Estate Planning 101 And Why You Should Start On Yours Now [Chills 22 Sponsored by Providend]

Today we even went on to discuss about someone in their thirties, someone in their fifties have already accumulated… and all the different kinds of personas. But interestingly, we discuss foreign share ownership, crypto as an asset and how all these things that we commonly own today, all these asset classes will then be factored into our estate planning process. For all that and more, stay tuned. 

Welcome to a special mini series of Providend chills with TFC. In this series, we will be bringing on a team of wealth managers and financial professionals with varied life experiences to share about topics we believe you will be interested in. Definitely this series is sponsored by Providend, if you cannot yet tell, Singapore’s first fee-only wealth advisory firm, meaning all their clients pay them a fixed fee for planning their finances. They do not accept any fees or compensation from product providers at all and with this model, they believe there will be no conflict of interest. 

In today’s episode, we will be spending time with two power women in the house. Extremely insightful and personable, one was an auditor in one of the Big 8 accounting firms… like yes, yes, Big 8 very long time ago. Another received her Masters of Quality Management while being a mom of two. Now she’s a grandma. I’m very happy to welcome Ms. Eleanor and Ms. Mei Kuen, who are both founding partners of Singapore’s first fee-only wealth planning firm – Providend. 

I’m going to start off today’s episode a little differently. I think during our discussion, they shared a little bit more about their family and how that forms their estate planning process and I want to share with you that. 

I’m curious… how does your situation with your family, how does that affect the way you look at your planning, your strategies? Does it need to be even more holistic?

Mei Kuen: Yes, more and also when it comes to the numbers, planning eventually is at what’s the magic number. I need a much bigger number because typically for someone, when you plan, we talk about planning for the day when you want to be financially independent, or retirement or whatever you call it. And that’s where you plan to your end of life and that’s it. Generally people assume that… my kids, once I have given them a good education, they get a job and that’s the end of my financial responsibility. They can take care of themselves. But for me, it’s a different ball game. I have to provide for my son for the rest of his life. It means a longer time, means more money. Besides the financials, there’s also the issue of who is going to take care of him when my husband and I are no longer around. So there are all these issues, the planning becomes a lot more complicated and not easy to find solutions. Sometimes even if you are set to want to plan, but you may not have the perfect solutions. 

Reggie: That is actually all just part of estate planning. Planning your time out of… after you’re done. That is the whole idea of estate in that sense. 

Mei Kuen: This is one part. It’s just that for my case, that planning has to be more than a typical family because the planning is just the estate part. When they are gone, you just want to make sure that the assets go to whoever they want it to be. Typically, of course it also depends on when it happens. If they’re gone when their kids are still young, you want to ensure that you have sufficient capital to provide for them until they are independent. But for estate planning for people where their kids are grown up, there’s no need to take care of them financially then it’s not so much of having enough capital for their kids anymore.

Of course, everybody would like to have more. In the course of our work we find that we have lots of clients, as much as their kids are already grown up, but as parents you still say that “when I’m gone, I still want to leave behind monies for my children to give them a head start.”

Typically we hear, “I also want to help them with money, to help them to buy a property because it’s so expensive to purchase a property in Singapore. If I can help them with a certain lump sum, that will be great.” That’s what we hear from a lot of clients. I think people always want more. This is good to have but not essential. But that’s what a lot of people are thinking of. Or maybe we are an affluent society, people now have more than enough so we are not talking about basic needs anymore. So even when they are gone, they just want to have that extra monies to pass to their kids.

Reggie: Okay, in that sense then am I hearing that estate planning is only for the rich? Because your extra money passed down into the future… a lot of these like after you are done here, what are you going to leave behind? But what if you don’t have much to leave behind? 

Mei Kuen: I think if you equate estate planning with just writing a will, then typically there’s this misconception that I don’t need to do estate planning because it is about a will and I don’t have a lot of assets. What’s the will for, not much to give away? So if you look at it from that point of view, yeah. But estate planning is more than just having a will. It’s more than just talking about a will, having that distribution. Estate planning is also about the other areas. If that’s the case, estate planning is not just for the rich. Even if you have very few assets or very little assets, estate planning is still important. Having a will may still be important because whatever little you have, you want to make sure that it goes to the right person. Without a will, it may not land up with the person that you intend it to be. Or there could be so much difficulties in getting our estate to be passed down to our loved ones. Whether you are rich or not rich or not wealthy, I think estate planning is still important. It’s just that perhaps if you are less wealthy, the planning probably will be simpler and easier to plan. Whereas if you are wealthier, you have more complex needs, then the planning becomes more complex. 

