Weigh up giving money away while you are alive against leaving it in your estate.
Giving money to family during your life and leaving it in your will are two ways of passing on the same wealth. A gift now is safe only if your own retirement plan still holds after the money has gone, so test it in your drawdown map before you hand anything over. These notes are general education; HDB, CPF and a lawyer can confirm how the rules apply to your situation.
A lifetime gift is money you give while you are alive. It has three benefits. First, the money arrives when it helps most. That is often in your children's thirties, when housing, young children and careers all compete for cash. Second, you see the money used and can talk about it with them. Third, it moves outside your estate, so it does not wait for probate.
The cost is that the money is gone. It cannot come back if markets fall, if you live to 100 or if you need care. Your retirement plan assumes your savings will pay for you for as long as you live, and every gift shrinks what is left to do that job.
There is also a quieter risk. A gift can look affordable when you make it in a good year, from a portfolio that has just gone up. If a bad decade follows, it can turn out not to be. So the test is not whether you can afford the gift today. It is whether your plan still holds through the module 5 scenarios after the gift is made. A gift also costs far more than its face value, because the money would otherwise have kept growing until the end of your plan.
Jasmine is retired. She has a drawdown map, a housing and care plan from lesson 6.4, "Write your housing and care plan", and two children, Megan and Ryan. Megan and her husband have just been offered a BTO flat, and the down payment and renovation will stretch them. Jasmine wants to give Megan S$50,000 (an invented figure, as are all of Jasmine's balances and ages). She reasons that the children will inherit most of her money anyway, so she might as well give some now, when it helps most and she can see them enjoy it. But she hesitates when she thinks about Ryan, about her own care in thirty years, and about whether her drawdown map would still hold.
She puts the S$50,000 into the map as a one-off withdrawal in the year she turns 61 and reruns her cases. In the central case with no care costs, she reaches 95 with about S$434,000 left instead of S$710,000. A S$50,000 gift has cut her end balance by nearly S$280,000, because that money would have grown for thirty-four years, from 61 to 95.
Next she reruns the scenarios that use her lesson 6.4 plan: care costs from age 85 and right-sizing at 75. With both, she reaches 95 with about S$289,000 instead of S$565,000, so the plan still works. With care costs and no right-sizing, her money runs out at 93. The gift works only if she goes through with right-sizing.
She also tests a larger gift of S$100,000. With no care costs she reaches 95 with about S$158,000. With care costs and no right-sizing, her money runs out at 92.
Jasmine settles on S$50,000. She adds a note to her plan that right-sizing at 75 is no longer optional and that she will recheck the plan before any further large gift.
To test your own gift, follow the same steps:
Add the gift to your drawdown map as a one-off withdrawal in the year you plan to give it. Rerun the central case. Rerun the scenarios that matter most, for example care costs with and without right-sizing. Compare end balances, and the age at which the money runs out, against the plan without the gift. If you are weighing amounts, test a larger figure too. Choose an amount that holds up. Write down any conditions it now depends on, such as right-sizing becoming mandatory, and commit to rechecking before any further large gift.
Helping with a home has its own rules, because HDB eligibility, grants and CPF all come into it, and the way you help changes the outcome. A cash gift is the simplest option: you give the money and your child uses it. A loan is money that must be repaid. Write it down with the terms, so there is no argument later about whether it has to be paid back.
Co-owning your child's flat can affect your own housing eligibility, the grants your child qualifies for and how the flat passes on death, so check HDB's rules before you agree. You can generally only use your own CPF for a child's flat if you are an owner, which brings the same complications as co-ownership. HDB also has grants for families who live near or with their parents, and these may shape where your child buys. HDB's website sets out the current eligibility rules and grants. Your CPF statement shows what your own CPF can and cannot be used for.
Gifts to one child and not another are one of the commonest seeds of family disputes. They often surface at the funeral, in a remark such as "but you already got S$50,000 for your flat". You do not have to give every child the same amount at the same time, because children have different needs at different moments. You do need to decide how gifts will be treated, and then tell your children in writing and in person.
You have three options. The first is to equalise later. Your will says that lifetime gifts count as an advance on a share, meaning an advance on that child's inheritance, so the estate tops up the others. The second is to give the other child an equal sum when they need it. The third is to explain, in writing and in person, why one child got help and the other did not.
Jasmine chooses to equalise later, so her new will will treat the S$50,000 as an advance on Megan's share. She tells Ryan this directly, and he seems more relieved by the conversation than by the will clause.
A gift should come from money your plan does not need. It must never come out of your floor, your cash bucket or the money set aside for care. If giving now makes your bridge thinner, or makes your care plan depend on a sale you might not make, the gift is too large or too early.
Before the activity, list any gifts you are planning, with their size and timing, and have your drawdown map open to test them.
List any gifts you plan to make and how much each is, then check that your retirement plan still works after them.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).