Estate Planning

[puffer_fish]

Hi All,

just need expert's input into the subject matter.

allow me to give a scenario. 1 couple has 3 children and X numbers of properties. In-order not to let the children squander all their inheritance, the couple decided to draft up a will, within the will are the terms and conditions.

1) all properties shall not be sold, dependents shall only either live off the rentals or owner occupied.

2) if the property is leased out, 50% of the rental will go toward the dependent, 25% will be kept for taxes, repairs and management fees, remaining 25% will be donated to a charity of the couple's choice.

3) should the property be en-bloc, 90% of the proceeds will go back to purchase of a new property.

4) dependents need to be gainfully employed for a minimum of 150 days per year, otherwise the entire year rental will be donated to the charity of the couple's choice and start over the following year.


would like to check if this is workable?

there will be 2 names under each property, the dependent and the charity

the reason why the couple wanted their children to keep working is to prevent them from getting lazy.


thank you for you precious input:cheers1:

[DC33_2008]

It is quite a good well drawn-up trust with reasonable considerations.

[puffer_fish]

the reason why the couple decided to draft up this will, as currently one of their relative has lost his entire home to the spouse in a divorce case.
the relative is currently renting a room and the ownership of the house has been transfer to the spouse.

did not go into the details of the divorce, but the person whom paid for the house's downpayment and installment, just gotten back his CPF monies and nothing else.

the couple is just worried that the children spouse in the event of a divorce will claim 50% of the property.

[phantom_opera]

if I am the lawyer I will work out a deal with lazy descendant

[DC33_2008]

I know of one case where the son refused to take the inheritance from his parents eventhough they have started giving out their money to the other children. Reason could be the same as your relative as he has some problem with his spouse.
the reason why the couple decided to draft up this will, as currently one of their relative has lost his entire home to the spouse in a divorce case.
the relative is currently renting a room and the ownership of the house has been transfer to the spouse.

did not go into the details of the divorce, but the person whom paid for the house's downpayment and installment, just gotten back his CPF monies and nothing else.

the couple is just worried that the children spouse in the event of a divorce will claim 50% of the property.

[chiaberry]

the reason why the couple decided to draft up this will, as currently one of their relative has lost his entire home to the spouse in a divorce case.
the relative is currently renting a room and the ownership of the house has been transfer to the spouse.

did not go into the details of the divorce, but the person whom paid for the house's downpayment and installment, just gotten back his CPF monies and nothing else.

the couple is just worried that the children spouse in the event of a divorce will claim 50% of the property.

Could it be that the person who had lost his home is the one at fault in the divorce case (eg having affair/gambling) and therefore the judge awarded custody of the kids to the spouse and also the ownership of the house?

Cannot ignore the details of the case as it is likely to explain the situation.

Moral of the story, don't leave too much to your descendants if you don't want them to be lazy.

[puffer_fish]

if I am the lawyer I will work out a deal with lazy descendant


If that happen. Dont think anyone can do anything about it. But it better than losing it to the casino . Thanks for the input

[puffer_fish]

Could it be that the person who had lost his home is the one at fault in the divorce case (eg having affair/gambling) and therefore the judge awarded custody of the kids to the spouse and also the ownership of the house?

Cannot ignore the details of the case as it is likely to explain the situation.

Moral of the story, don't leave too much to your descendants if you don't want them to be lazy.


Yup. That why part of the will include children home and old folk home.

Even if the decendents are lazy. Part of the monies will still help the needy . Thanks for the input

[starrynight]

What you are talking about is actually better accomplished by a trust than a will. Some possible tax savings if you structure it right too, though less these days now that there is no longer estate duty.

I believe you can also make it irrevocable in some cases - can't remember my Year 2 Property Law in law school, but usually if all beneficiaries agree, the trust can be dissolved.

A good tax lawyer can do this.


Hi All,

just need expert's input into the subject matter.

allow me to give a scenario. 1 couple has 3 children and X numbers of properties. In-order not to let the children squander all their inheritance, the couple decided to draft up a will, within the will are the terms and conditions.

1) all properties shall not be sold, dependents shall only either live off the rentals or owner occupied.

2) if the property is leased out, 50% of the rental will go toward the dependent, 25% will be kept for taxes, repairs and management fees, remaining 25% will be donated to a charity of the couple's choice.

3) should the property be en-bloc, 90% of the proceeds will go back to purchase of a new property.