Eleanor: I also want to come from the point about… say for example, married couples with children. Important part about will drafting is also appointing the right executor trustee to manage the assets for your family and also appoint… appointment of the guardian. Because as a married couple, sometimes there is actually disagreement as to who is the person that you want to entrust to look after your children. If let’s say eventually, if it happens that both of you and your wife passes, your spouse passes away at the same time, then without drafting the will you have not appoint who is then the person. Then the guardian is going to be appointed, that may not be the person that you have in mind. When I think about appointing a guardian, I want to think about somebody that would love my child the way I love, would be able to provide the kind of value system. Or let’s say for example, if you’ve got different religion, you want a child to grow up in that kind of environment. But without having a will then all these would be out of your control. 

Reggie: What I’m hearing is will is not the only thing, but we start with the will. So I think a few things that you pointed out, one thing is about right trustee. Can you just kinda give me clarity, what is a right trustee? 

Eleanor: A trustee is actually someone that you appoint to manage the assets. And why is it that the assets need to be managed? It’s when you have beneficiaries who are not in the right mental capacity, or say for example you’ve got minors who are too young, below the age of 18. That’s actually legally speaking in Singapore. When you talk about right trustee, you want to have a… someone that you know that is trustworthy. You know, you don’t want… 

Reggie: It is baked into the word “trustee”, right? 

Eleanor: Trustee, trustworthy… who is willing and able too also. I think that is also important. 

Reggie: Then when it comes to the guardian, you were saying we want to go for people that have similar value system, can love the child the same way as us. Must it be a family member? 

Eleanor: Not necessary. Not necessary.

Reggie: Have you seen cases where it is not a family member or how does that work? Just kinda paint me some…

Eleanor: I think usually it’s the family member. But I would say that it is not necessary because sometimes like these days, people prefer to have pets rather than children. Maybe they don’t want to be bogged down. 

Reggie: That’s why don’t need estate planning… no more children to pass down the estate. Of course I know that there are complexities.

Eleanor: So far at least with the clients I work with, when it comes to the appointment of guardians, typically most of them would appoint, usually it’s their relatives, family members to be the guardians. I have not had a client whom they have appointed their best friend to be their guardians. But I think increasingly, as families get smaller and smaller, we could see more of this because it means that if you come from a two child family, there’s only your other sibling. And also with globalization, people are everywhere. So your sibling may not be based in Singapore. Maybe they are residing in US and you may not want… if you’re gone your children to be in US, you prefer them to be Singaporeans. Then that means that you have no choice, right? You can’t appoint your sibling to be the guardian and maybe it could be your best friends. People you always hang out with, have children who are about the same age. Then you’ll think that they will make better parents, guardians in an unfortunate event if both the parents are gone. 

I think having a guardian is also important. Not so much your choice, people always… there’s this joke… it could also create a problem because imagine if her parents are gone and they leave behind young children, and maybe both sides paternal and maternal side of the families also want to be the guardians of the children. Then it could mean that they may fight over. I recall reading newspaper articles where both sides of the family fight for the custody of the children because they all love the children, they want to be the guardian. It could end up that way if you don’t have a will. When we are gone, we leave it to the court and they could end up fighting.

Of course sometimes lawyers joke… worse, if nobody wants your children. We assume people want them and fight over them. But it could also end up that nobody wants the children, then that will be very sad. I think one of the important thing, having a will is that you can appoint your guardian and this is very important when you have young children. 

Reggie: So in that sense, as a guardian of the kid if you appoint someone as the guardian of your kid, then they become the legal rightful owner of the kid. Is that how it is? They become the new parent?

Mei Kuen: You’re right, so guardian means… as the term we know, the layman’s term means they are responsible for the kids, typically the children normally would live with them and they will take care of the well-being, physical well-being decide on what school and all those… they’re just like the parents. 

Reggie: So it’s the same in that sense. Do you consider and is that considered adoption or? 

Mei Kuen: They are legal guardians, so legally they can sign whatever school exam report… legally they are like the parents, legal parents. They may not, they are not the biological, but they are the legal parents. So they are responsible for the children. 

Reggie: And for everybody that decides to get their best friend to be the guardian, better tell your best friend. Don’t suddenly got something happen, then suddenly your best friend got two more kids. 

Eleanor: Before we actually get our clients to draft the will, one of the things that we tell our clients is to say that… think about the people that both of you and your spouse agree and approach them to actually ask for their permission. Because as what you said, you don’t want to be in a situation suddenly you end up with two kids. So ask for their permission, make sure that they don’t have plans to migrate, because that will actually derail the whole thing. 

