“Estate planning is for the rich. We have only just started accumulating our wealth.”
“We are not old enough to think about writing our wills.”
“We are happy with how our assets will be divided under intestacy laws.”
All of these are common responses when parents of young children are asked if they have an estate plan in place. Oftentimes, such parents think that they should be focusing on wealth accumulation instead of setting up an estate plan.
However, having young children makes it even more important for them to make preparations in the event of their untimely deaths.
5 reasons why parents of young children should have an estate plan in place.
(1) Appointment Of Guardian
Parents of young children should have an estate plan as they can name a guardian for their minor children in their will.
(i) Natural / De Factor Guardian
In the event that one parent passes away, the surviving parent will be the guardian of their children. The surviving parent would be the “natural” or “de facto” of the children.
(ii) Testamentary Guardian
It is possible for parents to name a guardian for their minor children in their Will.
The guardian is known as a “testamentary guardian”. The testamentary guardian will have custody of the minor children and be responsible for their care. The testamentary guardian will have the power to make decisions concerning their education, healthcare, living arrangements and religion.
In the event that there is a surviving parent, the testamentary guardian will have to act jointly with the surviving parent.
In the unfortunate event that both parents pass away and have not appointed a testamentary guardian, any person(s) may apply to court to be the guardian of the minor children. The court may, if it thinks fit, appoint the applicant(s) to act as the guardian(s) of the minor children. If no one applies to be the guardian of the minor children, it is likely that they will be cared for by the Singapore authorities.
In light of the above, it is highly advisable for parents of young children to name a testamentary guardian.
Firstly, this will allow them to appoint a guardian who they can trust and whose values are aligned with how they would like their children to be raised.
Secondly, if there is no testamentary guardian, children with no surviving parents would be in a state of limbo while they wait for someone to apply to the courts to be their guardian(s). One can imagine how distressing this would be for children who have just lost their parents.
(2) Appointment Of Trustees
One of the benefits of having a Will is the ability to appoint trustee(s) to manage the assets that comprise their estate. The trustee will be responsible for ensuring that the deceased’s assets are distributed in accordance with the Will.
In the absence of a Will, the likely outcome is that the deceased’s next-of-kin will be appointed by the court to distribute the estate according to intestacy laws.
As such, without a Will, the deceased parent would have lost the ability to ensure that the person in charge of the estate is trustworthy, responsible and able to act in the beneficiary’s best interests. This is particularly important when the beneficiaries are young and vulnerable.
(3) Being able to make specific gifts
Another advantage of having a Will is the ability to make specific gifts. This means naming a specific asset that you would like to go to a specific beneficiary in the event of your death.
For example, if you own a collection of watches, choosing to leave a particular watch to your child would be a specific gift.
In the absence of a Will, all of your assets will be divided up according to the proportions stipulated by intestacy laws. For example, if you pass away leaving behind 3 surviving children, each child will receive 1/3 of your estate according to the laws of intestacy in Singapore.
The intestacy laws do not go into detail to prescribe which assets should go to which beneficiary.
Therefore, if you have any prized possessions or items of sentimental value (e.g. family heirlooms, jewelry or artwork), it would make sense to have a Will as you can specify how these items are to be divided in the event of your death.
It would also mitigate the possibility of disputes arising between your children should they both have their eye on the same item.
(4) Catering for particular circumstances
Having an estate plan would also give you the flexibility to cater to the family’s particular circumstances. For example, parents of a child with special needs can leave specific directions on how their assets are used to take care of their child after they pass on.
Using this example, it is possible for the parents to direct that certain assets be liquidated and the funds channeled into taking care of their child with special needs. It is also possible for parents to grant their child a right of residence in their will. This means that the child will be allowed to reside in one of their properties until the child attains a certain age or when he or she passes on.
Parents might also want to cater for a situation where a child turns out to be a spendthrift or is careless with money. In the absence of a will, the estate of the deceased parent will be distributed according to intestacy laws under which the child could potentially inherit a large amount of wealth and assets upon attaining the age of 21.
In such a situation, a Will would be beneficial as you can stipulate for the assets to be distributed in a stages or upon the attainment of certain milestones, e.g. upon entering university or pursuing tertiary education, on graduation and so forth. This is done through the creation of a testamentary trust, which will ensure that the child does not inherit everything upon attaining the age of 21.
Essentially, having a Will would allow you to have more control over how your assets are to be distributed, which will be especially important when there are beneficiaries that need special care or who are unable to manage large sums of money on their own.
(5) Ease of estate administration
When a person passes away with a will, the executor(s) named in the Will have to apply to court for a document known as the Grant of Probate. The Grant of Probate is basically a court order authorizing the executors to start calling in the assets, paying off the deceased’s debts and start distributing the assets to the beneficiaries.
In the absence of a Will, the deceased’s next-of-kin will apply to court to be granted Letters of Administration so that they can have such authority.
The process for an application for Letters of Administration is lengthier and more complicated than a Grant of Probate. In an application for Letters of Administration, the court will ask for 2 sureties to be provided if there are minor beneficiaries or if the estate is large.
It is usually difficult to find 2 persons who would be willing to stand as sureties, as they are basically agreeing to be held responsible in the event that the distribution of the estate is not done properly.
Furthermore, each surety must have assets that are worth the total value of the deceased’s estate – a requirement which further narrows down the pool of people who can stand as surety.
In the event that sureties cannot be produced (which is usually the case, for the reasons mentioned above), an application has to be made to court for the dispensation of sureties.
This requires the next-of-kin to file an affidavit explaining the difficulties in finding sureties and also obtain the written consent of all adult beneficiaries to the estate. These complications will not arise in the event that there is a Will.
We hope that the above reasons have made you consider the importance of having an estate plan, especially if you are a parent with young children.
If you have any questions or require advice, please do not hesitate to drop me an email to email@example.com