guardians for your children, named in your will, do not live in Singapore. If your children are suddenly orphaned, a delay will occur until the legal guardians arrive in the country and are able to take up their responsibility.
The Singapore authorities have a duty to take children into social care from day one, if something happens to both parents. They will remain there until a legal guardian is approved.
It is possible to put in place Temporary Guardianship to ensure that your children can remain in the care of someone they know and trust until their legal guardian can take over.
Temporary Guardians are usually close neighbours or friends and can be nominated by way of a simple signed authority, a copy of which should be left with the nominated temporary guardian.
Help with your estate planning
Contact us today to discuss your estate planning needs or for help in drafting temporary guardianship for your children.
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