Estate Settlement via Intestacy (without a will)
It is commonly known that when a person dies WITHOUT a will, the person is considered as having died intestate. Less commonly known is the fact that a person can also be considered as having died intestate if he/she leaves behind an invalid will, or his/her will cannot be located.
The following write up will focus on the main issues of a person dying intestate; they are:
- Who can administer the deceased person’s estate;
- settlement of liabilities;
- settlement of assets; and
- the beneficiaries of the deceased person’s estate according to intestacy laws.
1. Who can administer the estate?
When a person dies, his legal persona ceases, and his financial affairs come to a standstill. Until the letters of administration have been applied for and obtained from the court, there is only one person who has the power to act on behalf of the deceased. The only person who has the power is the legal personal representative of the estate, who in the case of intestacy is called the “administrator”.
The person who wants to be the administrator and thus administer the estate needs to apply to the court to seek the appointment formally. In deciding who will be the administrator, the law gives priority to the next-of-kin of the deceased person’s family. However, the creditor of the estate also has the right to be the administrator of the estate.
The law also requires that at least 2 administrators be appointed where there are one or more minor beneficiaries. A ‘minor beneficiary’ refers to any person below 21 years of age who has a share in the estate. This is to protect the minor beneficiary’s interest in the estate.
Guardianship of infants
If only one of the parents passes away, the surviving parent would usually be the guardian of the infant children. This is usually not an issue unless the parents have divorced, and have their own family. In this situation, the guardianship of the infant children is not that straightforward.
If both parents pass away at the same time, there is no certainty as to who will be the guardian of the infant children. Sometimes there may be disputes as to who is the most suitable person to be guardian.
In settling intestacy estate, where there are beneficiaries who are minor, or the value of the estate exceeds S$250,000, the administrators are required to furnish 2 sureties to the Administration Bond. This is to ensure that the administrators administer the estate properly. Each surety must have assets worth the total value of the deceased person’s estate. After the Registrar has approved the particulars of the sureties, they have to affirm an affidavit certifying their worth.
If the administrator cannot get any person to stand as surety, he may apply to the Court to dispense with the sureties. The administrator will have to affirm an affidavit setting out the reasons for his application. The administrator will also have to obtain the consent of all adult beneficiaries and creditors to the dispensation of sureties. The Court has the discretion to dispense with one or both sureties.
2. Settlement of liabilities in intestacy estates
Outstanding debts and liabilities have to be settled before the (net, if any) estate assets can be distributed to the beneficiaries. Some examples of common outstanding debts are:
- Credit card debts
- Car loan
- Personal loan
- Business loan guaranteed by personal assets
Once the creditors know about the debtor’s death, they will file a caveat onto the estate. The caveat will only be lifted if the creditors are satisfied with the administrator’s undertaking of settling the debts and liabilities from the estate. If the caveat is not lifted, the court will not issue the grant (i.e. letter of administration), and therefore estate assets cannot be distributed.
3. Settlement of assets in intestacy estates
The administrator has to provide the court with a schedule of the deceased person’s assets at market value as of the date of death. For example:
- Bank Accounts (name of bank, account numbers)
- Insurance Policies (name of company, policy numbers)
- HDB flat at (full address)
- Private properties (housing, shops, etc.) at (full address)
- Other properties in Singapore
- Other movable property outside Singapore
- Outstanding debts in Singapore secured by mortgage (name of bank, property involved)
The net estate value is the difference between the sum of assets (items i to vi) and outstanding mortgage (item vii). The purpose of the schedule of assets is for the court to confirm the value of the estate and to determine the fees payable for the matter. If the net estate is worth more than $3M, the grant would need to be applied for at the Supreme Court.
The co-administrators, the sureties, and the beneficiaries are entitled to this information.
After the a letter of administration has been extracted, the administrator can start to call in the deceased person’s assets, pay off the estate debts, discharge estate liabilities, and then distribute the net estate to the statutory beneficiaries.
4. Beneficiary issues
The beneficiaries of an intestate estate are determined by Section 7 of the Intestate Succession Act. In some situations, this might not reflect a fair and equitable distribution of assets, and many court cases have been fought over this. The rules are as follows:
If an intestate dies leaving a surviving spouse, no issue and no parent, the spouse shall be entitled to the whole of the estate.
If an intestate dies leaving a surviving spouse and issue, the spouse shall be entitled to one-half of the estate.
Subject to the rights of the surviving spouse, if any, the estate (both as to the undistributed portion and the reversionary interest) of an intestate who leaves issue shall be distributed by equal portions per stirpes to and amongst the children of the person dying intestate and such persons as legally represent those children, in case any of those children are dead.
Proviso No. (1) — The persons who legally represent the children of an intestate are their descendants and not their next-of-kin.
Proviso No. (2) — Descendants of the intestate to the remotest degree stand in the place of their parent or other ancestor, and take according to their stocks the share which he or she would have taken.
If an intestate dies leaving a surviving spouse and no issue but a parent or parents, the spouse shall be entitled to one-half of the estate and the parent or parents to the other half of the estate.
If there are no descendants the parent or parents of the intestate shall take the estate, in equal portions if there be two parents, subject to the rights of the surviving spouse (if any) as provided in rule 4.
If there are no surviving spouse, descendants or parents, the brothers, sisters and children of deceased brothers or sisters of the intestate shall share the estate in equal portions between the brothers and sisters, and the children of any deceased brother or sister shall take according to their stocks the share which he or she would have taken.
If there are no surviving spouse, descendants, parents, brothers and sisters or children of such brothers and sisters, but grandparents of the intestate are surviving, the grandparents shall take the whole of the estate in equal portions.
If there are no surviving spouse, descendants, parents, brothers and sisters or their children or grandparents, but uncles and aunts of the intestate are surviving, the uncles and aunts shall take the whole of the estate in equal portions.
In default of distribution under the foregoing rules the Government shall be entitled to the whole of the estate. As innocent as the rules might seem to be, there are many potential problems.
Problems surrounding Beneficiaries determined by the intestacy law:
- Elderly parents are excluded from the deceased estate if the deceased leaves behind a spouse and children.
- Step-children are not included in the list.
- Illegitimate children are not included in the list.
- Children from your previous marriage might be disadvantaged.
- Ex-spouse can gain access to the deceased estate as a guardian of the children.
- Couple going through separation leading to divorce is still considered husband and wife, and hence the surviving spouse is legally entitled to at least 50% of the estate.
- The next-of-kin could be the administrator or co-administrator of the estate, but might not be entitled to the estate.
- Living-in partner is excluded from the list.
- If one beneficiary is bankrupt, your estate could land up with the beneficiary’s creditor.
- If one beneficiary lacks financial discipline or maturity, you can’t stop the distribution to him. The administration cannot hold the assets in trust, and must distribute the estate to the beneficiaries after the probate formalities are completed.
- Your best friend is excluded from the list.
- You can’t leave a legacy to any organisation.