Monday, 3 July 2017

Wills, Trusts, AMDs and LPAs

I just attended a 2-day estate planning talks on wills, trusts, Advanced Medical Directives (AMDs) and Lasting Powers of Attorney (LPAs) organised by RockWills Corp Pte Ltd. There are some interesting facts about them that I share below.

Wills 

Most people know what is a will, so I will skip the basic facts and mention what I learnt from the talk. As you may be aware, you need to identify who are the executor and trustee of the will. The executor is the person who will carry out all necessary actions to distribute the estate according to the wishes of the will, while the trustee is the person who will hold on to the estate until it is completely distributed to the beneficiaries of the will. Although you can nominate an executor and trustee to carry out the wishes of the will, they can actually renounce these roles! The beneficiaries will then have to appoint another executor and trustee to execute the will.

The other point highlighted is that while you can write a well-planned will, if the will cannot be found or is destroyed, it is useless as well. This may sound like common sense, but the safekeeping of the will is sometimes taken for granted. For example, I made my will approximately 10 years ago. It is sealed inside an envelope and placed in an easily accessible location as nobody knows the existence of this will. However, for these past 10 years, I never open up the envelope and check the content. Who knows, maybe the ink might have faded or the paper on which the will was written might have turned yellow such that the will is no longer legible? 

The other concern for leaving my will so easily accessible is if someone were to read it after I am gone and dislike its content, he could simply destroy it and there would not be a will left behind.

The reason for my complacency is because I believed a copy of the will is kept by the law firm who wrote my will and by the Wills Registry under the Ministry of Law. I was reminded at the talks that the Wills Registry does not keep a copy of my will; it only has a record of when and who drew up my will. Will the law firm still keep a copy of my will 10 years after making it? I believe so, but I better not count on it since it did not charge me any custody fee. I will have to seriously think through how should I keep my will securely while still keeping it accessible when needed. 

Trusts

This is the most interesting topic that I learnt from the talks. If you have read my blog post on There is Really a Regular-Payout Term Insurance, you would know that I have a preference for insurance policies that pay out regular sums of money over a period of time instead of a lump sum. This is because my dependents might not be financially savvy enough to handle a large sum of money suddenly and might unwittingly invest the money in some risky investment products. A regular payout provides greater certainty on the financial sustainability of my dependents.

Similarly, a will pays out the inheritance as a lump sum, which has the same disadvantages mentioned above. However, if you write a will to pay out the inheritance into a trust, you can provide instructions on how regularly a trust disburse the funds to the beneficiaries. You could also set certain milestones for your beneficiaries to achieve before they get further payouts, such as getting a degree, etc.

Advanced Medical Directives (AMDs) 

AMDs are instructions that you set in advance to inform doctors whether you wish to be kept on life-support in the event of a terminal illness and when death is imminent without life-support. You can refer to Ministry of Health's website on AMDs for more information.

The key thing to note is that the witnesses to the AMDs should not be beneficiaries of your will.

Lasting Powers of Attorney (LPAs)

LPAs are legal documents authorising a trusted person (known as a donee) to make decisions related to your personal welfare and financial matters in the event of mental incapacity such as dementia or stroke. This is a very powerful document as the donee(s) can make many decisions on your behalf. Thus, whom you appoint as donee(s) is very important. For the simple LPA, you can appoint 1 or 2 donees and specify whether the 2 donees need to act jointly or can act alone. You can also appoint a replacement donee should one of the originally appointed donees becomes unsuitable. You can refer to Office of the Public Guardian's website on LPAs for more information.

Some other practical considerations that the speaker mentioned at the talk are the donee should preferably not be of the same age, because both the donor and the donee might suffer from dementia when the LPA needs to take effect. Also, the donee should not be someone living overseas as he would have difficulties overseeing daily matters related to personal welfare and/or financial matters. 

That's all for the lessons I gathered from the talks. It is useful to attending such talks from time to time to clear up any misconceptions and understand the options available for estate planning.


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8 comments:

  1. Thanks for this write-up and sharing . I learnt something and it's prudent to pay out regular sums of money over a period of time

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  2. Did they mentioned the minimum sum to set up Trust?

    The last time I checked with one local Trustee; it is $5m minimum.

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    Replies
    1. Hi Uncle8888,

      I think that's if you want to create PTC --- Private Trust Company, like what many multi-millionaires & billionaires do. Can cost a few hundred K just to setup a PTC. Open secret that many of our politicians have such vehicles. Nothing wrong about it.

      But for mere mortals like us, we can create simple trusts for a few hundred bucks or at most maybe around $3K-$4K max for Living Trusts. There really isn't a minimum amount required for trust. Of course anything less than $100K may not be worth it.

      As I mentioned before, there are mainly 2 types of trusts --- living & testamentary. Testamentary trust is the usual one for mortals like us, as it takes effect only when we die. It is written as part of a Will for a few hundred bucks.

      The problem with Trust (especially after you die) is who can be a trusted trustee to manage the trust properly?? Ideally a younger trustworthy relative who is not the beneficiary. Otherwise you may need to appoint a trust company. Then the trust will be whacked with annual fees. Jialat!! Like that the amount should be over $1M otherwise not worth it.

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    2. Uncle CW8888,

      No, they didn't mention the min. amount to set up the fund.

      Delete
    3. Spur,

      You are very knowledgeable in this area. RockWills offered a package for $4K+ that includes setting up the trust, writing the will that pays the inheritance to the trust, and lifetime safekeeping of the will.

      The annual trustee fee ranges from 0.5% for trusts with less than $1M to 0.1% for trusts with more than $10M (but min. charges apply, e.g. min. $3K+ for trusts with less than $1M).

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  3. Hi Wai Chin,

    (1) Can a church or temple act as a "Trustee" or Trust Company? If can what can they do for the beneficiary?

    (2)Is it possible to set up a trust at a lawyer's office and have two trustees to manage say a rental property.

    One take care of the rental & maintenance(aka property agent) ,the other(aka relative)to ensure rent goes to the
    beneficiary?

    ReplyDelete
    Replies
    1. Hi temperament,

      Sorry, I was busy over the weekend.

      I'm not sure about question (1). You need to check with a lawyer.

      As for question (2), yes, you can appoint 2 trustees to take care of different aspects of the property.

      Delete