4) dependents need to be gainfully employed for a minimum of 150 days per year, otherwise the entire year rental will be donated to the charity of the couple's choice and start over the following year.


would like to check if this is workable?

there will be 2 names under each property, the dependent and the charity

the reason why the couple wanted their children to keep working is to prevent them from getting lazy.


thank you for you precious input:cheers1:

[puffer_fish]

What you are talking about is actually better accomplished by a trust than a will. Some possible tax savings if you structure it right too, though less these days now that there is no longer estate duty.

I believe you can also make it irrevocable in some cases - can't remember my Year 2 Property Law in law school, but usually if all beneficiaries agree, the trust can be dissolved.

A good tax lawyer can do this.

Thanks for the info. Do u mind pm me a few tax lawyers

[starrynight]

Good and cheap tax lawyers are a bit hard to find. I will ask around and PM you :)

Do note that once the trust has been set up, the testator (i.e. the starter of the trust) cannot unwind it anymore. Maybe there are exceptions, but this is the general rule.


Thanks for the info. Do u mind pm me a few tax lawyers

[puffer_fish]

hey, thanks. :cheers1:

[Laguna]

Thanks for the info. Do u mind pm me a few tax lawyers

Your proposal is no good for many reasons, eg too rigid and no flexibility given to the administrator. Changing of will cost money as well.

I suggest a well drawn trust is a better option. I did that with a professional trustee.

If you are interested,
Drop me a PM

[triple70]

TS,
There are too many techinical deficiencies in the proposal.

Firstly, a will is about closure. If the will does not distribute the assets, then the estate will never end. The properties will be held under the name of " Estate of xxx", and the poor administrator and his successors will carry this estate forever!

What you are referring to is about setting up a trust, which can be done anytime, and not wait till death. But my analysis of a property dominated Trust is that it's not a positive thing. The devil is in the details.

Firstly, to transfer property into a Trust will incur prevailing stamp duty, just like any S&P. This is substantial $. Is this cost justifiable vs. the objectives?

Secondly, Typically trust properties cannot be pledged for loan facilities, and is usually accepted into the trust as unencumbered. It can still be pledged but the paperwork involves substantial guarantees by third parties. Now.. the low yield from rental income from fully paid up properties.. whether it makes financial sense to savvy folks, is subjective. Property tax is also assesed based on investment property rate. Furthermore trustee fees is about 1% of AUM. Wld there be any nett distribution after all expenses?

Thirdly, properties occasionally need cash calls for minor renovation. Where is this cash going to come from if the proceeds are constantly being distributed? There has to be a cash float within the Trust to handle such contingencies. Unlikely a Trustee will fork out own cash to upkeep the properties that he has only a minority interest. There are many run down properties in Sg.. and most can be traced to Trust related ownership. The resident has very little vested interest to upkeep the property.

Ultimately, the question is really about preserving the family properties, or to preserve wealth. Both have different paths, there are so many scenarios to consider, and alot depends on the maturity of the trustee, whether is that person a risk taker or not.

If the whole idea is to preserve properties, then there must also be a substantial cash component to weather all the possible scenarios. A private bank relationship is ideal for such matters.

[puffer_fish]

Hi Thanks for the insightful details,

the whole idea is to generate income from the property to continue "giving allowance" to the dependent.

for example, the dependent might turn out to be a loser and only work minion jobs. this is just created to give them some kind of relief.

it was meant to be rigid so that the dependent will understand that they are only getting an allowance and should they want to "upgrade" their life, they will have to fight for it themselves.

but your input was very refreshing as it give another perspective on the subject.

[onglai]

Lol headache of a rich man

This couple macam pap like dat. Accumulated wealth but scared the children squandered them away, so impose alot of restrictions on the usage of this wealth.

[triple70]

Just to add on to this topic, u did mention that the idea was to put the property under 2 names, the beneficiary and the charity(Trust). This is quite risky, becuase as a private property owner, the beneficiary will not be able to benefit from the social safety net that the affordable Public Housing Scheme provides.

Properties placed in Trusts are usually those type of palaces that the future generations will unlikely to be able to afford down the road, those huge irreplacable types like Istana. It's done for emotional reasons, not so much to generate a steady income.

If the intention is to provide a CPF-like regular dividend, then cash out the properties and invest the funds into corporate bond instruments, which today pays ard 7-10%, before leverage. With leverage, returns can hit 20%.

As of now, my thots is that it is better to keep assets in Pte Ltd companies, and if need be, pass down the shares of the company. As least we know that any shareholder actions are governed by the Companies Act, which most ppl are familar with. To sell shares of a company is much faster than to liquidate property holdings. Well.. at least thats my current thinking until the govt starts changing the rules again.