Estate planning is an essential aspect of financial management, and it becomes even more critical when regular savings are involved. In addition to creating a will that outlines how your assets should be distributed after your demise, estate planning involves making strategic decisions to minimise taxes and legal challenges for your beneficiaries.
One way to effectively manage your estate in Singapore is by leveraging brokerage support. Brokerages are financial institutions that facilitate buying and selling securities such as stocks, bonds, and mutual funds on behalf of their clients. This article discusses advanced strategies when planning your estate with regular savings in Singapore.
Create an equity portfolio
Creating an equity portfolio is one of the most popular strategies for estate planning with regular savings. An equity portfolio refers to a collection of stocks, bonds, and other securities managed by a brokerage on behalf of an individual or entity.
The primary advantage of having an equity portfolio as part of your estate plan is the potential for long-term growth. A well-diversified portfolio can generate significant returns over time, providing financial security for your beneficiaries. Additionally, equity portfolios are highly customisable, allowing you to select risk levels and investment objectives that align with your estate planning goals.
However, managing an equity portfolio requires expertise and experience, which is where brokerage support comes in. By working with a brokerage firm, you can tap into their research capabilities and access a wide range of investment products. This support can help you make informed decisions and navigate market fluctuations, ensuring the long-term success of your estate plan.
Potentially maximising tax benefits through unit trusts
Unit trusts are pooled investments managed by professional fund managers on behalf of investors. In Singapore, unit trusts offer significant tax benefits, making them an attractive option for estate planning.
One of the critical advantages of unit trusts is their ability to reduce taxable income. By investing in unit trusts, you can claim a tax deduction of up to SGD 7,000 per year under the Supplementary Retirement Scheme (SRS). This benefit applies to both regular savings and lump-sum investments.
There are no restrictions on the types of investments that can be made through unit trusts, making it a versatile strategy for estate planning. For example, you can invest in funds with high dividend yields to provide regular income for your beneficiaries or opt for capital growth-focused funds to build wealth over time.
Utilising insurance policies
In addition to creating a will and leveraging brokerage support, utilising insurance policies is another critical strategy for estate planning with a regular savings plan in Singapore. Insurance policies can provide financial protection for your beneficiaries in the event of your death, ensuring they are not financially burdened.
One type of insurance policy commonly used in estate planning is whole life insurance. This type of insurance covers the insured’s entire life and offers a guaranteed payout to beneficiaries upon death. By regularly paying premiums, you can build up cash value in your policy, which can be used to supplement your retirement income or leave it as an inheritance for your loved ones.
Insurance policies offer tax benefits, making them a valuable tool in estate planning. In Singapore, whole life insurance premiums are tax-deductible up to a maximum of SGD 5,000 per year. Insurance payouts are not subject to income tax, providing beneficiaries with a tax-free inheritance.
Establishing a trust
Trusts are legally binding agreements that enable you to assign assets to a trustee, who will oversee their management on behalf of your beneficiaries. Establishing a trust can be an effective strategy for estate planning with regular savings, as it allows you to control how your assets are distributed and provides tax benefits.
One type commonly used in Singapore is a revocable trust, which allows you to retain control over your assets and make changes as needed. By transferring money into a trust regularly, you can reduce the value of your estate and minimise estate taxes. Trusts protect against potential legal challenges from creditors or divorcing spouses.
It is essential to work with experienced professionals when establishing a trust for estate planning purposes. A trust specialist and a brokerage firm can help you navigate the legal and financial complexities involved, ensuring your assets are protected and distributed according to your wishes.
Strategies for estate planning are essential for ensuring that an individual’s assets are distributed according to their wishes after death, while minimizing tax liabilities and avoiding legal complications. Key strategies include creating a comprehensive will, which outlines asset distribution, and establishing trusts to manage wealth during one’s lifetime and after passing. Charitable giving can also be incorporated into an estate plan to reduce estate taxes. Additionally, powers of attorney for healthcare and finances ensure that decisions can be made if an individual becomes incapacitated. Regularly reviewing and updating the estate plan is crucial, especially in response to changes in family dynamics, laws, or assets. Consulting with financial advisors, estate planning attorneys, and tax professionals helps in crafting a personalized strategy that aligns with long-term goals and maximizes benefits for heirs.
Investing in real estate investment trusts
Real estate investment trusts (REITs) are another popular option for estate planning with regular savings in Singapore. REITs are an investment that owns and manages income-generating real estate properties.
Investing in REITs can provide several benefits for your estate plan. For example, they offer higher dividend yields than other investments, providing regular income for your beneficiaries. REITs can hedge against inflation and market volatility, providing stability to your estate plan.
REITs are highly liquid, meaning you can sell your shares quickly. It makes them an attractive option for those looking to build wealth while having easy access to their funds.
