What Happens If Your Parent Dies Without A Will
Death is a difficult subject, and even more so when you’re trying to discuss it with your parents. It’s not surprising that most people find it difficult to speak with their parents about estate planning, and about writing a Will.
But, why is it important to do so, and is speaking about it with your parents really worth it?
The short answer is yes - it may be unthinkable, but not having a plan, and in particular a Will, can actually make the death of a loved one worse.
We’ll explore what happens when they pass, why it is important to plan for the eventuality of their demise. If you’ve got elderly parents, you’ll want to read this post till the end - we’ll include some tips as to how to broach the topic.
What Does Estate Planning Entail
In short, Estate Planning is the process of coming up with a comprehensive plan to distribute one’s assets when you’ve passed on. However, with the right tools, Estate Planning can also serve to increase the amount that one can pass on. Instruments such as investment and insurance plans can allow a person to give more than he/she has.
That said, the bulk of retirement planning is nonetheless focused on the distribution of a person’s assets when he/she has passed on. There are several mechanisms available to do this:
- CPF Nominations,
- Nominations for Death Benefits from Insurance Plans, and
- A Living Will and Testament, more commonly known as a Will.
CPF nominations, and insurance nominations serve to distribute CPF monies, and monies from death benefits respectively. On the other hand, the Will serves to distribute all other assets that a person owns at the time of his/her passing.
This article is mainly focused on distributing assets via a Will.
Difference Between Having a Will and Not.
There is a significant difference in terms of both process and outcome depending on whether your parent passes away with a Will, or without.
Generally, the process of distribution is longer, and more expensive if one passes without a Will. Beneficiaries of a person who passes away without a Will can expect to wait about 3 months longer before getting any distributions, and would probably spend more on legal fees during this time. In addition, where one passes without a Will, the outcome of distribution is predefined by law.
Effects of Not Having a Will
The government does not handle the distributions for you
If my parent(s) passes away without a Will, the government will just handle the distribution, right? Well, not really. As the next-of-kin, the responsibility is solely yours.
Within 6 months from the passing, you (or any other next-of-kin) will have to submit an application to the Singapore Courts to obtain authority to commence the distribution of assets. This application is called a Probate Application.
If your parent(s) passes away without a Will, he/she is considered to have passed intestate. In this case, the result of the Probate Application is a document called a Letter of Administration, and the time taken for the Courts to process such an application may take up to 6-9 months. By contrast, if your parent(s) passes away with a Will, the result of the Probate Application is called a Letter of Probate, and the time taken for the Courts to process such an application takes about 3 months.
Your parent(s) not having a Will means default distributions
When your parent(s) passes intestate, the allowable distributions are governed by the Intestate Succession Act. The Intestate Succession Act sets default distribution percentages on the estate.
The Intestate Succession Act stipulates (generally) that the estate is to be distributed equally between you and your siblings.
However, if your parents have a Will, their estate will not be distributed according to the Intestate Succession Act, and instead be distributed according to the instructions in the Will.
This distribution may seem unfair, especially where one sibling takes on the lion’s share (financially or otherwise) of taking care of the parents. Of course, the dynamics of every family is unique. In such cases, using a Will can ensure that the distributions are fair, and (where loans are taken out) sufficient, and that additional stress is not put on your family as you grieve.
Passing away without a Will takes about 3 months longer to process
Why is the processing time different, and why are there different outcomes? Because the process is different.
Generally, the Probate Applications where your parent(s) had passed intestate or not is similar - in that both cases would require an estimate of the total assets owned (i.e. the size of the Estate), and a list of the assets that are actually owned at the time of passing (also known as the Schedule of Assets).
Where the Probate Application differs is in relation to who has the authority to distribute the assets. Where one passes away without a Will (i.e. intestate), the courts have to undertake an extra step of determining who should be able to distribute the assets.
During the Probate Application process for a person who has passed intestate, the courts would have to additionally take applications from the deceased’s next-of-kin, and decide who should have the authority to distribute assets. This also means that the lawyers making the probate application would have to prepare extra documents for submission to the courts.
By contrast, when a person passes away with a Will, the persons that should have the authority to distribute assets are already decided - in the Will (i.e. the Executors).
The additional work required of the courts (and of the lawyers making the Probate Application) accounts for the extra time taken in the Probate Application.
Additionally, since more documents are involved in a Probate Application for a person who passed intestate, the legal fees for such applications would generally also be higher.
Your parent(s) not having a Will may be expensive for you
The additional time taken to process the Probate Application is important.
It is not uncommon for children (or other next-of-kin) to take personal loans, or to seek out financing to afford medical bills and end-of-life care for their parents - especially for people whose parents face chronic medical ailments, or have to avail of palliative care. The plan is usually to use the distributions from the estate (possibly from the sale of assets) to repay those loans.
At the last stages, such expenses do not come cheap. Since the plan is to repay those loans from estate distributions, the additional time taken to process Probate Applications (in the case where one passes intestate or without a Will) results in an accrual of interest. The longer the time taken to obtain Probate and to start distributions, the longer those loans remain active, and more interest is accrued.
Considering the additional costs of obtaining Probate in intestate cases, the cost of passing away without the Will could result in a higher financial burden on the children of the deceased.
Making a Will is Easy
These days, there are services, like WillCraft, that allow you to make an LPA or Will completely online, from the comfort of your home. Be sure to choose services that are affiliated or partnered with law firms in order to avoid any issues - Wills are after all important legal documents, and wills that do not cover all your assets will potentially result wasted time and money (e.g. partial intestacy, where a portion of the estate is distributed per the Will, and the rest under Intestate Laws).
The advantage of being able to estate plan from the comfort of your home, means that you can have those difficult conversations in a safe, private, and comfortable setting.
Talking about death is indeed a difficult conversation to be had, especially with your parents. However awkward it may be, having the proper preparations in place can save you money and time, and make a difficult period a little less stressful, should something untoward happen to your parents.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.
This advertisement has not been reviewed by the Monetary Authority of Singapore.