Source : The Sunday Times, September 9, 2007
Q. MY PARENTS are owners of an existing private property as joint tenants. They wish to pass on the property to me ultimately when they die.
The property is worth about $1 million and still has a small outstanding bank loan.
What are the full costs, taxes and so on involved to add my name as a joint tenant? And what would the costs be like if my name is added as a tenant-in-common instead?
After adding my name as either joint tenant or tenant-in-common, can I use my Central Provident Fund (CPF) money to pay off the outstanding bank loan in either case?
Alternatively, if my parents choose to write a will after one of them dies, what are the costs to be considered?
And when the time comes to exercise the will, what costs and taxes are there to exercise the will and to transfer the property to my name. Are there stamp duties to be paid?
Other than what has already been mentioned, are there other smarter or more cost-effective ways to transfer the property to me?
A. IN ORDER to add your name as a joint tenant, you are likely to have to pay stamp duty on the transfer of your notional share of the property.
The Commissioner of Stamp Duties will adjudicate the amount of stamp duty payable on the transfer. Your notional share is taken at one-third of the value of the property since there will be three joint tenants when your name is added.
On the basis of your computation of $1 million as the value of the property, your notional one-third share is $330,000 and the stamp duty payable is $4,500.
There is also your lawyer’s legal fees to effect the transfer which you will have to consider.
Joint tenancy means that you own the whole of the property jointly with your parents and the right of survivorship exists. This means whoever lives longest retains the property.
The joint tenant who has predeceased the remaining joint tenants cannot will his notional share to anyone because of this right of survivorship.
You are more likely to outlive your parents, in which case you are likely to be the sole surviving joint tenant with the passage of time.
If your name is added as a tenant-in-common, your parents may specify the percentage of the property to be allocated to you, for example, 1 per cent or 25 per cent or whatever percentage your parents decide.
Based on your share, you will have to pay stamp duty assessed on your share of the value of the property and your lawyer’s legal fees for the transfer.
The difference between transferring as tenants-in-common and joint tenants is that the share given to you by your parents is specific when transferred as a tenant-in-common. The larger your share, the higher the stamp duty payable.
Another difference is that your parents may make a will to give away their share in the property under tenant-in-common but not if the property is held as joint tenants.
However, as you have said that your parents intend for the property to be ultimately yours after they die, transferring the property to you as a tenant-in-common will not fulfil their goal.
This is because you own only the share that they transfer to you, and not their remainder which is still in their name. In order to obtain their share, they must specifically will their share to you in a will.
Once your name is added as joint tenant or tenant-in-common, you may start to use CPF to pay the outstanding loan.
If your parents write a will to will the entire property to you after their death, it will essentially ensure their wish that the property be passed to you when they are no longer around.
However, this means that you cannot use your CPF to pay for the property.
There are legal costs for preparing the will and for subsequently administering the estate of your parents when they die.
There is estate duty to be paid on your parents estate although dwelling houses are exempt up to $9 million and personal property up to $600,000 (for example, cash in hand, shares, and so on).
Therefore, if your parents’ private property does not exceed $9 million, it is unlikely to be taxed on an estate duty basis. There is nominal stamp duty of $10 payable on the transfer pursuant to the administration of probate.
It would seem that the best way for the property to be transferred to you pursuant to your parents’ wishes would be by way of a will rather than by effecting a transfer to you by way of gift or sale.
Lim Choi Ming Partner KhattarWong
Advice provided in this column is not meant as a substitute for comprehensive professional advice.
Transfer of ownership
Joint tenancy: This means you own the whole of the property jointly with your parents and the right of survivorship exists. On the basis of $1 million as the value of the property, your notional one-third share is $330,000 and the stamp duty payable is $4,500.
Tenant-in-common: If your name is added in this manner, your parents may specify the percentage of the property to be allocated to you. Based on your share, you will have to pay stamp duty assessed on your share of the value of the property and your lawyer's legal fees.
Writing a will: If your parents write a will to will the entire property to you after their death, it will ensure their wish that the property be passed to you when they are no longer around.
However, this means you cannot use your CPF to pay for the property's outstanding loans. There are legal costs to preparing the will and administering your parents' estate.
Subscribe to:
Post Comments (Atom)
.jpg)
No comments:
Post a Comment