The age of majority applicable in Singapore is 21 years old as provided by common law.
There are a few factors that parents need to think about when they are doing estate planning, eg. Executor/Trustee, Disadvantages of Simple Will- Lump sum payout, Guardian, Spouse, Property, Debts, and etc.
Under common disaster scenario (both father and mother die at the same time), is Simple Will really good enough to take care of their young children?
Factors to consider
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1. Executor/Trustee |
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For property, young children cannot inherit before they reach 21 years old. For other movable assets, eg. Cash, Life Insurance payout, and etc, they can only inherit when they reach 18 years old. Before they are eligible to inherit the estate, the estate will be held by Executor, and most of the time, executor will be holding the trustee position as well. Can the executor be trusted and hold the assets on behalf of young children? |
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2. Disadvantages of Simple Will- Lump sum payout |
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We assume that the executor/trustee do their job very well, and pass the movable estate to young children when they reach 18 years old. One of the disadvantages of simple Will is, lump sum payout of the movable estate. Why are we saying so? Ask yourself a few questions A. When you were 18 years old, studying for A levels or Diploma, and you were given 1 million cash, how would you spend the 1 million? B. When you were still a primary school student, and you know you are going to inherit 1 million when you reach 18 years old, are you still motivated to study hard? C. How well do you think an 18 years old student will know how to manage 1 million cash? D. Can you imagine when your children’s friends know that they have 1 million cash in their bank account? |
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3. Guardian |
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Guardian will have the power to make decisions affecting the welfare of your children until they reach 21 years old. These decisions may range from the basic provision of food, clothing, education and etc. What happens when nobody is willing to become their guardian? In the event that no persons apply to be the guardian of your children, any children you have that are below the age of 16 will be placed under the care and protection of the Ministry of Family and Social Development according to the Children & Young Persons Act. This entails the placement of your child in a home. Similarly, with the appointment of your Will executor, will be good to have consent from the person before your appointment, as he/she can reject the appointment as a guardian! Isn’t it better to give allowance to the appointed guardian as a token of appreciation until your children reach 21 years old? As well as to have a fund to cover the expenses and education cost of your children? Hence, you will be the one that decide the quality of your children life and education, instead of leaving the uncertainties to your young children, and guardian. |
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4. Spouse |
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Based on our experience, one of the common issues we have seen so far- Not everyone knows how to manage money! If you know that your spouse is not a money savvy person, you will need to do extra steps to protect your spouse from losing your estate. The money you have set aside for your children education, living expenses, and etc, could be spent away, cheated, or scammed. |
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5. Property |
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Plans to leave your HDB or Private property (Condo, landed and etc) to your children? There are a few factors you need to consider here. HDB- In Singapore, all of us is allowed to own one HDB only, if you have a few children, you may consider to leave your HDB to one of them only, easier for your child to sell away or keep it, and not affecting the others from buying their own HDB. Private Property- By inheriting private property in Singapore, we don’t have to pay Additional Buyer’s Stamp Duty (ABSD), but it becomes a count after your children inherit it! If they plan to buy another one in the future, they may have to pay ABSD! Mortgage- Have you bought mortgage insurance to cover the remaining mortgage if anything happens to you? If not, do you have enough cash to cover the mortgage? Bank will transfer the ownership to your young children, only if the mortgage is cleared, if not bank has the right to sell your property away and get the money back that they lend to you! The fact is that, young children doesn’t have income to pay monthly mortgage, and rental income cannot be part of income sources when it comes to mortgage refinancing. |
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6. Debts |
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Your family will only receive your estate, after your Will Executor clear off your debts. Do you have other debts such as car loan, personal loan, business loan and etc. If yes, how much left for your family? |
Different family would have different issues, which is very hard to have a template here to guide you exactly how to structure your Estate Plan. Family trust is one of the options which solve most of the above-mentioned problems.
If you wish to do Estate Planning which is involving young children, and you have no idea how to start with, please feel free to contact us for complimentary meeting! We will be more than happy to help you, like how we help other families to structure their Estate Planning!
