Legacy Planning: Going Beyond Your Financial Assets

An article first published on Providend website here: https://providend.com/legacy-planning-going-beyond-your-financial-assets/

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In the previous article, we touched on estate planning, which focuses on distributing your financial assets after death. In this article, we go beyond your financial assets to look at legacy planning. Both are dealing with what you leave behind after your passing, but there are key differences between them:

• Scope: Estate planning primarily focuses on the distribution of your financial assets, whereas legacy planning encompasses a broader perspective, including passing down your values, principles, and non-financial matters such as family traditions, stories, and personal legacies.
• Objectives: The primary objective of estate planning is to facilitate the efficient transfer of wealth to your beneficiaries, whereas legacy planning aims to preserve your family’s values, traditions, and cultural heritage, and passing down your wisdom, ethics, and life experiences in addition to wealth transfer.
• Components: Estate planning typically involves components such as CPF, insurance, wills, trusts, plus stakeholders’ designations (nominees, beneficiaries, executors, trustees, protectors, etc.) in those components, whereas legacy planning often includes a more comprehensive approach, and may involve documenting family histories, writing letters to share personal values, recording personal messages in audio/video formats, and perhaps establishing charitable giving strategies to support causes important to you.
• Communication: Family communication in estate planning primarily revolves around financial matters and the distribution of assets, whereas legacy planning encourages open and meaningful communication about your values, principles, and non-financial matters within the family.
• Impact: Estate planning has a more immediate impact on the transfer of wealth and assets to the next generation upon death, whereas legacy planning can have a long-term impact by ensuring that your family’s values, traditions, and non-financial legacies are carried forward for generations.

Why Is Legacy Planning Important?

The importance of legacy planning is a personal and individual matter, varying greatly from one person to another. It is a deeply reflective process that centres on what matters most to you and how you wish to be remembered. It goes beyond the usual financial considerations of providing for your loved ones and acknowledges that your legacy is not solely defined by your material possessions, but by the imprint you leave on the hearts and minds of your loved ones.

Some key reasons why legacy planning is important are:

• Preserving Family Values and Traditions: Legacy planning allows you to pass down your family’s values, traditions, and cultural heritage to future generations. It ensures that your family’s identity and shared history are preserved and celebrated.
• Fostering Family Unity: By engaging in open and meaningful conversations about your values and principles, legacy planning can strengthen family bonds and promote unity. It provides a platform for family members to connect and understand each other better.
• Transmitting Wisdom and Life Lessons: Legacy planning provides an opportunity to share your life experiences, wisdom, and life lessons with your loved ones. These insights can be invaluable for guiding younger generations and helping them make informed decisions.
• Providing Clarity and Guidance: A well-crafted legacy plan can offer clarity and guidance to your beneficiaries. It can outline your wishes for the future, including your expectations regarding wealth, education, philanthropy, and other matters.
• Minimizing Family Conflicts: Clear and documented legacy plan can help reduce the potential for disputes and conflicts among family members after your passing. When everyone understands your intentions and values, there is less room for misunderstandings and disagreements.
• Creating a Lasting Legacy: Beyond financial wealth, legacy planning helps you create a lasting and meaningful legacy that extends beyond your lifetime. It ensures that your family’s legacy continues for generations to come.
• Personal Fulfilment: Legacy planning can be personally fulfilling, as it allows you to reflect on your life, values, and aspirations. It gives you the opportunity to make a positive and lasting contribution to your family and society.

Some Topics for Consideration in Legacy Planning

While there are structured legal documents and planning processes in later-life planning and estate planning, there is no universally standardized document or process for some non-financial matters in legacy planning. Such non-financial matters are highly personalized and may include a wide range of considerations. We can only suggest some topics for your consideration in legacy planning.

Funeral Arrangement

When someone passes away, it is usually an overwhelming and emotional time for the family. Planning ahead and sharing your funeral wishes in advance can make a difference in such a time. A few things to consider in funeral arrangement:

• Choose someone to handle your funeral affairs.
• Choose a funeral service provider.
• Decide on the type of funeral service (Buddhist, Christian, Muslim, Hindu, non-religious).
• Decide how the remains will be handled (burial, cremation, store ashes in a crematorium or at home, or scattering of ashes at sea or on land).
• Choose a location for the funeral wake (funeral parlour, church, HDB void deck, mosque).

For more details in funeral arrangement, you may refer to My Legacy website here: https://mylegacy.life.gov.sg/when-death-happens/arrange-the-funeral/

Family Values

Family values are the guiding principles and beliefs that shape the character, behaviour, and identity of a family unit. They can serve as a moral compass, influencing decision-making, relationships, and the overall culture within the family. In the context of legacy planning, documenting and passing down family values is a significant and deeply personal aspect of ensuring that your family’s identity and principles are preserved for generations to come.