Reggie: Beyond the will, because like you ladies say, “The will is only the very basic layer, at least if anything happens, there is some sort of legal framework to work with.” Like based on what you want, in the event of something happened…. this topic is very heavy.

Eleanor: Heavy because it’s a responsibility. 

Reggie: And it’s like you’re planning for after life. So it’s a bit heavy. 

Mei Kuen: It is not an exciting… it is not like talking about wealth planning, very exciting right? But this is something very sober.

Reggie: Beyond the will, let’s… we put the extremely rich people aside first, we talk about the typical Singaporean. The narrative is you study hard, you get a good professional job and then you accumulate your wealth over an extended period of time, then you retire. Of course this narrative is getting shook, it’s changing and things are different these days. But assuming that is the general narrative, other than the will, what else should we consider as part of this estate planning process?

Eleanor: If you were to take a step back, there is actually a larger than that. Probably the distribution by way of a will is the exciting part whereby you’re the king and the queen and you give away your assets. You better be nice to me? 

Reggie: You get my pearls…

Eleanor: If you’re not nice to me, that’s it… I’m gonna write you off. But if you take a step back, you have to think about… number one is that, is there enough to be given away? Because if let’s say right now when you are still working and you are able to establish a certain kind of quality of life, your family gets to travel once a year, long trip and you get to spend as a family, $10,000 a month. If that is the kind of lifestyle that you still want to give to your family, then you’ve got to think about is that enough to be given? This is where you actually do a financial analysis, looking at your assets versus for example, the need for income provision. If there’s a gap, then naturally insurance is then used as a product to bridge that gap. 

We talk about estate creation, making sure that there’s actually enough for your family members to continue their life as normal as possible, to pay off the debts, to pay for education funding for the children. There’s also this part about preservation. Because if the death happens because of a prolonged medical, medical expenses can actually erode the value of the assets that you’re leaving behind for the family. 

We talk about assets preservation. It could be because of taxes, it could be because of say for example, obligations like liabilities, housing loan, that’s too exposed because you plan life as if you’re going to live forever and you take a loan that actually stretches for 30 years. And if at that point of time death happens, the debt is still going to be, has to be paid. 

Estate preservation is also another key area. When our clients come to us, we talk about these three areas before we talk about estate distribution.

Reggie: So creation, preservation then distribution. In the process of talking about creation, you were talking about… if there’s a certain lifestyle that you want to achieve in this life and you’re ongoing in this process, and you talk about income replacement if something happens. Can you just paint us a little bit more picture like how does that work then? How does insurance step in to create that income? 

Eleanor: In the planning process, we talk to our clients about their lifestyle. We look at their expenses, we look at how long they want to plan for and we also ask them whether they have got intention to provide for people outside of the family.

For example, if their parents are still dependent on them for income, for a certain allowance. Then we look at their assets position, are there liabilities? So we look at all these. This then actually presents what is your need in terms of income replacement. Income replacement that is actually required should you fail to come home. Then thereafter we look at what is the kind of assets you have? So we talk about net worth, then we talk about liabilities. We put these equations together. What you have is actually not enough to provide for what you need for the duration that you need, then there’s going to be a gap. 

Reggie: Because then, the assumption is there is some sort of human capital here in a sense at the end of 30 years of your prime… of your working career, you’re going to be accumulating so much. Your family is going to live through all this process together with you, with all the money that you’re going to make. Because a lot of times, these are future money, they’re going to keep coming and you’re going to keep living and going to keep enjoying your Moroccan traveling or whatever, what have you. But what you’re telling me is that you would think that people should allocate some money into some sort of insurance to replace the income if something happens, so that the family can continue to still have that same life that you were planning for without if let’s say something happens to you. Is that kind of what I’m hearing? 

Eleanor: It is like buying a safety net in case it happens, in case you don’t live as long as what you plan to. Then this is where the insurance as a product would actually create the money or create the estate that is actually caused because of the death. 

Reggie: So then where does investments then sit in this whole estate? 

Eleanor: Investments is actually for purpose of accumulation. If let’s say the question is “can I invest instead of buying insurance?” But you see the thing about investments is that you need time. So if you were to put a capital to say I want to have a million dollars, but I’ve only got $100,000, I need time for the investments to grow. But for death, you never know when it happens and your investments may not have enough time to grow. We would say that these 2 things actually can do it concurrently. You buy the insurances to provide for the safety net in case unfortunate eventually this should happen. But meanwhile you accumulate by way of investments. So it actually comes a time whereby say for example, after 15 – 20 years, you find that the value of your assets is actually more than enough or equal to what you need in terms of the income provision. Then you are really in a position whereby you can rethink about whether you need the insurance or not. 

