Financial Steps Upon Death of Spouse

22 Nov 2016 
SOURCE: Heartland Boy

​A few months before their marriage, Heartland Girl had this question for Heartland Boy,


"Dear, you must tell me what financial steps to take if you pass away."


That question caught Heartland Boy by surprise and he had no answers then. However, he realized that death of partner is not something frivolous that can be dismissed easily. (Just for clarification, Heartland Girl never says anything frivolous anyway)


This worry has its roots primarily because Heartland Boy has always been the one taking the initiative in financial planning for the household. To have Heartland Girl suddenly resume this mantle would be challenging and almost insurmountable during the time of immense grieving. While this period is indeed a difficult time, important financial decisions still have to be made. Some might even think that this is a morbid topic and best left not discussed. However, Heartland Boy realized that he can make the process less daunting by laying down an action plan detailing the financial steps that Heartland Girl can take upon the death of spouse.


Financial Step 1: How Much Did The Deceased Leave Behind?

The first step to take is to calculate how much money has been left behind for the surviving spouse. Given that this can be quite a complex exercise, it will be preferred that you work with a trusted financial planner. Anyway, a good financial planner would have done this with you in the first place before recommending any financial products.


Heartland Boy has worked with his financial planner in establishing the following sources that will form his estate upon his death. For international readers, do note that CPF and SRS are unique to the context of Singapore.


Source of Wealth and Estate


Financial Step 2: Check If There Is A Will Made By The Deceased

Heartland Boy is a believer of making a will. It helps to give some financial order to the household, and this view is also articulated in this article by the Sunday Times.


Heartland Boy admits that he has not made any will yet, so Heartland Girl probably should not waste time looking in the closet. By the way, if a will has ever been made, it may not be a bad idea to come clean lest the surviving spouse may be in for a nasty surprise. In the absence of a will, Heartland Boy's estate will be distributed according to the Intestate Succession Act.


A good rule of thumb is that his estate will be divided equally in half between parents and wife. However, exceptions, as shown in the table below, may sometimes apply.


Sources of Wealth/EstateExceptions to Interstate Succession Act
Personal InsuranceYou may submit a nomination form (either a revocable or trust nomination) to specify how the money will be distributed in the event of your demise
Company InsuranceAs the legal owner of the policy, your employer may pay out the money as stated in the welfare agreement of your employment contract. It is common practice that this money is eventually paid to your next of kin.
CPFCPF Nomination Scheme
Property (BTO)Under a Joint Tenancy Scheme, Heartland Boy's share in the property will be passed on to  Heartland Girl


Financial Step 3: Prudently Managing The Inheritance

Having understood how his estate will be distributed to the family members, the next step would be to manage the inheritance in a prudent manner. This is perhaps the most important as it is common to hear of lottery winners squandering their sudden windfall very quickly and very carelessly.


Heartland Boy would recommend the following actions:

  • Top Up Heartland Boy Parents' Retirement Accounts
    Heartland Boy knows that this will be a controversial decision that will probably not sit well with his parents. However, given their previous record of managing money, the chance of misusing this inheritance is potentially high. Therefore, since his parents have insignificant amount of money in their retirement accounts, it will be prudent to top them up to reach the Full Retirement Sum.

    The folks can rely on the CPF Life payouts during their retirement. Further, Heartland Boy has faith that this is the best and safest product available in the market to meet this need.


  • Liquidate Heartland Boy's Equity Portfolio And Invest In STI ETF
    Upon Heartland Boy's death, his retirement fund in the SRS will be considered as withdrawn. The 5% early withdrawal penalty shall not apply under this circumstance. In addition, given Heartland Girl's lack of interest in stocks picking, she should also liquidate Heartland Boy's equity portfolio. She should use these proceeds to maximize the annual $15,300 top up limit for her own SRS account. In addition, since the SRS account only provides a very low interest rate, Heartland Girl should invest in STI ETF bi-annually.


  • Pay Up For The BTO
    If HDB allows Heartland Girl to keep their BTO, she should use her inheritance to pay up for the BTO. Heartland Boy knows that Heartland Girl does not like debt, so doing this should help her sleep more soundly at night. Note that as the Heartland Couple has not started paying for their HDB mortgage yet, they have not purchased HDB mortgage insurance.

    In the event that HDB does not allow Heartland Girl to retain the BTO, she should transfer 70% of her inheritance into her CPF. She should view this as a purchase of a Triple AAA grade bond where the coupon payment is one of the highest in the world. She will do well by utilizing various schemes such as the Voluntary Contribution Scheme and the Retirement Sum Topping-Up Scheme. For the remaining 30%, use it to chase your dreams, dear.


  • Donate To Heartland Boy's Alma Mater
    Finally, all the proceeds collected from the funeral should be donated equally to his alma mater- Teck Whye Primary, Bukit Panjang Government High, Hwa Chong Institution and SMU. It may not amount to much but Heartland Boy cannot think of a better way then to allow future generations to have a better education.


Conclusion of Financial Steps For Death of Spouse
This is a post that Heartland Boy took the longest to pen, and rightfully so since death of partner is such an emotional and morbid topic. Well at least he was glad that he had a professional to guide him along and know that Heartland Girl would not be too lost financially when the inevitable happens.


This article first appeared on Heartland Boy

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