Introduction
I recently came across a tragic video of a woman being forced to climb out of her house due to an unexpected fire. The flames engulfed her home and she was hanging on the edge, when she slipped and fell to her death.
How old was she? 20s.
Age is just a number, anything unexpected can happen to your life in an instant.
COVID-19 has solidified this point where we can face a global pandemic, bringing thriving economies to a standstill. We have witness countless deaths, with so many suffering especially in less developed countries like India.
With the knowledge of life's fragility, we should plan ahead which includes nominating who should get you CPF money in your demise.
What happens if you do NOT make a CPF nomination
In such an event, all your CPF savings will be transferred to the Public Trustees Office and distributed to family members based on Intestacy law or Muslim Inheritance Law.
Intestacy Law is the default rule for a deceased without a will. The rules follows as seen below.
Source: moneysense.gov.sg
Under this law, the recipients received a fixed portion as stated and you lose the flexibility to allocate who and how much to allocate to. It may be given to family members that you do not want or at a proportion that is not ideal.
Do note that a "Will" does not cover for CPF savings of the deceased.
Why you should make CPF nomination
When you make nominations, your nominees need not wait up to 6 months to receive the amount.
Failure to do so leads to a long wait time.
An official claim needs be to file by providing documentation, such as certificate of birth/ certification of marriage and Identity Card to prove their relationship to you. In addition, your beneficiaries have to pay a fee before collecting your savings. Screenshot below from Ministry of Law.
With a nomination, these hassles can be avoided. Your nominees need not pay a fee when they claim your savings and the whole process takes approximately 6 weeks!
A huge difference, especially if the decease has many dependants and may experience financial hardships if there is insufficient cash flow to tide over.
What components of your assets does your CPF nomination cover?
A CPF nomination encompasses 3 components of your assets.
1. All your CPF savings in Ordinary Account (OA), Special Account (SA )and MediSave and Retirement Account
2. Any unused CPF LIFE premiums
3. Discounted Singtel Shares
On the other hand, CPF nomination does not cover :
1. Properties bought using your CPF savings
2. Payout from Dependant's Protection Scheme (DPS)
3. Investments made under CPF Investment Scheme (CPFIS)
Misconceptions about CPF savings
If you have written a will, it does not mean you do not need to make CPF nominations.
This is because your CPF is not covered under your estate and therefore cannot be willed. Only Property, Savings and Jewellery are some examples that can be under your will. CPF is not included to protect your savings from any creditor claims on outstanding loans.
And unclaimed CPF is definitely NOT confiscated by the government.
Further drilling this point, CPF nominees will receive CASH from your CPF savings in your demise.
It is NOT to their CPF accounts. This is by far the biggest misconception.
Closing Thoughts
With the advancements of technology you can even make your nominations online now in the comfort of your own home with this link.
If you want to learn how to do it, we have this
While it is a taboo to talk about death in Asian culture, we should be rational and embrace the fact that we all have to leave one day.
You do not want to be in a position where your assets are not properly allocated while you are mentally fit to do so. In addition, you do not want your loved ones to be in financial hardship when you are not around.