The importance of a Will

A Will determines how your assets and possessions are being distributed to your loved ones upon your passing. Understand why having a Will is important and how intestacy laws come into play in the absence of it.

Importance of a will

In August 2018, the world was shocked with the news that famous soul artiste, Aretha Franklin, had died after a long battle with pancreatic cancer. While the world mourned her death, potential conflict was brewing in Franklin’s household: without a will to direct the ownership of her US$80M estate, her four sons filed a document with the Oakland County Probate Court that lists themselves as interested parties in Franklin's estate, whilst a niece also asked the court to appoint her as personal representative of the estate.

Most of us might not have multi-million dollar estates like Franklin did, but the lesson to be learned from her experience applies to all of us: a will isn’t about how many assets you have, it’s about ensuring what you do have gets to the people who you want it to go to quickly, such as your loved ones or family. For example, making sure that sentimental piece of jewellery is gifted as you wish, your property goes to the right relative and your family know your burial instructions.

A quick and low-cost document, wills can save considerable headaches for your next of kin.

Cross Border Estates

Globalisation has changed the way we live, but it has also changed the way we die. Many families have assets and connections in countries other than Singapore: investments, holiday homes, bank accounts, family members, or retirement funds. Upon our passing, this diversity of connections can be fairly complex for our loved ones to manage.

Having routinely dealt with probates – legal processes where the estates of deceased persons are distributed to heirs and beneficiaries -  in foreign countries, we have seen everything: from expatriation of the body of a deceased back from a foreign country to be buried, funeral arrangements from afar, the poor Executor having to trace all the assets of the deceased person, to legal issues involving the appointment of multiple lawyers in different countries, obtaining multiple grants of probate, and conveying art, houses or other property to the beneficiaries. Dealing with these post-death arrangements is not an easy task, and they can be expensive. Few think about the complexities of winding up their estate during their lifetime, as they collect assets in multiple countries. It is not uncommon for assets never to be found, or turn up many years later.

Putting aside the practical issues, from a legal perspective, when a person dies in any country, there are several steps that must be followed. Firstly, it is necessary to deal with the deceased. Decisions by the family concerning a funeral and a proper burial are important action steps to be taken immediately. Simultaneously, it is also necessary to obtain the legal documents to prove the death of the deceased.

Proof of Death

There are 2 documents commonly referred to as Proof of Death. The first, the Medical Certificate of Death, is a legal document that confirms that a death has taken place. It includes the cause of death and associated medical information. The second is the Proof of Death Certificate, which is signed by a licensed funeral director and is used to notify companies and organisations of a death. Although the exact terminology may vary from country to country, the latter is generally known as the Death Certificate.

If the family wishes to claim the deceased’s life insurance, they will invariably need to produce the death certificate. This is to make sure they are not attempting to commit fraud by claiming on a policy unlawfully. It is important to note that some insurance companies will require the Medical Certificate of Death when the claim requires confirmation on the cause of death.

The death certificate needs to be present for the family to handle the deceased’s estate. These documents may have to notarised, apostilled or proved by an Embassy if the death took place out of the country where the applications are being made.

Is there a Will?

There are two key processes in passing an estate: succession with and without a Will. In a cross-border context, a Will is vitally important.

Who is the Executor?

If there is a Will, the Executor of the Will must apply for Probate. It is important for the Executor of the will to be aware of his or her responsibility as Executor. Ideally, he or she should know they are the Executor of the Will, so that they know to step in to take action upon death and know who to call to start the process. He or she needs to find the Will and contact a lawyer.

If there is no Will, the deceased's lawful personal representative will apply for Letters of Administration (LOA) to deal with his estate. In cross-border contexts, this process is invariably more complicated and expensive because it will require an interpretation of more than one law to determine the process to obtain an LOA, and determining the lawful beneficiaries to the estate.

Principles of Asset Succession 

It is important to understand how succession of assets operates under the law, the difference between moveable and immoveable property, and what laws govern it. 
Simply put, immoveable property is real estate and movables are mostly everything else – for example, shares in a company and investments. For real estate, the universal rule is that the validity of the Will is determined by the country that the real estate is physically located in. For everything else, the law governing the validity of the Will is governed by the country in which the deceased was domiciled (lawfully treated as a permanent resident). 

The concept of domicile is not the same as that of residence. Many people living in Singapore are residents in Singapore but domiciled elsewhere. To take a simple example, an Australian may own real estate and a bank account in Sydney, but he has a Will written under Singapore law, where he lives. The Will needs to comply with Australian law for it to be valid to pass his Australian assets. 

There is a divergence of thought about whether to have one will or many: the advocates of the latter take the approach that you should have a Will in each location where assets are sited, for no other reasons than to speed up probate (as each Will can be applied for simultaneously rather than waiting for each ‘reseal’ or fresh grant). 

There is also merit in ensuring that local tax issues are properly dealt with, for example, it can be problematic if the debts in one country exceed the liabilities of the estate, such that one beneficiary may be unfairly attributed a portion of the liabilities. For this reason, for simplicity, and to ensure there is no inadvertent revocation of any Will, we recommend having as few Wills as possible, but to ensure legal advice is obtained in each country where there is a will to ensure the Will is valid.

