20 Jan 2020

SOURCE: CPF Board

As my parents grow older, it’s become increasingly more important to talk about death. The full array of stuff about death includes end-of-life care, estate planning and funeral planning, but since this post is sponsored by CPF, we’ll be talking mostly about CPF nomination upon death.

I found it incredibly difficult and awkward to start the conversation, but here’s why I decided to do it anyway. 

It lessens the possibility of infighting amongst siblings.

People fight over money all the time. Couples divorce. Siblings sue. Money makes people do crazy shit. That’s why the less ambiguity there is about legacy, the better. 

By doing their CPF nomination (and will), your parents can make precise plans on how to split their wealth. 

On the flip side, if they don’t do the CPF nomination, their CPF funds will be distributed based on the intestacy laws (for non-Muslims) or inheritance certificate (for Muslims). 

While on paper this seems fair and good, it lacks the freedom of choice a CPF nomination allows. A CPF nomination allows you to specify who will receive your CPF savings, and how much each nominee will receive.​

That means that even if your dad intended to reward you with more inheritance because you took care of him in his old age, the intestacy laws will just ignore that and give you and that bochup brother the same amount. 

(Not saying that it’s a bad thing, as long as your dad is okay with that.)

CPF savings do not form a person’s estate, and they are not covered by a will. 

Okay, we get it that dealing with both a parent’s WILL and a CPF NOMINATION can be annoying. 

But on the bright side, if your dad passes on with gambling debt, his CPF funds will remain untouched because his creditors won’t be able to access that. Untouchable isn’t always bad, amirite?

Also, if there’s no nomination, the Public Trustee’s Office requires beneficiaries to show proof that all family members exist before the inheritance is distributed.

For families that have members who have migrated or fallen off the face of the earth, that’s potentially something that can be time-consuming, energy-sapping and emotionally traumatic – even if the money isn’t a problem to you, don’t you want the process to be as swift as possible so you can mourn in peace?

To avoid all that, just make a CPF nomination. The good news is, the CPF Online Nomination has launched, so you can do your nomination anytime and anywhere! You can view this quick guide to making your online nomination in 4 simple steps. 

If you ARE receiving some inheritance, you get some time to think where the money will go

I strongly believe that most people don’t know how to deal with sudden wealth. We’ve all read cases of lottery winners burning through cash and ending up broke again.

That makes inheriting a loved one’s CPF funds kinda like winning TOTO that you can predict. Morbid but true. Take time to think where this money will go to instead of spending it without a plan.

(Even in the scenario where you don’t need the inheritance, I still think that handling your parent’s ‘legacy’ should not be taken lightly.)

2 MYTHS ABOUT WHAT HAPPENS TO YOUR CPF AFTER DEATH:

1. Contrary to some rumours out there, the default place a dead person’s CPF goes to isn’t another CPF account. Rather, it is dispersed in cash (via cheque/GIRO) to their loved ones – an incredibly liquid and easily squandered form of asset class. 

It is true you CAN receive CPF in your own CPF account, but this is an option under the Enhanced Nomination Scheme (ENS), which is something you need to actively opt into.

2. Another myth out there is that if your parents haven’t made a nomination, all the money will automatically go to the government. That’s false. Instead, the amount will be divided and given to family members according to intestacy laws/inheritance certificate (for Muslims). 

CPF has a made a video about this (and other CPF myths) that you can watch to find out more.

Woke Ways to use my inheritance, in the hypothetical scenario I get one

Top up emergency fund: I’ve got 12 months of income saved up in cash right now, but if this happens when I’m way older with more commitments (i.e family), I might need the extra cash to remain financially secure.

Put the funds in my CPF: If I predict myself facing bankruptcy in the future and would like to put my inheritance in a safe place where my creditors can’t touch, then to CPF Special Account it is. Even if I’m not facing financial difficulty, a base interest rate of 4% in SA is still a solid option though I must be prepared to wait till age 55 to access it.

Invest in the stock market: If my parents both pass away when I still have many years ahead of me before retirement (say, below 40), I might take the risk and invest using a three-fund portfolio. This is course, only after I have sufficient emergency funds.

Support a remaining parent: Chances are, your parents won’t die at the same time. In a scenario where one parent dies way before the other, the remaining parent will need more attention, time and care. This isn’t always easy for the average salaryman to achieve.

Personally, I believe CPF LIFE is only there to provide for anyone’s basic needs. Extra money will be needed for their wants. This can be anything from hiring a caregiver to share the load, to bringing your Dad on a holiday to Hawaii, because he grew up watching Hawaii Five-O.

Donate to charity: If you’ve done well enough for yourself and don’t need the inheritance, why not donate it to charity? That extra money may not be a lot to someone with millions, but it can go a long way in helping the community.

I know my dad much rather have his money go to the less privileged, rather than leave it sitting in a bank account somewhere.

(Okay, I asked him, he said he’d donate the money to the Straits Times Pocket Fund, and/or his Alma Mata, Dunearn Secondary School)

One final point I’d like to make:

There’s a saying out there about how inheritance is unnecessary and that only lazy people depend on it. It goes along the lines of ‘capable children don’t need inheritance, and lazy children don’t deserve it’.

This sounds incredibly financially-savvy and woke, but it’s also important to take it with a pinch of salt.

We live in an ultra-competitive world where privilege and inequality exist. Every advantage matter, especially to the average salaryman.

That means that even if your parents think their savings are ‘puny’ compared to their peers, inheritance needs to be properly planned out. It’s not just something for the rich and wealthy.

If your parents want to leave you nothing, I think it’s only fair that they know they’ll be intentionally disadvantaging their children – and it will require substantial effort for you to overcome.

Of course, all this can only happen if you have that difficult talk. 

Good luck. 

Stay Woke, Salaryman.

This article was first published on The Woke Salaryman.