Estate planning advice often focuses on the creation of legal documents such as wills and trusts. The choices you make about where your assets will go after you pass can affect people’s lives profoundly. This is why you must familiarize yourself about the basics of estate planning.
In simpler terms, estate planning dictates how you would like to distribute your estate after your death. Your estate encompasses your properties, savings, and money. It makes sure that the people you love and the causes you care about are covered even after the inevitable event of death.
As said above, estate planning primarily includes the creation of a will by appointing an executor. For individuals with higher net-worth, they may choose to create a trust in order to transfer their assets to pre-determined beneficiaries. Singapore is a prime financial hub for individuals with higher net-worth to set up their trusts. It is because the country is characterized by:
- a business promoting environment,
- a comprehensive legal system,
- a globally competitive infrastructures,
- a strategic geographic location, and
- a robust set of regulations for the financial sector.
As trusts are used as a long-term tool, you must closely evaluate the pros and cons before setting one up. For instance, trusts are a viable option for vulnerable beneficiaries such as minors. However they can be costly and difficult to maintain.
Here are the common estate planning terms that may boggle your mind at first:
- Alternate Beneficiary is an individual or an organization named to receive the assets in the unlikely event that the primary beneficiaries die.
- Co-Trustees are two or more people who had been named to coordinate in managing a trust’s assets.
- Durable Power Of Attorney For Asset Management is a legal document that bestows a person full or limited legal authority to sign your name on your behalf in your absence. Its validity ends at death.
- Gross Estate refers to the value of an estate before the debts are paid.
- Will is a written document that includes the instructions for allocation of assets after one’s death.