Reggie: In that sense, insurance is a little bit of a stop gap… temporarily you need it in case something happens but as long as your assets build up to the desired way of life then you can drop it in that sense. Is that what I’m hearing? 

Mei Kuen: Yes, so typically you’ll find that for a young family, someone in their thirties, they’ve got young children, they’ve got mortgage home loan… so when you do this analysis, that means how much capital you need should they drop dead and no more income. And they have to provide for their young children for the next 15, 20 years until the children turns of age, provide for university education. It would mean that the gap…. that means what capital they have available versus the capital that’s needed to fund all the number of years will be very huge.

That’s where insurance would come in. But for someone let’s say we do this analysis for someone who is a lot older and because they are a lot older, it means that they have accumulated a lot of wealth. So if you do this analysis exercise, you’ll find that the gap is very small or maybe non-existent. That means their capital is actually more than enough. Even if they were to be gone, no more income coming in, and whatever they have accumulated is more than enough to provide for the family until the children are financially independent. 

Reggie: So those guys don’t need creation in that sense. They already have an estate. Is that what I’m hearing? 

Mei Kuen: Typically creation only comes in… so what we’re saying is that your estate is not big enough to provide should you be gone one day, and your estate that you have is not enough to provide for your financial dependence. Then the only solution is through insurance because insurance is instant. The moment a person passes away, the insurance kicks in. So that is the only solution. But for someone who has got so much capital and it’s more than enough, then if there’s no gap, you don’t need insurance. But typically we talk about Singaporeans, young couples in their thirties, likely they would need insurance. Unless they come from a background where they’ve got huge inheritances or…

Reggie: Trust fund babies?

Mei Kuen: Somehow, but it is just normal… you know you start work, you build your wealth. At that point, unlikely that your wealth is so huge that you can cater for, to provide for so many years of the kids. 

Reggie: So then at what age or under what situations should I then explore estate planning? It sounds like… must have kids first. It sounds like you must have a dependent before estate planning becomes a thing. But what are your thoughts? 

Eleanor: When it says dependents, you are not just equating dependents to be your children. Because your dependents could be your parents, your aged parents. So I would say that if let’s say your intention is to provide for your loved ones and to make, to have a high certainty that your assets will actually go to the ones that you want to distribute to. Then that is essentially a reason to kick start the estate planning process. Then of course, you go backwards to assess if there is enough to be given? This actually kick start… you know it sort of goes into the three areas of concentration: creation, preservation, and distribution.

Mei Kuen: I suppose let’s say a young person just graduated, starts to work, single. Then you’ll ask is estate planning relevant? I would say it is still relevant because if this young person has got a dependent, parents who are dependent on this person to support. If this person were to drop dead, there may not be enough assets to provide for the parents. So that’s where the estate creation comes in. The distribution, because he may be concerned that of course being a single, if he has not done the will, it’ll be like 100% to surviving parents. So it’ll be what you would want to. But having a will would also mean that the process of getting the assets to the parents would be a lot simpler, less costly.

So I suppose estate planning is still relevant for someone young, single, who just started work. It’s just that as a person who has got more things, young children, house, then the importance of estate planning becomes even more critical, higher on the list in terms of priority. But there’s nothing to stop someone, just start work, fresh from school. If they’ve got aged parents who are dependent on them, it still makes sense to at least do some estate planning. Probably it’s a lot simpler, not so many things to think about but it is still relevant. 

Reggie: I think a lot of people at that stage, they don’t really see as an estate. They just see it as if something happened to me, I got income replacement that I can continue to pass down. And that’s about it. 

Mei Kuen: Typically people would buy insurance. Also because when you graduate, you also have friends who work in the industry and they will ask you and you end up 应酬应酬 (Chinese “to entertain”). You know they will buy and to them it’s like… yeah, no harm. If something happens, at least it’s a sum of money to give to my parents. That’s a simple way. They don’t use it… bombastic term estate planning, but in a way they are doing some planning. For wills, I don’t see it… for young people typically when you speak to them, it’s not something they think about. I suppose it’s also because when you’re young, death is not something that you think is like… 

Reggie: You are still partying, still doing your thing, still trying to discover your life. Pak tor (Hokkien “dating”) more important.  

Mei Kuen: It’s never in their thought, it is not a term in their vocabulary or dictionary. There are other more important priorities to think about. So it’s the furthest thing from their mind. 

Reggie: Yes, to all the listeners, please, don’t 应酬应酬 (Chinese “to entertain”). You make sure you know what you want, you do your life, you find your way of life, then get all these structured financial products to help you to navigate this life that you seek. 不要应酬应酬 (Chinese “do not entertain”).

