Many of us have goals we want to achieve—whether it’s a short getaway, planning for a wedding, or buying our first home. Some of us might even have these goals written down, and a strategy in place. What is often neglected, however, is planning for the unexpected. And as Benjamin Franklin once said, “If you fail to plan, you’re planning to fail.”
While talking about death is often considered taboo, failing to talk about it has led to many unwanted scenarios that cause stress and create conflict. Some family members may be left in financial distress, and others may feel that the distribution of assets isn’t justified. This is why having a proper plan will help your loved ones during their period of grief and provide objectivity in making important decisions such as funeral arrangements and how your estate will be handled.
Is a Will not enough?
A Will typically covers assets such as property, car, bank savings, and insurance policies, but that Will you’ve spent time crafting with your lawyer also has limitations—and one of them is the money in your Central Provident Fund (CPF) account.
Consider this: You have two children, but due to certain circumstances, you intend for all your assets to be passed to one child only. Your Will clearly covers this intention. However, according to the intestate succession rules—or if you’re Muslim, the inheritance certificate—the Public Trustees’ Office (PTO) will still split your CPF savings equally between your two children. As at 2016, the average Singaporean has a CPF balance of S$87,4001, which is not an insignificant amount.
How can you fix this?
CPF Nomination works just like a Will, specifically for your CPF savings—you can nominate any person or organisation as your beneficiary (or beneficiaries), and your CPF Nomination covers all the money you have in your Ordinary, Special, and Medisave accounts as well as unused CPF LIFE premiums and discounted Singtel shares.
There are three ways your CPF savings can be paid out to your nominee(s), according to your wishes:
1. Cash nomination
This is the default mode of payment, where your nominee(s) will receive the CPF savings due to them in cash, via cheque, or through GIRO.
2. Enhanced Nomination Scheme (ENS) Nomination
The CPF savings due to your nominee(s) will be credited directly into their CPF accounts.
3. Special Needs Savings Scheme Nomination
Parents of children with special needs can choose to have their nominee(s) receive the CPF savings due to them on a monthly basis.
After nomination, then what?
Life changes constantly, so it’s a good habit to review your CPF Nominations as your situation evolves. The birth of a child or divorce will not change your existing nominations—although you may want to proactively make a new CPF Nomination to factor these changes—marriage will make your original CPF Nomination invalid to protect the interest of new family members. This means that if you don’t make a new nomination after marriage, your CPF savings will be distributed according to the intestate succession rules.
If one of your nominees passes away and you don’t make a new nomination, the deceased nominee’s share will be redistributed to the surviving nominee(s) in the same proportion you specified in your nomination.
Is there more to good planning?
While we don’t often like to plan for the things that we don’t wish to happen, death is only one of them. Other life events, such as being diagnosed with a critical illness like cancer or becoming disabled due to an accident, can also severely affect your financial planning.
Now that you’re all set to make your CPF Nomination, it’s also time to review your existing insurance portfolio to ensure that your loved ones are well-protected against financial crisis if you’re no longer able to provide for them.
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Get in touch with us to find out how we can help meet your estate planning needs, with a Singaporean-centric perspective.
1 CPF Trends: Analysis of CPF Members' Balances by Gender, May 2017.