Legacy insurance plan?

Life insurance is an efficient way to pass down wealth, because you can create a lot of money with little money, instantly and at the right time. Something that investment simply cannot do. Nothing to do with estate duty. However, as a priority, your retirement fund adequacy should have a priority over helping your children's retirement.

Hi Daniel,

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Not a parent (yet) but legacy planning has many components.

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It is merely a small part of estate planning which has multiple components. But for purposes of discussion it appears you are looking at leaving behind a sum of money upon your demise (correct me if I am wrong).

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If you MUST leave behind this money, then you can secure it with a legacy plan, since death is guaranteed, we're just making use of the 'fact' that you will die to ensure the payout. Yes, one can pass on other assets such as CPF, investments, house, etc. What you are doing is to pass on a lump sum of money that is independent of market conditions, property value, and government policies that may interfere with what you intend to pass on (e.g. estate tax on your wealth when you die, which the government might introduce in future, who knows?). And rather interestingly, the sooner you pass on, the higher your ROI when the payout goes to your children.

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Personally, if you leave behind money in the form of a lump sum, you need to also ensure you leave behind values, insofar as to ensure that the beneficiaries manage it wisely. Otherwise, it will probably be squandered. (This story is a perfect example: https://www.straitstimes.com/singapore/1m-gone-...) If you're worried about such things happening, leave behind your legacy in other forms, like a stream of income, or physical property, etc.

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So before you commit to a plan, think about whether this is what you want to leave behind. If you feel your loved ones can manage a sum of money, then go for it. But if not, then you might want to reconsider.

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Lastly, I am guessing that it is an ILP. No legacy plan with a guaranteed payout of $500K can be $6K for 5 years. A term to 99 with a 15 year payment term for an infant is already in the region of $5K/yr! I'd advise you to inspect the policy illustration closely and considered the possibility of the policy dropping to zero and terminating before you pass on, on the pretext when the investment returns do not perform as projected. Look for the charges and fees and there is probably a 'sum at risk' charge or equivalent. Look at the policy illustration and see if there is a scenario where the policy lapses/goes to zero.

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There is a very big difference between an ILP that may give your loved ones $500K when you pass on, and a proper term to 99 or SP/RP WL that guarantees $500K when you pass on. One is a CERTAINITY. The other is a BET on the markets and your funds doing well enough for 50 - 60 years so that the policy is still active when you die. What will you do if you live to 90 and the ILP gets terminated at that point?

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I hope this gives you some clarity.