5 reasons why you should write a will

Asian taboos about death often result in the reluctance in planning for financial matters after death. A simple document in the form of a will can get the job done. It is estimated that only about five per cent of Singaporeans have written a will. Many people tend to believe we will have adequate time to make a will, and as a result, procrastinate.

A friend told me the story of the time he was being rushed to hospital when he suffered a heart attack. When he was lying in the hospital bed, he recalled his father had passed away from a heart attack too. Assuming the worst and amid tears from all, he hurriedly gave his wife a rundown of all his assets and what to do with them. In his case, he had tried to make a verbal will.

Every so often, it takes a tragedy to hammer home the fact that death can come suddenly—when we least expect it. Incidentally, had anything happened to this friend of mine, his will would not have been recognized. This is because a will needs to be in written form—a verbal will is only allowed for military personnel in time of war.

So, what exactly is a will? A will is the legal instrument that permits a person, the testator, to make decisions on how his estate would be managed and distributed after his death.

There is a general misconception that only the rich need to write a will. The fact is almost everyone should write a will for the following reasons:

1. Children below the age of 21 are not allowed to own any assets

They are not allowed to own any assets and so a trustee is required. Furthermore, the will is the only document where you can name a guardian to take care of your child after your death. Otherwise, it would be subjected to a long and tedious court process, which is exhausting in terms of time and money. The worst scenario that can happen is that the court awards guardianship to someone whom you do not trust for this task. So why leave such an important decision to a judge who does not even know you at all?

2. You need to furnish two sureties without a will

Without a will, you need to present two sureties (similar to a guarantor) to provide "guarantee" for the gross value of the estate. Most people easily have a total insurance cover above S$200,000 and a house easily worth another few hundred thousand. Imagine, would it be difficult to get two persons with a net worth of S$500,000 to be willing to provide a S$500,000 guarantee? Well, with a will, no surety is required.

3. Making provisions for one's parents

If you are married and have children, are you aware that in the event of your death without a will in place, none of your estate will be distributed to your parents? In such a situation, the estate (including insurance proceeds of different policies) will be distributed according to the law—The Law of Intestate Succession. If a person is married and has children, but does not have a will, the estate will be distributed 50 per cent to the spouse and the remaining 50 per cent to his children. His parents will get nothing. Hence, the only way to ensure your parents are provided for is to write a will and expressly provide for them in the will.

4. Naming a beneficiary in any insurance declaration does not entitle the beneficiary to the life insurance proceeds upon your death

It is a myth to believe that the nominee declared in your insurance policy will inherit the proceeds after your death. This is despite whatever beneficiary nomination forms which you as an insured may have filled in and submitted to the insurer. The reason is policyholders automatically create an irrevocable trust under Section 73 of the Conveyancing and Law of Properties Act, when they name a spouse or child as beneficiaries to an insurance policy. This has put people in a blind, as they are not aware that a trust is being created. Insurers also allow changes in beneficiaries.

Prudential was the sole exception in never allowing beneficiaries to be named, unless there was an explicit intention among policyholders to create a trust. Today, all insurers do not allow the naming of beneficiaries, unless policyholders fill in a separate form creating a Section 73 trust.

Are you shocked? How is it that no one ever tells you this? The fact is this is a legal issue. Hence, a written will is the only legal binding document to name your beneficiaries to your life insurance proceeds upon your death.

The fact is that most insurance agents and advisers do not know of this themselves, so how could they have educated you on this risk? Due to this requirement under the law, all insurers (excluding NTUC Income) have terminated the practice of allowing the naming of beneficiary for insurance policies, since 2003.

5. Will witnesses to my will know the content of my will?

Many people have the misconception that witnesses to a will need to know its contents. Well, it is not necessary so. The duty of the witnesses is to "witness" the signing of the will by the testator (the person who writes the will). And so it is not necessary for them to know its contents.

Because of the legal implications, it is important to seek financial advice from a competent advisor on the allocation of your assets. The last thing you want is to be at the receiving end of inaccurate advice.

By Dennis Ng, Director of Leverage Holding and Master Your Finance. Posted via www.MoneyMatters.sg, your guide on how to make more money, save smarter, invest intelligently, and enjoy your money like a pro. Click here to get our free report on what you must know about financial freedom.

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