What exactly does a CPF nomination include? | Money Talks (ft author Pang Zhe Liang)

Key Concepts

CPF nomination, beneficiaries, eligibility, witnesses, CPF accounts (Ordinary, Medisave, Special, Retirement), discounted shares, unused CPF Life premiums, Enhanced Nomination Scheme (ENS), Special Needs Savings Scheme (SNSS), lasting power of attorney, court-appointed deputy, trust company, life milestones, intestacy law, revocation, oversight, mortgage, home protection scheme, joint tenancy, tenancy in common, CPFIS investment scheme, will, creditors, public trustee office.

CPF Nomination Basics

Eligibility: Individuals must be at least 16 years old and of sound mind to make a CPF nomination.
Witnesses: Two witnesses, at least 21 years old and not nominees, are required.
Nominatable Assets: Includes savings in Ordinary, Medisave, Special (if under 55), and Retirement (if 55 or above) accounts, discounted single shares from the government, and unused CPF Life premiums.
Process: Can be done physically at CPF service centers or online via Singpass login (face ID or fingerprint). Takes approximately 10 minutes online.

Types of Nomination Schemes

Cash Nomination (Default): Nominees receive CPF monies in cash.
Enhanced Nomination Scheme (ENS): CPF savings are transferred to the nominee's CPF account instead of a cash payout. This is useful if the nominator is concerned about the nominee mismanaging cash.
Special Needs Savings Scheme (SNSS): Payouts are made monthly to a nominee with special needs, ensuring continuous care.
- If the nominee is under 18, the legal guardian manages the funds.
- If the nominee is over 18 and of sound mind, they receive the money directly.
- If the nominee is over 18 and lacks mental capacity, payments are made to a holder of a lasting power of attorney or a court-appointed deputy.

Alternative to SNSS for Non-Special Needs Individuals

While SNSS is specifically for individuals with special needs, a trust can be nominated to receive a cash payout, which the trust company then disburses to beneficiaries in monthly installments.

When to Update CPF Nomination

Life Milestones: Marriage, divorce, birth of children, death of a nominee.
Asset Distribution Changes: When there are changes in how you want your assets to be distributed (e.g., CPF to parents, other assets to spouse/children).
Marriage Revokes Nomination: A previous CPF nomination is automatically revoked upon marriage.
Divorce Does Not Revoke Nomination: A CPF nomination remains valid after a divorce, requiring active revocation or updating.

Common Oversights

Forgetting to Update After Childbirth: Failing to include a new child as a beneficiary.
Marriage: Forgetting that marriage revokes the previous nomination.

CPF and Housing

Mortgage Payments: CPF Ordinary Account funds are commonly used for mortgage payments.
Outstanding Mortgage Upon Death: Any outstanding principal and accrued interest on the CPF used for the mortgage are waived off upon death.
CPF Savings Distribution: CPF savings are distributed according to the CPF nomination or intestacy law, separate from the house.
Legal Ownership: Legal ownership of the house is determined by joint tenancy (surviving owner gets the share) or tenancy in common (ownership according to will or intestacy law). Home Protection Scheme or private insurance covers the mortgage.

Beneficiaries Living Overseas

Singaporeans/PRs: CPF Board will contact them via email, and funds can be transferred to a local or overseas bank account (subject to FX and tax laws).
Foreigners: Must provide identity documents (preferably national identity card over passport due to expiration issues) and mailing address.

CPFIS Investments

Not Covered by CPF Nomination: Investments made under the CPFIS are not covered by the CPF nomination.
Inclusion in Will: CPFIS investments should be included in a will to specify management and distribution. This allows for flexibility in managing investments (e.g., holding during market downturns).

Will vs. CPF Nomination

CPF Nomination Takes Precedence: A will cannot override a CPF nomination.
Protection from Creditors: CPF savings are protected from creditors, ensuring they go to family members for living needs.

Post-Death Procedures

Automated Process: In Singapore, the system is integrated, and relevant authorities will inform CPF Board of a death.
Nominee Notification: CPF Board will contact nominees. Nominees must respond to receive the funds.
Without Nomination: If there is no CPF nomination, the distribution follows intestacy law via the Public Trustee's Office, which can take at least 6 months.

Notable Quotes

"When you get married it gets revoked but when you get divorced it doesn't get revoked."
"CPF savings are actually protected from creditors."

Synthesis/Conclusion

The CPF nomination process, while seemingly straightforward, involves several nuances and considerations. Understanding the different nomination schemes, the impact of life events, and the distinction between CPF savings and CPFIS investments is crucial for ensuring that CPF funds are distributed according to one's wishes. The CPF nomination takes precedence over a will and protects the savings from creditors, making it an essential component of estate planning for Singaporeans. Regular updates and awareness of potential oversights are key to a smooth and efficient distribution process.