Eleanor: Thanks for pointing that out. 

Reggie: This is a very common practice that happens out there. I think a lot of people also feel very pressured. That’s why there’s a general disdain for structured products or insurances, but if you look at it, it’s really just a risk management tool. If you understand what is it for, how you use it, it’s a beautiful tool, you can use it very well. 不要 (Chinese “do not”) just feel pressured to buy. That’s my view. 

Reggie: So that’s for the typical person that don’t really have a lot, just starting out still in the accumulation stage. But what about somebody that has a lot already? That means maybe somebody in the fifties, in the prime of their career, they have all these money and as a couple, everybody’s doing pretty well. Then they have some stocks here, some property here, some funds here, all these different things. What are some things that they need to know then? How do they then establish that estate of theirs? Because they are messy, they’re everywhere. So what should they do? 

Eleanor: Maybe what they can do is to actually have an asset listing. Because you mentioned the word messy… is to actually take stock what they have. 

Reggie: Because overtime you accumulate… buy this jewelry, buy that stock, buy that house.

Eleanor: That’s right. So there’s certain things that you may not even tell your spouse that you buy. You know it is like 私房钱 (Chinese “secret stash of money”), so it’s good to actually have a schedule, schedule of your assets. Where you have the banking relationship, what is the account number, who is your bank RMs (Relationship Managers). You’ve got investments with Providend, Providend is your wealth advisor, you’ve got these investments with Providend… actually have a list of assets, so that would be a good start because during the probate process you also want to make sure that you don’t have a situation whereby your asset gets lost, nobody knows. Right now you don’t get physical statements anymore. So sometimes it’s actually more of an e-banking, your family members don’t even have the password. That would be a good start to collate and then update this list on a regular basis and then put it together with the estate documentation. 

If your assets are quite substantial, you may think beyond the gifting, you may want to see whether… beyond giving a certain amount or certain assets to your family member. We want to think about what is the value that you want to translate to the one that you love. Because it is your hard earned money, for them they are inheriting, so it is just another dollar for them. But if you actually talk about instilling values, like for example, you want to instill values about the joy of giving, doing charity etc. as an example, you could actually incorporate some of these requirements in the will to say that you set aside a certain amount of money and then work with your beneficiary even while you’re still alive.

So here I’m actually talking a little bit about going into legacy. So that you can basically instill values that you hold so true as an individual. Probably another thing that this person could do is to actually have a conversation with the family members to see whether what do they want. Probably a certain beneficiary may want a certain asset, as opposed to say I want money and I don’t want a house. Instead of giving them something that they don’t treasure, have that conversation. It may actually take a lot of guts to want to have that conversation because sometimes people are just so secretive.

Reggie: And there’s this arbitrary idea of fairness. If let’s say I have 3 kids, everybody must same, everybody must be fair and exactly like what you point out, it’s really about asking your next generation because you’re going to pass to them. What do they want, what do they actually want? It’s like I’ll give you the house, actually you also don’t want the house. It’s like “I don’t want, I want to live elsewhere. Why do you want to give me a house, very tao tia (Hokkien “headache”).” End up I see the thing then. You know it becomes a little bit against the owner of the will and puts me in a moral dilemma.

Mei Kuen: Recently I heard from a lawyer that some kids don’t want to have a house because it becomes like a burden to them. Because imagine if they inherit the house and eventually when they want to get married, and they want to find their own dream home with their partner. Oh now I have ABSD (Additional Buyer’s Stamp Duty) it becomes like a burden. So then that’s where this conversation with your family members is very important to see what’s really important to them. And typically like I said a lot of parents think… to be fair if I have one property, if I’ve got 3 kids or 2 kids, it’s just all equal divide. But I think increasingly people come to realize that maybe in the past that’s what people always think: fair, everything all equal share. But increasingly I think parents or a lot of our clients come to realize that actually it may create issues because a property is unlike cash, easily divided.

If I gave a property to two persons, two of my kids, one kid feels “wow, I think I need the money. I want to start a business or whatever. I want to sell this property. So with that money, I can do what I like.” Another kid may be a lot financially well off. He says, “Actually I don’t need this money and I think this property has got good capital appreciation potential. Just keep it for 5, 10 years before we sell.” But if both have differing views, you can’t say, “okay, I take my 50% share and sell mine. you’ll continue to retain.” You can’t divide a property and then it creates problems which I think increasingly, we find that people start to realize it and that’s where it’s important to have this conversation with their children and ask… do you like this property, or maybe I’ll give one child a property but to be fair and still fair, then I’ll give the other child who don’t like a property maybe the shares or the investments or the cash instead. But it may create a problem in terms of equality because let’s say if I have a $2 million property to give Child A but I may not have enough other assets to make up to $2 million for the second child. So I can’t be fair anymore. And yet I don’t want this issue of giving 2 of them the same property and then they end up fighting over what to do. That’s also where maybe for some people insurance comes in to create their estate to have that extra to make up for that difference that allows the person to do that. 

