How should we own our home? – Part II

When a couple, married or not, live in a property which is legally owned by one or both of them, questions can arise as to what their respective beneficial interests are. A simple example will make this clear.

H and W live in their matrimonial home, which is registered in H sole name. But W contributed fifty percent of the purchase price. The law recognises W’s contribution and she will have at least a fifty percent “beneficial” or “equitable” share in the property. In effect, H holds the property on trust for the two of them.

The mechanism by which this conclusion is reached is quite complicated and depends on the application of different types of trusts.

The idea is to discern what the couple’s intentions were when the property was acquired. The fact is that people do not really address this issue at the relevant time except in the most general way. The result is that if an issue arises as to the ownership of the property – because, for instance, one of the parties dies and a third party claims entitlement to his or her estate – the court has to fill the gap and decide what the parties’ respective intentions were when the property was acquired.

The solution is provided by the application of what are called resulting and constructive trusts.

Briefly, in the case of a resulting trust the law presumes what the parties’ intentions were when they acquired the property, by looking at the surrounding circumstances, in particular, their respective contributions to the purchase price. This is referred to as the presumption of a resulting trust. It does not operate if the parties’ intentions were, as a matter of fact, and law, made expressly clear at the time, but this is a fairly unusual scenario.

The point is that there is a presumption against gifts. This if A pays a million dollars for a property and gets it registered in the name of B, there is a presumption that B holds the property on trust for A, unless there is evidence to indicate that a gift was intended; that evidence can be used to rebut the presumption. It is different, though, if B is A’s wife, or child (even adult child). Then there is a countervailing presumption, the presumption of advancement, which can, again, be rebutted by evidence that no gift to the wife or child was intended.

An example might make this clear. In a Court of Appeal decision a few years ago, Lau Siew Kim v Yeo Guan Thye Terence, an engaged couple purchased, as joint tenants, two properties, one the matrimonial home, and the other an investment property. Both parties contributed to the purchases, but not equally. When the husband died, the wife remained the sale registered owner of the properties because of the right of survivorship (explained in Part One). But the husband’s sons from his first marriage claimed that she held both properties on trust for his estate, on a resulting trust. The Court of Appeal disagreed. Although the presumption of a resulting trust was raised by the fact of unequal contributions to the purchase price, it was rebutted by the presumption of advancement in favour of the then fiancee. (The court’s decision was based, inter alia, on its consideration of the nature and quality of the relationship.) They were both legal and beneficial – equitable – joint tenants and the wife was now the sole owner.

Common intention constructive trusts are quite different. With a resulting trust, unless the plaintiff can rely on the presumption of advancement, he – or more probably she – is likely to be limited to a proportionate share of the property based on her contribution to the purchase price.

With the common intention constructive trust, on the other hand, the court examines the dealings and conduct of the parties at the time of the acquisition in order to discern what their common intention was; the party who contributed less may well have acted to his or her detriment on the faith of such a common intention, justifying a bigger “slice of the pie”.

This is an area of law where the Singapore courts have diverged significantly from their English counterparts. In England, the default approach – where the couple have bought a home together as joint tenants – is to presume that their beneficial interests are equal unless there are factors indicating an agreement to share on a different basis, applying constructive trust principles. There is an increasing tendency towards “fairness” – doing justice between the parties irrespective of their financial contributions. The resulting trust, and in particular the presumption of advancement, are thought to be out of step with contemporary social mores.

In Singapore, by contrast, the resulting trust is the default mechanism for resolving disputes concerning matrimonial or quasi matrimonial property. Only in special circumstances will the courts resort to the common intent – constructive trust.

In short, there is a considerable degree of uncertainty regarding the respective interests of cohabiting couples – whether married or not – in residential property that they acquire jointly. It makes sense for such couples, when contemplating the purchase of a property, to seek legal advice as to how they want the property to be divided in the event of same unforeseen event.

January 23, 2017May 30, 2017

How should we own our home – Part I

Wills & Property Planning - Singapore HDB over river

It is a fact of life that most adults get married, or find a partner, and live together as couples.

In an ideal world they will buy a home together, a house, as private apartment or an HDB flat.

For most people, especially in land-scarce Singapore where – even in a depressed market – property prices are very high – their matrimonial home, or the home they share as partners – is likely to be their most valuable asset. How should they own it, and what is to happen when one of them dies?

The first question is one that is rife with legal and social issues. Historically it was not uncommon for the man – the husband – to be the sole breadwinner and for the family home to be in his sole name. That did not mean that the wife did not have what lawyers call a beneficial interest in the property. But it could make it more difficult for her to prove that she had such an interest if the issue became a subject of legal argument. (More about this later.) These days the parties are much more likely to be an equal terms.

