What is the Hand of Life framework?
Dealing with uncertainty and constant transformation is a fact of life. It is normal to want to avoid discussing the painful realities of life, but they do need to be addressed - especially when we are in peak fitness and when our minds are clear.
This is a defensive move and is necessary.
Before you leave the house, you want to check that the lights are off, the windows are closed and you have brought money, phone and keys with you. You want to do the same with your finances.
The Hand of Life Framework consist:
1. Making a CPF Nomination
This tells CPF what you want to do with your money. This is the only way you can provide instructions on who should inherit your CPF monies after you pass away. CPF cannot and will not reveal any information about your CPF - how much money you have, whether or not you have made a nomination and so on.
Without this nomination, your funds will be handed to the Public Trustees Office (PTO) for distribution as prescribed by the Intestate Succession Act. This process is long and tedious and the PTO will require you to fill in numerous forms and request for documents that will be difficult to acquire - such as marriage certificates of persons who have died long ago, or proof of relationships from a time period when documents were already destroyed.
2. Making Insurance Nominations
2a. Dependent Protection Scheme (DPS)
You first start with the Dependent Protection Scheme (DPS):
All Singaporeans above the age of 21 are covered by the DPS.
The Dependants' Protection Scheme is a term life insurance plan that provides death, terminal illness, and total and permanent disability (TPD) coverage for all CPF members. Should you become unable to provide for your family, the DPS safeguards your family members against such a situation, Singapore provides a safety net in the form of the Dependants' Protection Scheme (DPS), which is available to all citizens and permanent residents who are members of the Central Provident Fund Board (CPF).
Your premiums will be automatically paid using your CPF account, and either you or your beneficiaries will receive the pay-out should a claimable event happen.
2b. Your Insurance Plans
Next, review your insurance plans:
Most people assume that they would simply “leave all their money to their children/wife/parents”. Human relationships change all the time and this is the basis of fights over a person’s legacy.
Moreover, you will want to design a plan that would be able to meet living and post-living needs without having to burden your family.
There are 4 types of insurance:
- Savings ; endowment
- Retirement; annuity
3. Making an Advanced Medical Directive (AMD)
Medical procedures can be costly and even when used, may not improve the quality of your life. These costs can destroy your finances and leave you worse off. To make matters more complicated, your loved ones will be left with an incredibly difficult decision on whether or not they should pull the plug.
An Advance Medical Directive (AMD), is commonly known as a “living will”, helps you make this decision whilst you can. It is a legal document you sign in advance to inform a doctor that you do not want to use any extraordinary life-sustaining treatment to prolong your life, in the event of terminal illness or when you become unconscious or incapable of exercising rational judgment.
4. Appointing a Lasting Power of Attorney (LPA)
The LPA is a legal document which allows a person to voluntarily appoint one or more persons (donees) to make decisions and act on his/her behalf, should he/she lose mental capacity one day. A donee can be appointed to act in the two broad areas of personal welfare and property & affairs matters:
To enable a person to make a personal, considered choice of a trusted proxy decision maker, who is reliable and competent to act in his/her best interests should he/she lose mental capacity one day.
Alleviates the stress and difficulties faced by loved ones who need to apply for a Deputyship order, if the person loses mental capacity without an LPA in place.
5. Writing a Will
Finally, we come to the Will. Just as with insurance nominations, you want to be careful and clear with this document as it is the basis of a lot of fights and long drawn court battles. Many people draw up Wills with simple statements such as “distributed equally amongst XYZ” or “all of my assets to ABC”. However, relationships and assets are not easily defined.
What if one child wants one particular property over another? What if a family member wants a particular bank account over another? What if there is disagreement on whether property, stocks, or even cryptocurrencies these days, should be sold or held?
And speaking of cryptocurrencies, what if there are financial assets that are undeclared but discovered later that have rocketed in value? Who gets to keep them?
What if a person has a secret family, or an unknown extended family and they turn up for a claim on the assets?