Source : The Sunday Times, Mar 16, 2008
Q What happens to a person’s liabilities when he dies? For example, if he is in debt to a bank for his personal credit line, will his dependants - say, his wife - be required to repay the debt even though she has no interest in the account, which is held in his name only?
A YOUR dependants, such as your wife, are not liable for your debts unless, for instance, they were joint-account holders with you, or acted as guarantors for your loan.
Your estate is liable for your debts. The estate includes your assets other than an HDB flat, the balance in your CPF account, and any life insurance expressed for the benefit of your spouse or children at the inception of the policy.
As the CPF Dependants’ Protection Scheme (DPS) was transferred to two private insurers about two years ago, and CPF nominations are no longer applicable to DPS, DPS death proceeds will also form part of your estate.
While the balance in your CPF account is protected from creditors, any CPF used for investment will not be protected from creditors on death. You should therefore consider liquidating any CPF investments before death.
As in the high-profile case of former NKF chairman Richard Yong, when someone, while in a state of insolvency, makes any asset transfers that could be construed as an attempt to defraud creditors, those assets may be recovered by creditors too.
Leong Sze Hian
President, Society of Financial Service Professionals
Advice provided in this column is not meant as a substitute for comprehensive professional advice.
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