Reggie: What about trustee structures? Do people entertain that kind of idea? They must be quite well to do that. 

Eleanor: Trustee as to like appointing a corporate trust. 

Reggie: Like you set up a whole structure around it. 

Eleanor: That is actually very interesting. Increasingly more and more people are actually asking about it. But itself is actually quite a… there’s a lot going into it. I think we will take a separate session to discuss it. Because it’s yeah… a lot of stories to tell. 

Reggie: But it’s increasingly popular. 

Eleanor: It’s increasingly popular, that’s right. There are people who loves it, there are people who hates it. there are people who after know more about it, they open up to the idea. 

Reggie: We’ll talk about it another time. And then we talk a lot about the creation process, from whether you have assets or no assets, or you have a lot already, different phase of your life. But just now we also talk about preservation, right? Idea of preservation. Can you just share with me a little bit more? Like what is the idea of preservation here? 

Eleanor: In preservation, what we are talking about is to actually reduce the something that will actually erode the value of what you intend to give behind. Example will be estate taxes. In Singapore, they have already abolished the estate taxes. But if you were to say for example, look beyond the shore of Singapore, you look at US and you say… Singapore is restricted in terms of what I can buy. What are the kinds of potential gains I can actually get from stocks? And I want to look at New York. It’s actually more vibrant! 

Reggie: Apple, Disney… all the Interesting companies are there.

Eleanor: But do you know that even though you have not stepped into the shore of US and if you actually pass on holding US shares, the estate tax could be quite high as much as about 40% and the exemption they make is actually very low. So these are examples whereby estate tax could actually erode the value of what you have actually intended to keep behind.

Reggie: Okay, wait… so clarity. That means if I own a million dollars worth of US shares, and then I pass on. 40% is being taxed in a form of US estate tax and there’s limited exemptions for foreigners. Is that what it is? 

Eleanor: That’s right. 

Reggie: Wow, very hou tan (Hokkien “good to earn”), very good.

Eleanor: And then the value of the stocks is at the point of death. So let’s say at the point of death and after that if the market should erode, you still have to find money to pay for them, the tax.

Mei Kuen: There is a very classic example, it is a real life story. It came up in the papers I think in the early 2000, so many years ago. I still remember the title of this article in Business or Straits Times is “The Case of the Missing $3 Million”. What happened is that this very rich man, he passed away leaving behind… at the time was I think in the late 1990s.  He bought a lot of technology stocks. Then was the technology craze. He passed away $3 million worth of estate, a lot invested in tech stocks in US. So what happened is that because estate duty applies, the amount that is dutiable comes up to like… I cannot exact remember, it’s about $1.7 million. But unfortunately, this $1.7 million is arrived based on a percentage of the value of the shares at the point of death of their $3 million worth. The estate duty comes up to $1.7 million. 

Unfortunately after everything is over, after some time when they finally resolve the probate and all that, the value of the shares has dropped to like $1.3 million. Because there was like a tech bubble, right. So it crashed. At that time, when they are ready to distribute, the shares were only worth $1.3 million. So imagine the beneficiaries, I inherit these shares now, am ready to sell them it is worth $1.3 million, but I have to pay tax of $1.7 million. So you’re not even getting anything but the estate has a liability. This is a very classic example because the amounts are huge. And even though it happened years ago, but it’s still very true today.

A lesson to learn that as much as investing in US shares is very exciting nowadays… fight with a huge gain, but I suppose the person need to be mindful that… they make sure they don’t die, then nothing of this would happen. But should something happen, that’s where the high estate taxes come in and it’s going to eat away whatever that we have.

Reggie: And in that case, is there any way to rectify this? Like to avoid this way of taxation? 

Mei Kuen: I mean there are other ways. One way is that, one way may not be… for some people who like to just pick on specific stocks, that may not be a good solution. But if you just think that, generally I like a lot of the US stocks, you can always invest through funds. So that way you wouldn’t be exposed to this estate duty liability. 

Reggie: Funds are not exposed at all to estate duties? 

