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Inheritance Planning: 5 Important Things You Should Know

Alevin Chan

Alevin Chan

Last updated 18 May, 2023

When done well, inheritance planning can foster harmonious transfer of wealth and assets in your absence. Here are five things to consider when planning who gets what, and how much.

Inheritance planning is the process of leaving clear and detailed instructions regarding the distribution of your wealth, valuables and assets – which collectively form your estate when you pass on.

While the concept is fairly simple and straightforward, there are potential pitfalls that can arise due to the various policies employed in Singapore.

Here are five things to note when approaching inheritance planning.


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There is no estate tax in Singapore, but property tax (and others) still apply

Estate tax was abolished in Singapore on 15 February 2008, which removes the risk of the inheritance you leave behind causing a tax burden on your loved ones.  

This means that should your estate include a residential property, the parties inheriting it will not need to pay Buyer’s Stamp Duty. Note this exemption does not apply when it comes to commercial properties.

That is as far as the exemption goes, any further transactions involving said property will be subject to prevailing taxes. Specifically, if you inherit a property and then sell it, you will have to pay the Seller’s Stamp Duty.

If you decide to keep the property, you will have to pay property tax on it. You will also have to pay Additional Buyer’s Stamp Duty, if you decide to purchase another property after inheriting one.

Be aware that prevailing home ownership rules and restrictions still apply, including HDB eligibility requirements around age, marital status and number of residential properties you may own.

For these reasons, it is best to clarify your intentions regarding any family properties so as to prevent any such complications.

Related to this topic: Stamp Duty: A Summary For Property Buyers & Sellers In Singapore

CPF savings cannot be distributed via a will

The introduction of the CPF Life annuity scheme way back then inspired no small amount of uproar and conspiracy theories. One of the silliest was the claim that your CPF balances would be confiscated by the government upon your death, so too bad for those who happen to die early.

That is, of course, wrong; your unused CPF Life premiums will be returned to your estate, instead of being lost forever. Thus, the inheritance you pass on could include a substantial CPF balance.

Now, the key thing to note is that the instructions in your will do not apply to your CPF balance. This could result in your CPF balances being distributed according to prevailing intestacy laws, which could be very different from what you intended.

If you want to control how your CPF funds are distributed after your passing, you can do so by making a CPF nomination.

Note that any CPF nominations you made before marrying will be revoked, so as to give you a chance to nominate your spouse as well (why they don’t simply allow you to add your spouse to your list of nominees is beyond me).

In any case, it’s a good idea to check your CPF nominations to ensure that things will go according to your wishes. Note that you can nominate anyone – not just next-of-kin – to receive your CPF funds.

This is important because if you happen not to have any family members left to inherit your remaining CPF (or, for that matter, your estate), everything will be absorbed by the government.

You can prevent that from happening by listing a non-related individual or even an organisation in your CPF nomination.

Related to this topic: CPF Nominations: What Happens To Your CPF Money After You Die?

Family members may be liable for some of your debts

Generally, family members do not inherit your debt.

So for instance, the bank cannot go after your spouse or children to pay off an outstanding credit balance or a personal loan. (Instead, the bank will make a claim against your estate to make good on any outstanding debt, which will be paid out by the executor of your estate).

Notwithstanding, there are certain circumstances under which your loved ones will be held liable for your debt. Firstly, if they happen to be a co-signer or guarantor of an outstanding loan, the obligation of paying it off will fall to them.

Secondly, if they are listed as a co-owner of a property that has yet to be fully paid up, they will assume fiscal responsibility for the remaining mortgage. This also applies if they inherit a property with an existing mortgage.

Assuming your loved one wants to retain ownership of property, they can try refinancing the mortgage for more favourable terms. Otherwise, they will have to sell the property to be discharged of the responsibility; this is not ideal as they may be forced to accept a bad deal.

One solution to avoid this potential complication is to purchase a mortgage insurance policy which will pay off the remaining mortgage as a death benefit.

HDB homeowners using their CPF funds to pay for their unit should note that they are already covered under the Home Protection Scheme, so there is no need for a separate mortgage insurance policy.

Lasting Power of Attorney is important

More and more people are increasingly starting to realise the importance of Lasting Power of Attorney (LPA), likely because of the growing awareness of the need for proper legacy planning.

LPA is a legally protected way to ensure your inheritance planning is executed as planned, instead of being derailed by malicious parties.

Through an LPA, you can appoint suitable individuals or parties to take over decision making on your behalf should you lose the mental capacity to do so. This prevents others from manipulating you into making harmful changes to your will or CPF nominations, keeping your assets and wealth from falling into the wrong hands.

An LPA also covers decisions regarding your personal welfare, which is essential in ensuring you have access to appropriate care and treatment options. This includes – in conjunction with an Advance Medical Directive – the right to refuse extraordinary life-sustaining medical intervention in terminal illness.

Another benefit of an LPA is the potential to reduce the time and effort spent on gaining control of the accounts and assets that make up your estate. This is because under the law, there is no such thing as “inherent right” to take over the affairs of a departed loved one. Hence, putting an LPA in place can help to shorten the process.

To be valid, an LPA must be registered with the Office of the Public Guardian. Note that the fee for drafting a general-purpose LPA (from S$75) is waived until 31 March 2026 to encourage more Singaporeans to sign up.

Related to this topic: Inheriting A Property In Singapore: Do You Need To Pay Inheritance Tax And Stamp Duties?

Trust nomination protects your life insurance payout from creditors

If you have a substantial amount of debt, be aware that your creditors can lay claim to your life insurance policy, leaving your family unable to receive the proceeds.

This can happen if you did not make the right nominations for your life policy.

Specifically, if you nominate your estate as the beneficiary of your life policy, the payout will become part of the pool of assets that the executor will draw from to settle outstanding debts. This means your family can only receive whatever remains – if any – which defeats the purpose of buying life insurance in the first place.

To keep your life policy away from creditors, you will need to make a nomination in your insurance policy.

There are two forms of nominations to choose from. The first one is known as a trust nomination, which causes you (the policyholder) to give up the rights to the ownership of your policy, leaving all proceeds to the beneficiaries you name.

A trust nomination is irrevocable, and changes can only be made with the consent of all beneficiaries. It also revokes your right to make changes to the policy, such as taking a policy loan, or surrendering the policy.

Given the inflexibility of this action, you should consider very carefully before proceeding.

The second form of nomination is known as a revocable nomination. This is much more flexible, as you retain ownership rights, and remain entitled to any living benefits of your policy (i.e., right to take a policy loan, or to surrender the policy, etc). Your beneficiaries are only entitled to the death benefits of your policy.

It may be helpful to consult your insurer or financial advisor on which form of nomination you should make, in accordance to your own circumstances.


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Read these next:

What is Legacy Planning, and When Should You Start?

What is Will Writing and How Does That Impact Your Legacy Planning?

9 Things To Do With Your Inheritance Money In Singapore

6 Signs of Financial Stability in Singapore

A Full Guide To Priority Banking In Singapore (2023)

An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.


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