I will not be saying anything about divorce. If a married couple get divorced, the court divides up the matrimonial assets which will of course include the home. I am talking about situations where there is no divorce. Instead, the husband or wife dies, or goes bankrupt. Or the couple are living together but not married, or siblings sharing a home. Then it becomes important to determine how the property is owned.

If two or more people own property together, irrespective of whether they are married, they are either joint tenants or tenants in common.

Joint tenants, to the outside world, are like a single person as far as their ownership of property is concerned. They do not have shares in the property; each joint tenant owns the whole thing, together with the other(s). Tenants in common, on the other hand, do own shares in the property: it’s just that those shares have not been physically divided between them.

There is one very important consequence to this apparently subtle difference. When a joint tenant of property dies, the surviving owner – if there is just one – becomes the sole owner. It does not matter that the deceased made a will leaving all his or her property to a third party: that will is ineffective as regards property held on a joint tenancy.

It is different with tenancy in common. Because each tenant in common has a notional “share” in the property, this will pass in accordance with the deceased’s will or the intestacy rules.

Most married couples, and probably most cohabitees, are probably content to own their property as joint tenants, happy to accept that their partner will continue to own the property after he or she has passed on. But the situation does require careful thought.

If there are children, can you ensure that they will inherit the property (if that is what you want)? Not if you are joint tenants. If H and W are joint tenants of their home, and have two children, and H dies, W becomes the sole owner of the (former) matrimonial home. They might each have made wills providing that if he or she, as the case may be, survived his or her spouse, the property would go to the children.

But a will is “ambulatory”: it is only effective on the death of the testator. W might remarry – which would in any event revoke any pre-existing will – and her children with H may end up with no interest in that property.

It would be different if H and W were tenants in common. Then H could leave his share of the property to the children. If the couple are joint tenants they can “sever” the joint tenancy and convert it into a tenancy in common. This way each party can be sure that the children will at least have a share in the property.

January 11, 2017May 30, 2017

Why should I make a will?

It was Benjamin Franklin who said that nothing is certain except death and taxes.

Well, some people can avoid taxes, but there is no avoiding the Grim Reaper.

Nobody likes thinking about it but – unlike your golden retriever or your guinea pig – you know it’s coming: so there is really no excuse for not being prepared.

Just because you’re young and healthy, it doesn’t mean you shouldn’t make a will.

Do you travel a lot on business? Do you drive in Singapore, or use taxis, or a bicycle?

Statistically, most fatal accidents take place at home.

Go figure.

Do you have young children? What is going to happen to them if both you and your spouse or partner are in the wrong place at the wrong time?

Of course, the law does have rules for dealing with the situation where you do not make a will. There are special legal rules covering the general business of administering the estate and also the specific issue of distributing the assets.

The distribution process ordered by the court where you don’t have a will is a mechanical one dictated by the categories of relatives you have left behind. Nothing will go to friends or unmarried partners.

Surely it is better if your assets are allocated in precisely the manner you want them to be.

That is only going to happen if you make a will.

As regards administration, if you make a will you can nominate an “executor” (there can be more than one but no more than four), someone whose job it will be to “administer” the estate – get in all the assets, pay off the debts and distribute the balance in accordance with your instructions set out in the Will. If you got any sense you’ll speak to them and got them to agree to act as executor. Lawyers often act as executors, but it doesn’t have to be a lawyer.

If you don’t make a will, there is no executor. There will be an administrator, appointed by the court. It might be a relative – if they agree – or it might be an anonymous public official: either way, it will take a while to sort out.

It’s just more efficient to make a will.

Some things are not part of your estate and cannot be left in your will. If you and your spouse or partner own your home as what the law calls “joint tenants”, when one of you dies the house remains the property of the survivor. But if you both perish in a common disaster, the law says that the older person died first, so the house is treated as part of the estate of the younger person. For many people their home is their most valuable asset. It’s good to decide who is going to inherit it.

CPF moneys cannot be dealt with in a will. You should make a nomination and file it with the CPF Board.

The children? Your will should make provision for appointing a guardian. It’s really just a matter of peace of mind.

That is what it’s all about – peace of mind. And, even though every case is different, it needn’t be expensive.

NB (a) this is Singapore specific and (b) different rules apply to Muslims.

If you wish to make enquiries on Will writing services, contact us here.

January 11, 2017May 30, 2017

How do I make a will?

These days almost everything important is done online.

We live in a virtual world, where clicking a mouse in the right slot is about as complicated as things get. Even buying a property is basically done online, although there are a few documents to be signed.

Making a will is different. The formalities are important. They were first laid down in the English Wills Act of 1837 and in places, like Singapore, where English law took root, they have not really changed since.

The person who makes the will is the testator or testatrix, if a woman. He or she must sign the will at the foot, i.e., at the end of the document.

His or her signature has to be witnessed by two witnesses, who also sign at the foot at the will. (It is good practice for all three to initial the other pages.) It is important that all three – the testator or testatrix and the two witnesses – are together in the same room while the will is being executed.