Mei Kuen: No. If you buy… let’s say a fund in Singapore that invests in US companies, they invest in US companies and all that. So in Singapore, there’s no estate duty. It is only if you own directly US shares. That is one way but it’s not a very direct way. For some people who insist, “oh but I like Apple stock. I just want to buy Apple stock and full stop.” Then through buying of a fund you can’t, because typically a fund would invest in quite a number of US companies and not just one stock. 

Reggie: That’s good to know. That’s good to know. I think at some point in time, people will want to have a little bit more structure, a little bit more steady. I think when you’re younger, you want to accumulate, you want things to grow, grow, grow, grow, grow. But at some point in time, you feel okay, I have enough, things are good. So maybe we can structure our portfolio a little bit differently at that point in time. 

Mei Kuen: I suppose there could be other ways like maybe if I set up a company to invest in shares. But this is provided if your shareholding is going to be quite substantial because setting up a company itself would create additional costs and other issues. But if the portfolio is really huge enough, that may be worth looking into. 

Reggie: That’s cool, that’s good thoughts, good thoughts. What about JB (Johor Bahru) property? If people buy JB property. You know these days, a lot of people buying JB property right? How does that factor? 

Mei Kuen: JB property… JB, they have actually done away with the estate duty already. That was actually back in 1991 I think. So there’s actually no estate duty. 

Reggie: Okay. So you can go and buy your 碧桂园 (Chinese “Country Garden”), your Country Garden and retire in Johor if you so choose to. But you also point out a little bit about the medical cost. You were saying about medical costs eating into preservation, eating into the estate. So how does that work? 

Mei Kuen: Medical, you could actually look in terms of like buying a comprehensive inpatient medical insurance. Because a large part of the cost is actually associated because of inpatient surgical. Outpatient, like for example, chemotherapy, kidney dialysis etc… So your comprehensive medical insurances to take care of the bigger bill. Then on top of that you could think about buying greater disease coverage. If the trigger of that event is actually because of major illnesses, then what the major illnesses insurances actually does is that they actually pay a lump sum upon diagnosis. So this amount of money then can be available to make provision for income replacement. 

Reggie: I think increasingly there are more and more people owning cryptography, owning crypto assets and that will probably form a very big part of people’s future, estate and assets. Is that taxable? How does that work? Do you have any insights on this? 

Mei Kuen: Like you know what Eleanor talked about having this asset listing, because increasingly people have a bank account whereby there’s no paper trail. Even if you deposit money, there’s no slip, nothing. And if you never tell anybody, nobody knows that you actually have this account. CIMB, I know CIMB has got this where it’s the e-saver, no trail, nothing. It’s just example. I think increasingly all banks have this. So if you don’t leave behind a trail, your assets could be lost. I guess it’s the same for crypto because crypto is about having the password to that wallet, right? Once that password, nobody knows this password is gone. You may have a mass of fortune because you started in buying crypto early and then now especially Bitcoin has gone up so much. And then if nobody knows, or even if someone knows you invest in crypto, but what is your passcode? What is your… the details to access your wallet… this crypto wallet? Then everything is gone. I guess there is also importance of putting down all these, letting people know the access to your wallet. 

Eleanor: From what I know is that crypto currencies, there’s actually… it’s not regulated by the government. So because of that, that’s why places like India, they are banning the people and they are fining the people for actually trading in cryptocurrency. In that sense if let’s say it’s actually not under the purview of the government, then question is that… how to tax?

Reggie: It’s always that question, government always ask how to tax? 

Mei Kuen: There are lots of regulations or standards now, setting out that actually they treat crypto, even though we call it cryptocurrency, but they classify this asset as a property. So it’s not treated as a currency. It’s like a property, a real estate. And depending on which country you’re in, if you trade in crypto, your gain or loss… I think most of the time it’s gain now, it could be lost depending on the timing. Your gain is actually considered as capital gain tax and apparently a lot of exchanges… they are supposed to do reporting. But maybe it’s still new, I do not know how to, how they can really police this but by right, there’s supposed to be all these reporting of all these gains and you’ll be subject to say you are a US citizen, you will be subject to capital gain tax. Of course in Singapore, we don’t have capital gain tax so even if you make a gain from selling your crypto, you don’t have to pay capital gain tax, but in countries like US they have to.

Reggie: Nice. I think we’ve talked a lot about the whole estate process, in terms of nitty gritty… then it’s case by case, a lot of individual realities that people have to work with, but I think we covered the idea of creation, preservation, distribution largely in today’s discussion. 

This last question… what are some common mistakes that people make, if we have not already covered that you want to add?