Family values can encompass a wide range of ideals and principles, and they often reflect the unique experiences and traditions of a family. Some examples of common family values are faith and spirituality, love and mutual support, respect and empathy, integrity and honesty, lifelong learning, hard work and perseverance, generosity and giving back.

To document family values in your legacy plan, consider creating a written statement or letter that outlines these principles. You may share personal anecdotes and stories that illustrate the importance of each value in your family’s history and encourage discussions among family members about how these values influenced their lives and decisions.

Special Needs

In the previous article on estate planning, we talked about one of the reasons for trust set up is to take care of beneficiaries with special needs. One such trust company specifically set up to provide affordable trust services for persons with special needs is the Special Needs Trust Company (SNTC)[1]. SNTC is a non-profit trust company set up in 2008 with the support of the Ministry of Social and Family Development (MSF)[2].

To set up an SNTC Trust for the beneficiaries with special needs, an initial $5,000 deposit is required. Once the trust account has been set up, you can choose to top up the trust account anytime via cash savings, CPF nomination, insurance nominations, and/or will.

The specific CPF nomination for special needs is the Special Needs Savings Scheme (SNSS)[3], developed by MSF in partnership with the Central Provident Fund (CPF)[4]. It enables you to nominate your children with special needs to receive a pre-determined monthly payout instead of a lumpsum distribution upon your demise. It is intended to provide long term care for them.

Lifetime Gifting

Lifetime gifting refers to the practice of giving gifts or transferring assets to individuals or entities during your lifetime, as opposed to leaving them as part of your estate to be distributed after your passing. This gifting strategy can be an effective way to manage your wealth and reduce the overall value of your estate, potentially minimizing estate taxes.

While Singapore does not have gift tax, there are stamp duty implications on a conveyance or transfer of Singapore real estate or stocks and shares. Despite the cost, it is worthwhile to consider lifetime gifting for various reasons:

• Wealth Transfer: Lifetime gifting allows you to provide financial support to your loved ones when it is needed most. For example, you might help your children to pay for downpayment in buying their house.
• Asset Protection: You may transfer your assets to a trust and place them beyond the reach of creditors while still benefiting from the income or use of those assets.
• Probate Avoidance: Assets transferred through lifetime gifting can bypass the lengthy probate process, expediting your loved ones’ access to those assets.
• Family Harmony: Lifetime gifting can help address financial inequalities among your loved ones, potentially reducing disputes and conflicts among family members after your passing.
• Charitable Causes: Lifetime gifting allows you to support charitable organizations and causes you care about. Singapore offers tax incentives for charitable donations, making it financially advantageous to give to charity.

Investment Mandate

You might have taken many years to learn, practice, finetune and eventually establish your investment approach, and you probably wish to impart your knowledge to your loved ones who would take over your portfolios in your legacy planning. In this case, you may consider writing an investment mandate, which is a document or set of guidelines that describes your investment philosophy and strategy.

If you don’t have anyone savvy enough to take over your portfolios, you may consider setting up a trust to help you manage your investment according to your investment mandate. You would have the flexibility to put in place a distribution plan from the trust assets to your beneficiaries.

Business Succession

Business succession is a critical area to consider for business owners in legacy planning. You want to ensure not only a smooth transition of your business to the next generation, but also its continued success and stability under the new leadership.

The key to business succession planning would be the selection of successor. If you plan to pass the business to family members, you need to consider their interests, skills, and willingness to take on leadership roles. This involves identifying potential successors within the family, grooming them through adequate education, training, mentorship, and practical experience.

Conclusion

Beyond financial assets, your legacy encompasses the stories you share, the knowledge you impart, and the wisdom you accumulate over a lifetime. Your legacy is found in the relationships you nurture, the memories you create, and the causes you champion.

Legacy planning is about crafting a narrative of your life with values, purpose, and love that continues to resonate through generations. It is a testament to the idea that we leave behind not just what we own, but also who we are and the positive change we bring to our family. It truly goes beyond your financial assets.

For a case study involving later-life planning, estate planning and legacy planning, check out: https://providend.com/life-decisions-first-before-legacy-decisions/

– Footnotes –

[1] Special Needs Trust Company: https://www.sntc.org.sg/about-sntc

[2] Ministry of Social and Family Development: https://www.msf.gov.sg/

[3] Special Needs Savings Scheme: https://www.cpf.gov.sg/member/account-services/providing-for-your-loved-ones/making-a-cpf-nomination/special-needs-savings-scheme

[4] Central Provident Fund: https://www.cpf.gov.sg/