You will be able to plan who looks after your children and who decides for you if you lose mental capacity.
Marcus and Priya, the parents from module 6, were on a flight to Bangkok for their tenth anniversary when the question first came up. Ethan, Maya and Arjun were staying with Priya's sister. Somewhere over the sea, Priya asked: if the plane went down, who would bring the children up? Marcus said her sister, obviously. Priya said she had assumed his brother. Neither of them had written anything down.
This lesson covers two decisions that couples with children tend to put off because they are uncomfortable. The first is who looks after your children if both of you die. The second is who makes decisions for you if you are alive but can no longer make them yourself.
If one parent dies, the surviving parent usually continues to look after the children. The harder question is what happens if both parents die while the children are still young.
You can name a guardian for your children in your will. The guardian is the person who would bring them up and make decisions about their upbringing, schooling and health. Naming one does not guarantee it in every case, because the court looks at the children's welfare, but it tells the court and your family clearly what you wanted. Without a named guardian, relatives may have to agree among themselves, and if they disagree, the court decides, with nothing from you to guide it.
When you choose, think about who shares your values on how children should be raised, who has the energy and the room in their life to take on your children, and whether the children know them and would be comfortable with them. Think about practical things too, such as where they live, their age, and whether your children would have to change school.
Name a first choice and a second choice, in case the first cannot act when the time comes. Talk to both before you name them. It is a big thing to ask.
Remember that a guardian looks after the children, which is not the same as managing their money. Many parents name a trusted person in their will to manage any money the children inherit, or set up the will so that money is held for the children until they reach an age you choose. Discuss this with whoever writes your will.
Both parents should make wills naming the same guardians. If Marcus names his brother and Priya names her sister, they have recreated their argument on the plane, this time in writing.
A will only takes effect when you die. It does nothing if you have a stroke, a serious accident or dementia, and are alive but cannot understand or make decisions for yourself.
Many couples assume that their spouse could step in automatically. They cannot. Without the right document, nobody, not your spouse, not your parents, not your adult children, has an automatic right to manage your bank accounts, sell your property or make decisions about your care. Your family would have to apply to court to be appointed a deputy, which takes time and money while bills go unpaid and accounts may be frozen.
A Lasting Power of Attorney, or LPA, solves this. It is a legal document, made under the Mental Capacity Act, in which you choose one or more people, called donees, to make decisions on your behalf if you lose mental capacity. It covers two areas, and you can grant either or both: personal welfare, such as where you live and your care, and property and affairs, such as your money and assets. You can choose different donees for each, and name a replacement donee.
An LPA only takes effect if you lose capacity. Until then, you remain in full control, and you can cancel it while you still have capacity.
LPAs are registered with the Office of the Public Guardian. Its website explains the forms, including the standard form most people use, the steps, and the fees. Before the form is submitted, a certificate issuer, such as an accredited doctor or a practising lawyer, has to certify that you understand the LPA and are not being pressured. Check the current process, fees and list of certificate issuers on the Office of the Public Guardian's website, because they are revised from time to time.
Lesson 8.3 of The Singapore personal finance system, Who decides for you if you cannot: the LPA, walks through the steps in more detail. Estate planning in depth, including trusts and more complex arrangements, is taught in Retirement & Estate.
For a couple, the natural first choice of donee is often the other partner. But think about the case where something happens to both of you at once, and name a replacement donee who is not your partner. Marcus and Priya each name the other first, with Priya's sister as replacement for both.
Now settle the names with your partner. You need a first and a second choice of guardian for your children, and a donee for each of your LPAs, with a replacement.
With your partner, name a first and second choice of guardian and a donee for each of your LPAs.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).