Mei Kuen: Maybe I would say that procrastination. As much as people know the importance generally of estate planning, at least for most people, one of the very big thing out of estate plan to them is having a will. We talk to people, most people will know that it’s important to have a will, but it is important, but never urgent for a lot of people. So I think one lesson to learn is not to procrastinate, but to set aside time because it is not an exciting topic. 

Reggie: It’s so heavy, even I feel heavy. 

Mei Kuen: So people are not excitedly, “let’s talk about it!” It has to be something very intentional and as usual, everyone is busy. So in our busy-ness, we tend to do the urgent things but not important. It’s not something that people enjoy doing. It’s always pushed, often forgotten. So I guess one important thing is to maybe remember not to procrastinate, but to really intentionally set aside time to look into this area of planning.

Reggie: Thanks. Good reminder.

Eleanor: For me, I’ve got an incident of a client who comes in and he says that “I want to draft my will.” So when I actually shared with him the three things to consider, he says “No, I just want to draft my will.” Eventually I helped him to do that and he chunked off a lump sum for this, for that person, for this person, for that person, and eventually when he come around to say “Okay, Eleanor, I’ve got time. Let’s do the holistic planning.” When you actually look at the consequences of his estate plan which is the will, it would actually translate to actually very little left for his own family members. Because out of all he has, he’s already taken quite a bit of a lump sum to the people outside of his direct family members.

So one of the so-called risk is not having a holistic plan: doing things piecemeal and then you don’t see how it actually comes together as the complete plan. Because ultimately what you want is to work, cumulate and provide a certain quality of lifestyle for your family members. These are basically the benefits. But if you do things piecemeal, the end results could be quite different. 

Reggie: Yes. Not everything should a la carte. Some things come in a set. Thanks for sharing. I know it is a very heavy topic, but I think I learnt a lot and I’m sure our listeners will learn a lot of good stuff. Thank you!  

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We have last three questions that we ask everybody. The first question I want to ask is what is a core life principle that you hold close to? 

Eleanor: For me, it’s hard work and prudence. There’s no free lunch. And if we talk about prudence it is actually counting of pennies, be intentional about accumulating. For some people what they save is actually what they don’t spend. At the end of the day, they will look at it… how come I’m actually accumulating so little. To actually have a systematic savings plan. And that actually starts with not investing, but actually starts with being mindful about what you’re setting aside in paying to yourself first.

Mei Kuen: For me is really like learning to appreciate whatever season of life or stage of life you’re in. Appreciate whatever, wherever you are and make the most out of it. 

Reggie: Nice, that’s very nice. Beautiful seasons, I love it, I love it. So then what is a personal finance advice that you feel needs to be further propagate?

Mei Kuen: I think it is important to plan, but now there’s this philosophy of YOLO (You Only Live Once). You live, you only live once and there’s this FIRE (Financial Independence Retire Early). I feel it is important to have that balance as much as we should always plan for the future and not live as if you only live once and ignore the future. But the other extreme of FIRE, meaning to say I scream and save every single cent just to work towards a goal in mind that I have. But the thing is that, we don’t have a contract with God, you never know. So while I think having that balance is important, while we want to save for the future, but we also want to make sure that we spend time, we spend the money to try to achieve what is important to us in life along the way, the journey. So the journey is important. It’s not just the endpoint. You know FIRE is about looking at the end point I want to achieve, but we may never get there. So while trying to work towards that journey of going there, we want to make sure that we have that time and resources to leave out what really means a lot to us. What is important to us in our life. 

Eleanor: For me, it’s time in the market as opposed to timing the market. So instead of trying to wait for the right time to buy and right time to get out, which is actually really very stressful. So have a comprehensive plan, accumulate consistently and just enjoy what you’re doing.

Reggie: Cool. Then what is something that you’re focusing on in your life now? 

Eleanor: For me, I’m actually focusing… I would say it is actually my family because I shared with you just now was that I got two kids and both my children are big already. In fact my son is married and my daughter is actually staying on her own. So I would say that similar to your description of someone that’s actually in her fifties and who have actually accumulated and is generally quite comfortable. What I want to focus is then what is then my role as a parent to support my children, so that they can then have that future. I don’t want to just give, I want to be there to support and to have the wisdom to know what to do, when to stop, when to stay back, when to watch and when to come in.

Reggie: Nice, beautiful. 

Mei Kuen: At this point of my life, I think I’m focusing a lot on relationships. Not just my immediate family, my extended family, the close friends. So it’s trying to have that time to deepen and build these relationships because I think that’s very important to me at this point in my life. 

Reggie: Thank you. Thank you. Thanks for coming on, appreciate it. 

Mei Kuen: You’re welcome. Thank you. 

Eleanor: Thank you for having us.