Why many young Singaporeans expect million-dollar inheritance from their parents

The prudence of older Singaporeans in accumulating wealth has apparently caused many of their children to feel entitled to a share, with some of them viewing inheritance as a windfall, much like winning a big lottery prize.

A recent survey on the state of wealth transfer here shows that of about 1,000 people polled, over 10 per cent of them actually hope to inherit $1 million or more from their parents so they have less to worry about their own savings and retirement planning.

The dependence on parents’ wealth is higher among younger Singaporeans, with 62 per cent of those under the age of 24 anticipating an inheritance.

Not surprisingly, the result of its polls has prompted Etiqa Insurance Singapore to highlight the importance of early and careful legacy planning because mismatched expectations can often lead to resentment and conflict, the top concern of many families here.

“Wealth transfer is more than just passing down assets – it comes with emotional and financial complexities,” the insurer says.

For instance, 31 per cent of about 1,000 people polled also expressed concerns about potential mismanagement or loss of wealth while 23 per cent worry about their heirs’ ability to effectively manage the inheritance.

Poor planning and lack of guidance by some parents had even led their children to be overly dependent on them because without their financial support, the kids will have problems taking care of themselves.

This problem has already reared its ugly head among Chinese communities overseas, which have coined the Mandarin term “啃老族 (ken lao zu)” – elder-gnawing tribe – which refers to the group of adults who do not work and are fully supported by their parents.

So even before receiving any inheritance, these adult loafers choose to live under the same roofs with their parents so they can continue to eat, play and sleep at their parents’ expense.

Here are two important financial lessons that all parents should know so they can maintain peace in the family and have a comfortable retirement.

The importance of managing your assets well

It is crucial to understand the rules that govern your real estate, since properties are likely to be the most valuable asset in your family.

If you have sent mixed signals to family members by letting them become joint owners when you have no intention of giving them the properties, stating this clearly in your will is not the silver bullet that will resolve this matter.

Indeed, most family disputes erupt because the joint owners are aggrieved when they find out their parents have willed the properties they are holding to other relatives.

There have been at least 130 such cases in Singapore in the past decade alone, meaning that an average of 10 families a year choose to slug it out in court because they could not agree on the rightful owners of their homes.

Most of these fights happen after the heads of the families die because those tasked with holding the assets usually proclaim total ownership. Such unilateral moves invariably prompt others to mount legal challenges, especially when there are no wills to state who should be the rightful owners.

If enmity runs deep in the family, even having a will cannot stop the fight when the joint owners are adamant on keeping the properties to themselves.

In one case, a couple bought two properties – a shophouse and a house – and listed their eldest child as a joint owner as he was above 21 at the time.

The son and his two siblings never talked about these properties until their parents died. In both their wills, the parents gave their shares of their properties to their youngest son.

The wills naturally sparked a dispute between the eldest son and his youngest brother because as a joint owner, the eldest son was adamant the real estate should go to him due to his right as the only surviving owner.

But because the parents had indicated that their shares of the properties would go to their youngest child, the High Court had to determine the family’s ownership arrangement.

In the end, the court found that the eldest son has no share in the shophouse as this belonged to the parents only. So the shophouse would go to the youngest son as the named beneficiary, but he had to refund $120,000 to his eldest brother for paying part of the shophouse mortgage.

As for the house, the court found that it would be owned by the parents and the eldest son in equal shares because he had consistently paid for one-third of the mortgage.

This son also had an additional $271,000 refunded to him for redeeming the outstanding loan.

So the lesson here is that if you have no intention of giving your property to a particular relative, it is wise not to name that relative as a joint owner.

Your own retirement needs matter more

Many parents make the mistake of under-planning for their retirement needs because they overspend on their kids.

Indeed, it is silly to think about legacy planning when you don’t even have enough to last you through your own old age.

For instance, some people hesitate to top up their CPF Retirement Account because they’d rather have more money to pass on to their beneficiaries than having higher CPF Life monthly payouts for themselves.

But the question they should ask is, what happens if they live a long life and their savings start to run out because they had failed to save for higher CPF Life payouts of up to $3,400 a month, which can cover most of their expenses.

In the starkest example of how inadequate retirement planning can have dire consequences, a divorced couple ended up in court because they were battling over a mere $600 monthly allowance.

The retiree wanted to reduce his monthly maintenance to his ex-wife from $1,200, but she objected because she could no longer work due to her poor health.

Both of them ended up in this state because during better times, they had spent over $600,000 to send both their children overseas for their studies.

Despite having such good parents, both children “ghosted” their parents by not even keeping in touch, let alone helping to support them.

As the retiree had his own cash flow problems, the court approved the maintenance reduction after giving the couple’s two adult children a sharp rebuke for vanishing inexplicably at a time when they were needed most.

What this means is that it is always prudent for parents to have adequate savings for themselves first so that they do not run out of money in their old age.

Finally, the wealth survey has highlighted a good practice that all families should take note of.

Over 40 per cent of parents here involve their heirs in financial planning conversations and, in doing so, they also instil good values such as responsibility and diligence in managing their assets.

It should not be a taboo to discuss legacy planning because you would want to see whether your beneficiaries will be pleased with your decision.

After all, if you are unable to even keep the peace in the family when you are around, you can be almost certain that pandemonium will break out the moment you are gone.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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