A witness cannot receive anything under the will. It is important to remember this when arranging who the witnesses should be. Subject to that anyone can be a witness except the spouse of the person making the will.

Sometimes a husband and wife make what are called “mirror” wills, i.e. wills that are more or less identical to each other. In these circumstances it is important to ensure that each person signs the right will. This may seems very obvious but you would be surprised at how often it happens that husband and wife sign each other’s will, with the witnesses happily endorsing the same. It seems that in England and Australia there is legalisation enabling the court to rectify this error but the position in Singapore is untested. So get it right.

Although a will is such a formal document, it is – by definition – not effective until the testator or testatrix actually dies. So it is always possible to change a will. In the world of Agatha Christie this happens quite often. But in real life, circumstances do change: you acquire or sell assets; an executor or beneficiary dies before you: these things can make it sensible or necessary to change your will.

The simplest way to change a will is to “revoke” it – cancel it and replace it with a new one, which will expressly revoke all previous wills.

A testator or testatrix can also make additions to the will in the form of what is called a “codicil”: the same formal requirements apply as for a will.

What you must not do is start deleting and inserting words and sentences in the original will. That will only lead to confusion and possible challenges.

If you get married any will made before the marriage is automatically revoked unless it was expressly made in contemplation of that marriage.

A will is a private document but you need to ensure it is not forgotten. Your lawyer can keep the original, or a copy. In Singapore there is a Wills Registry and you can make use of that to keep an official record of the fact that you have made a will. It is not compulsory and the Registry does not keep a copy of the will.

December 23, 2016May 30, 2017

Here, There and Everywhere

It’s as gloomy as the weather in Singapore in December.

What happens when one shuffles off this mortal coil? While one can’t escape the inevitable, one can choose the manner in which one’s material legacy is distributed. An oft-skirted topic, though understandably so, many do not think it necessary to spend time considering the manner in which they pass on their assets.

Even if you have only lived in one country (or territory) your entire life, things may not be straightforward. Depending on your family composition (which unfortunately excludes your golden retriever or guinea pig), your assets may be distributed in ways and proportions which you may not desire, and to people whom you may not have considered.

Everything is further complicated when one has lived here, there and everywhere; or has assets located here, there and everywhere.

Almost cruelly, upon one’s death, if one dies interstate (i.e. without having a will) one’s family must face stress and headache (and possibly, significant legal costs) to be advised on default distribution mechanisms that may not be desirable. Broadly speaking, the general principle is that the law of the country in which the deceased was domiciled (i.e. lived, as opposed to a transient stay) at the time of his or her death governs the distribution of and the succession to at least some of his or her assets. While all this sounds easily determinable, the fluid movement of people’s habitual residence across borders these days means it will not necessarily be straightforward to determine an individual’s domicile, and hence, which set of legal rules should be applicable to the distribution of his or her assets on death. Each individual’s case is different and the determination of the person’s domicile can be a complex question.

To make matters worse, immovable property – real estate, whether in the form of “landed” property or apartments – does not fall under this broad general principle set out above. Typically, succession to the immovable property of one who dies intestate is governed by the law of the country or territory where the immovable property is located. This further complicates the distribution and there will be corresponding dollars (or pounds or euros) to be incurred by one’s estate if one passes without having drawn up a will.

Yet, even if one does draw up a will, there may be concerns.

The will may be challenged as to whether it was properly executed. In Singapore, this depends on whether execution conforms to the laws of the territory where (a) the will was executed; (b) the testator was domiciled; (c) the testator habitually resided; or (d) the testator was a national. For (b) to (d), the time of reference is when (i) the will was executed; or (ii) the time of the testator’s death. And this is only the tip of the iceberg.

In addition, if one disposes, in a Singapore will, of one’s immovable property located overseas, one must ensure that that will conforms with the laws of the jurisdiction in which the foreign immovable property is located.

Unfortunately, there is a vast number of permutations of circumstances in which one can own assets in various jurisdictions, and there is no one-size-fits-all solution.

On top of all this, with regard to one’s worldwide assets, a key question is whether one should draw up multiple wills covering each jurisdiction or “one will to rule them all”. A single will runs the risk of not being recognised as valid (or requiring significant time and effort to be “proved” in the jurisdiction(s) concerned. Additionally, ) as some jurisdictions have a distinct set of rules governing succession to property, such as “forced heirship”, where distribution of certain assets is dictated irrespective of the existence of a will. Also, while having multiple wills runs the risk of internal contradiction unless there is careful coordination.

Good planning allows one to avoid unnecessary expenses, and, maybe, reduces the impact of inheritance tax, and other death duties (not an issue, if you are domiciled in Singapore). This not only allows one to retain the robustness of one’s assets, but also saves one’s family from stress and heartache.

If you have assets here, there and everywhere, remember, where there is a will…