Don't disinherit your parents in your financial plan!

Since the beginning of 2007, I was privileged to work with a few young couples in planning their finances. Below are some interesting similarity in their situations:

1. These young couples are new parents.

2. These young couples plan for their finances.

3. These young couples do not have a will.

4. These young couples also love their respective parents and provide for them.

5. These young couples also DISINHERIT THEIR PARENTS from their financial plan !

Sounds funny and illogical ? Let me explain the facts:

Lets assume Peter marries Mary, and Mary gives birth to Peter Junior. Peter has an elderly parents.

The moment Peter and Mary sign the marriage certificate, their previous wills (if any) and CPF nominations are revoked. This means that if Peter dies, his assets (or estate) will be distributed according to the Intestate Succession Act, which means 50% of the estate will go to Mary (being his spouse), and the other 50% will go to Peter Junior(being his son), leaving Peter's parents nothing!

In an un-planned situation, a married couple with children and write no wills will automatically disinherit their respective parents from their estates.

One cannot assume that our parents will die before us. Anything can happen in life. Therefore it is necessary to plan. Below are some suggestions:

1. Write a will to include your parents as beneficiaries to your estate. (Similarily, update your CPF nomination)

2. Provide sufficient capital in your estate to make sure the allocation stated in your will is meaningful. Use a life insurance policy to create the capital if it is insufficient. For a small fraction of premium,you could create a sizeable estate immediately.

3. If it is not convenient to name your parents in the will (in reality, some spouses cannot get along with their in-laws), do an assignment of life insurance policy to your parents. An assignment of life insurance policy means you transfer the legal ownership of the policy to your parent(s), say your mother. When you die, the insurance proceed is an asset belong to your mother.

4. Last but not least, communicate to your parents ! If you assign a life policy to your parents, let them have the policy document. If you have a will, use your judgement to let them know the necessary (similarily if you have updated your CPF nomination). If you have a trusted financial planner, let him (or her) knows your intention.

Yes, we can enjoy our family, but lets not disinherit our papa and mama in our financial plan.