Failure to make plans for properties can cause family squabbles
Failure to make plans for properties can cause family squabbles. One of Singapore’s great obsessions is real estate, yet it’s surprising how few of us grasp the ins and outs of the important laws that regulate property, particularly when it comes to the sometimes contentious issue of legacy planning. This is especially concerning given how mistakes in this area can lead to significant family rifts. After all, we all have family with whom we disagree, especially when it comes to money.
Consider joint property ownership: if you and your spouse own your home together, you should be aware that you cannot just leave your part to your child in your will. Because of the “law of survivorship,” when one of the joint owners dies, the other inherits the entire property. A reader was shocked to learn of this law from a recent Invest piece because she had written in her will that she wanted her portion of the home, which is in joint name with her husband, to go to her child. “My lawyer never informed me this the last time I made my will,” the senior human resource executive stated.
Failure to make plans for properties can cause family squabbles? Here are three crucial considerations for all property owners.
Extra planning for properties
To be fair to lawyers, most people write wills when they are young and healthy as a precaution in case they die suddenly. Many people opt for basic wills with typical terms stating that all “movable and immovable assets” should be distributed to designated beneficiaries. However, this risks overlooking the significance of shared properties. After all, few people send a list of all their assets to their lawyers, complete with instructions on what to do with each item, when creating wills. Even if they do, the list will never be comprehensive since it will not include any additional properties purchased after the will is written. Wills are said to as “living documents” because they must be updated at key points in your life, such as when your financial situation changes or when you want to change your beneficiaries.
If you want to donate your portion of a property to certain persons, lawyer Ivan Lee recommends instructing your lawyer to sever the “joint tenancy” so you can become a 50% owner as a “tenant-in-common.” He continues, “Of course, the other joint owner has to agree to this.” Private residences and Housing Board apartments have different procedures, but in general, if all joint owners consent to the conversion, a declaration of severance will be issued. The legal charge for this is around $2,000, but it will prevent your beneficiaries from becoming embroiled in costly lawsuits in the future.
Additional buyer’s stamp duties
Inadvertently, his cooling strategy has led to an odd property arrangement among some Singapore couples who seek to avoid paying the additional buyer’s stamp duties (ABSD) payable on second and subsequent properties. To avoid paying the ABSD, which can easily approach $200,000 for private properties, some couples “de-couple” their first property, allowing one spouse to own it solely in his or her name, and the other to buy another home without having to pay the ABSD. While it is completely acceptable for spouses to own separate properties, they should ensure that they have proper estate planning in place so that part of their real estate assets do not end up in the hands of unanticipated beneficiaries.
For example, if a childless couple owns property in their sole names and none of them creates a will, half of the property owned by the spouse who dies will go to that spouse’s parents. If there are children, however, half of the property will be divided evenly among them. Consider naming your children as tenants-in-common on your properties early on so that everyone is aware of the fixed share they will receive. While this may appear to be a wonderful way to keep siblings from fighting in court, Singapore’s property laws may cause havoc with the kids’ own ambitions for a family.
For example, if your children own shares in your current home, they are effectively barred from purchasing HDB apartments because only non-property owners are eligible. Even if they can subsequently afford private properties, their new home will be considered their second property, and they will be subject to the current ABSD of 17% for citizens and 25% for permanent residents.
Property owners must have wills
Those who do not create any estate plans for their properties may end up causing difficulty to their relatives if they pass away. Consider the scenario of a man who owns two properties: a shophouse with a loan and a fully paid-up house. If he dies without a will and is married with two small children, half of his assets will belong to his wife and the other half would be divided evenly between the two children.
The shophouse must be sold to pay off the mortgage if the wife does not have the financial means to take over the debt. If the property’s worth exceeds the debt, the family will benefit financially from the sale. Otherwise, as the new owners, they may have to shoulder the cost of paying the balance. Allowing the children to possess a fourth of the house will undoubtedly pose problems in the future, as they will be unable to apply for HDB flats and may be subject to an ABSD charge if they purchase other properties. Even if one of them wishes to sell his or her portion, the other owners may not be able to afford to do so.
If sufficient preparation is done, all of the properties may be given to the surviving parent, who could then determine how to care for the family. As a result, giving everyone a piece of the property may not be the best option for many families.
Some children, for example, may live with their aging parents while the rest have their own homes. If the parents fail to prepare a will to provide for the live-in children, their home will be divided equally among all siblings when they pass away. If this occurs, the house will most likely be sold, leaving the live-in children homeless unless they are able to purchase their siblings’ shares. If parents want to make sure that people who live with them are taken care of, they can write a will that leaves the house to the children so that they can stay. They can consider offering cash or other assets to the kids who already own homes instead of shares in the property.
Because real estate is likely to be your most valuable asset, you should take extra precautions to guarantee that legal titles remain in the hands of those who deserve them. So don’t let your dream home turn into a house of cards that falls apart when families feud over it.
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Failure to make plans for properties can cause family squabbles
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