Failure to make plans for properties can cause family squabbles
Failure to make plans for properties can cause family squabbles. Real estate is one of Singapore’s great passions, but it’s surprising how few of us know the ins and outs of the key property regulations, especially when it comes to the sometimes contentious issue of legacy planning. This is particularly troubling given how missteps in this area can cause major family rifts. After all, we all have family members with whom we disagree, particularly when it comes to financial matters.
If you and your spouse own your home together, you should be aware that you cannot just leave your share to your child in your will. When one of the joint owners dies, the other obtains the full property due to the “law of survivorship.” Because she had specified in her will that she intended her half of the home, which is in joint name with her husband, to go to her child, a reader was astonished to learn of this rule from a recent Invest item. The senior human resource executive stated, “My lawyer never notified me of this the last time I made my will.”
Here are three important factors to consider for all property owners. This will avoid the issue of failure to make plans.
Extra planning for properties
To be fair to lawyers, most people create wills when they are young and healthy as a preventative measure in case they die unexpectedly. Many people choose simple wills that state that all “movable and immovable assets” should be given to specified recipients. However, this runs the risk of disregarding the importance of shared assets. When it comes to wills, few people send a list of all their assets to their solicitors, along with instructions on what to do with each item. Even if they do, the list will never be complete because it will exclude any properties acquired after the will is drafted.
Wills are said to as “living documents” because they must be changed at various stages throughout your life, such as when your financial status changes or you want to change your beneficiaries. Lawyer Ivan Lee recommends asking your lawyer to sever the “joint tenancy” so you can become a 50 percent owner as a “tenant-in-common” if you want to donate your half of a property to select people. “Of course, the other joint owner has to agree to this,” he continues.
Private dwellings and Housing Board units have various procedures, although in general, a declaration of severance will be given if all joint owners agree to the conversion. This will cost you roughly $2,000 in legal fees, but it will keep your beneficiaries out of costly disputes in the future.
Additional buyer’s stamp duties
Inadvertently, his cooling technique has resulted in an unusual property arrangement among some Singapore couples seeking to avoid paying the additional buyer’s stamp duties (ABSD) on second and subsequent properties. Some couples “de-couple” their first house, allowing one spouse to hold it solely in his or her name and the other to buy another home without having to pay the ABSD, which can potentially approach $200,000 for private properties. While owning separate properties is perfectly appropriate, spouses should make sure they have proper estate planning in place so that part of their real estate assets do not end up in the hands of unintended beneficiaries.
If a childless couple holds property, for example Lentor Modern condominium, in their sole names and neither of them makes a will, half of the property owned by the deceased spouse will belong to that spouse’s parents. If there are children, however, they will share half of the property equally. Consider identifying your children as tenants-in-common on your properties early on so that everyone understands their fixed share. While this may appear to be a good approach to save siblings from fighting in court, Singapore’s property laws may interfere with the children’s own family plans.
If your children own shares in your present home, for example, they are virtually excluded from purchasing HDB apartments because only non-owners are eligible. Even if they can afford private properties later, their new home will be considered their second home, 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 make estate plans for their homes may cause problems for their relatives once they pass away. Consider the case of a man who owns two properties: a shophouse with a loan and a house that is completely paid for. If he dies without a will and is married with two little children, half of his assets will be distributed equally between his wife and the two children.
If the wife does not have the financial means to take over the obligation, the shophouse must be sold to pay off the mortgage. The family will profit financially from the sale if the property’s value surpasses the loan. Otherwise, as new owners, they may be forced to pay the remaining sum. Allowing the children to own a fourth of the house will definitely cause issues in the future, as they will be unable to apply for HDB flats and may face an ABSD charge if they buy other properties. Even if one of them wants to sell their share, the other owners may not be able to afford it.
All of the properties might be transferred to the surviving parent, who could then decide how to care for the family if enough preparation is done. As a result, for many families, giving everyone a piece of the property may not be the best decision.
Some children, for example, may live with their elderly parents while the others live independently. If the parents do not leave a will for their live-in children, their home will be shared equally among all siblings when they die. If this happens, the house will very certainly be sold, leaving the live-in kids homeless unless they can buy their siblings’ shares. If parents wish to ensure that individuals who live with them are cared for, they can prepare a will that leaves the house to the children so that they can continue to live there. Instead of shares in the property, they may distribute cash or other assets to the children who already own properties.
Because real estate is likely to be your most important possession, extra steps should be taken to ensure that legal titles remain in the hands of those who deserve them. So don’t let your dream house become a house of cards that comes apart because of family feuds.
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Failure to make plans for properties can cause family squabbles
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