Debts – Death will not part us

Debt and death may seem to bear some (albeit sinister) familiarity or harmony. But this is not one of those “till death do us part” situations.

Should the deceased have personal debts which have not been settled (before he kicked the bucket), the deceased’s estate will still be liable for such debts. Thus the debts do not pass to the deceased’s beneficiaries. The creditor may only make a claim for the debt against the estate; there is no claim against anyone else.  The only exception is when someone is jointly liable (with the deceased) for the debt, e.g. if a mortgage / loan was taken out jointly with e.g., a spouse. If the debt is owed jointly, then the surviving debtor will bear the full burden of paying it off.

Generally, creditors (e.g. banks if credit card bills are owed) will not write off the deceased’s debt unless his estate is worth less than the outstanding debt. If the debt is so small that the cost of recovery is greater than the debt, there is also a possibility that small debts will be written off. This of course will be on a case-to-case basis.

Although the beneficiaries under a will or the intestacy rules do not technically inherit the deceased’s debts, the end result is not very different in practice because the estate cannot be distributed until all the debts are paid.  In the case of a properly drafted will with a gift of residue (so that the entire estate is disposed of in the will) the residuary estate will be utilised first to satisfy the debts.  If that is not sufficient, the law lays down the order in which other portions of the estate may be utilised. If the deceased’s estate is insolvent, then the deceased’s funeral, testamentary and administration expenses will have priority.

There is arguably some tranquillity in death, but such unfortunately does not apply in relation to the deceased’s debts.

I have property overseas, can I still make a will in my home country?

What happens to my foreign real property/land when I die? Some may say this is a first world problem, and it is hard to fault them. As real estate is typically governed by the law of the land, there may be conflicts of laws issues arising if, for instance, your will is governed by Singapore law while your property is located elsewhere.

Each jurisdiction has its own specific rules for dealing with real property (land) and how it is to be dealt with upon the passing of its owner. For example, Singapore’s Residential Property Act (the “Act”) is designed to restrict or at least control the extent to which foreign persons can own “residential property” (defined to mean, essentially, landed property and not, for example, condominiums). Under the Act, no residential property can be owned by or held on trust for a foreign person without getting appropriate permission from the authorities (this process has been facilitated in the case of residential property located in Sentosa, an island resort in Singapore).

If the owner of residential property passes away, leaving that property to a foreign person in his or her will, that foreign person is effectively prohibited by the Act from inheriting the property. Instead, the deceased person’s personal representative(s) must take steps to sell the property to a Singapore citizen or persons approved by the authorities within 10 years; the proceeds of sale will be passed to the foreign person designated in the will.

Who would have thought that owning property/land overseas would be such a hassle after death?

What can you do? First and foremost, before you make a will, you must remember to list out all your overseas assets carefully and inform your lawyer. Otherwise, notwithstanding that there is often a “catch-all” clause at the end providing for the rest of your assets, your foreign property may be ignored, mismanaged and squandered.

Additionally, depending on whether that foreign jurisdiction will recognise the Singapore will or whether the foreign jurisdiction permits the writing of two wills, you may wish to consider making two (or more) wills, each specific to where your assets are located. However, extreme care must be taken to ensure that the wills do not contradict (or worse, revoke) each other.

Unfortunately, there is no easy and fast rule on managing your overseas real estate nor is there a simple answer to whether a particular foreign jurisdiction will accept a Singapore will. Much will depend on which jurisdiction is applicable In this case, you may wish to appoint a foreign counsel to help you wade through these complicated waters.