In short, the location of an asset determines where probate or Letter of Attorney (LOA) will need to be obtained. 

What happens if there is no Will?

For a Singapore domiciled person, the Intestate Succession Act applies.

The rules for the Act are as follows:

Survived by In the absence of Who gets what 
Spouse Children, parents  Spouse gets everything 
Spouse, children   Spouse gets half, children gets the other half in equal portions
Children Spouse  Children get everything in equal portions. Grandchildren can claim their parent’s share in equal portions if their parent is dead
Spouse, parents Children Spouse gets half, parents get half in equal portions
Parents Spouse, children  Parents get everything in equal portions
Brothers and sisters (or children of the deceased brother or sister) Spouse, children, parents Brothers and sisters get equal portions. Their children can claim their share for them in equal portions if they are deceased
Grandparents Spouse, children, parents, brothers and sisters or children  Grandparents take the estate in equal portions
Uncles and aunts Spouse, children, parents, brothers and sisters or children of such brothers and sisters, grandparents Uncles and aunts take the estate in equal portions
None Everyone  Government takes everything

The rules will be different for individuals domiciled in other countries.

Many individuals will own their home, and perhaps some bank accounts jointly with their spouse. We need to understand two important concepts:

  • Ownership as joint tenants and ownership as tenants in common are legal terms and represent the two ways in which property can be owned jointly. Property which is owned as a ‘joint tenant’ is immediately granted to the survivor on death and bypasses probate procedures. Property held as ‘tenants in common’ is only granted under the persons Will or on a LOA. It is crucial that you know the ownership structure of your property when writing a Will. 
  • Further life insurance policies typically also bypass probate, and insurance companies typically pay out a claim under a life policy to the named beneficiaries quickly, following proof of death.

It is important if possible, to avoid the intestacy rules by having a Will in the first place.

Typically, applying for Probate with a Will is much faster than applying for Letters of Administration (without a Will). This was illustrated in a case in 2017, where a Singaporean woman died without a Will. As the table above illustrates, without a named executor in a Will, seven classes of people can apply to the Court to be the administrator of her estate– and in this lady’s case, several family members simultaneously applied, which resulted in a bitter family dispute that took time and money to resolve.

Why it is important to have a Will

The key reasons to have a Will can be summarised as follows:

  • Provide an inventory of assets, especially in cross border estates.
  • Clearly set out the deceased’s final wishes for the ownership of assets to minimise the chances of conflict. A Will, or side letter, might even set out reasons for such decisions.
  • Avoid uncertainty or unintended consequences (such as the intestacy rules).
  • Tax optimisation: there are numerous countries that impose inheritance tax. Exemptions may apply if the property is disposed in a certain manner, which can be planned using a Will (UK domiciled persons will be familiar with this). Without proper planning. heirs to an estate may end up paying considerably more in estate taxes than legally necessary. Marcus Hinkley, Hawksford’s head of Private Client Services in Asia, who has acted on a large number of estate matters, recalls acting for an elderly Malaysian who owned 5 properties in the UK. Due to changes in UK inheritance tax (IHT) law, the elderly man would have paid 40% IHT on his properties upon his death. However, the IHT spouse exemption allows one to pass on the entirety of their estate to their spouse, inheritance tax-free. Had he died without a Will, his estate would have been divided according to the English intestacy rules - which meant that his spouse would not receive the whole estate due to IHT liabilities.
  • If you have no plan in place for your minor children and they are left parentless, a judge gets to decide who will be their guardian.

Because of competing laws, it is best to have a Will in each jurisdiction that you have real estate and company shares, and a general Will for everything else. This also makes the process of the estate administration much faster. Amongst Commonwealth and former commonwealth countries, there is a general right to what they call "reseal" a grant of Probate - that is, if you obtain a grant of probate in Australia, you can go to other countries and simply give evidence of that grant to the other country rather than re-proving the Will from scratch. Not all countries allow this, but it does make the process much faster and cheaper.

You need to be aware if there are any local restrictions imposed on such domiciles for example when a deceased is domiciled in a country that does not permit freedom of testamentary disposition, such as many civil law countries and predominantly Muslim countries. These countries may prevent you from freely giving your assets away. Usually, any attempts to defeat these rules by a foreign Will are ignored under the local laws.

Trusts – thinking beyond a Will

There are a variety of reasons why going the extra step of setting up a trust is more desirable than simply having a Will. Both letters of administration and probate are public matters, and airing all assets and liabilities in public can lead to unwanted publicity and claims. There is currently a paternity claim by Carlin Q. Williams, a 39-year-old inmate in a federal prison, who claims to be the late singer, Prince’s son. Had Prince had his assets held in a trust, publicity could have been avoided.

Having assets held in trust can also help to avoid estate taxes (charged in the US, for example, at 40% of the estate). While there is a US$11.2M exemption (formerly US$5M) for US citizens, the exemption for non-residents owning US property is a mere US$60,000, which making the prospect of being dragged into estate tax filings likely for many owning US investments. 

It is generally advisable to have at least one Will, unless your estate is altogether jointly held (in which case the survivor should thereafter draw a Will).  A Will is simple to write, doesn’t cost a lot, and can save considerable time and uncertainty for loved ones that are left behind.

 

Hawksford provides expert advice and services on succession planning.

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