When Alien Huang passed away suddenly last month, the Taiwanese host left behind a S$2mil Taipei apartment, among other assets. He’d planned to pay off the mortgage by the time he was 45. But with his sudden passing at age 36 — and with no will drawn up — experts estimated that Alien’s dad may be saddled with the remaining mortgage of the house, and may have to shell out at least S$4,700 monthly for mortgage or sell the property at higher tax rates.

What if this happened to you in Singapore? What happens to your HDB flat or private property if you pass away suddenly and without a will? Will your parents, children or other family members inheriting the property be riddled with insurmountable debt, repaying your home loans?

While Singapore’s real estate laws may be different from Taiwan’s, one thing’s the same: Death is certain, and it pays to do proper real estate planning, regardless of which country you live in.

To break it all down, we spoke to Alfred Chia, CEO of financial advisory firm, SingCapital. He’s among a panel of property and financial experts helming webinars at the Singapore Property Show 2020 (https://sps2020.99.co/), happening online from Oct 10 to Dec 4. Among the highlights of the fully-digital event are virtual 4D tours of online show flats, webinars, and even prizes for webinar viewers. He’s also penned ‘Last Wishes’, a book about financial and will planning for when death happens.

What happens to your property in Singapore when you pass away?

Writing a will, regardless of how old you are, may help simplify things. “I definitely recommend home owners to write a will. A simple will will cost only a few hundred dollars, and you have a peace of mind,” Alfred asserts. “Writing a will helps if the person has certain specific beneficiaries they want to designate [their assets to]. For example, if your children have their respective HDB flats, you can write a will to say that the property should be sold, and proceeds to be distributed among your children, or other family members, if you wish to.

[If there’s a will], it can also help expedite processes. When someone dies without a will, a letter of administration has to be applied for, and that takes a long time, especially if there are many beneficiaries involved. If there’s a will, then it’s about the execution of the will — you determine who’s the executor and it’ll be easier for them to go to the different banks or government bodies [to do what needs to be done].

If the home owner did not leave a will…
Then intestacy laws of Singapore come into play. “Intestacy law is the law that governs when people pass away without a will,” Alfred says. All this applies to both HDB and private properties.
If the deceased is the sole owner of the property: It depends on their marital status. “Under the law, if someone is single, the property goes to their parents. If married, it goes to their spouse and children. If they don’t have children, then their parents will get half and their spouse gets half.
If the deceased is a joint owner of a property: It depends if the ownership is a joint tenancy (where co-owners hold equal interest in the flat, according to HDB) or tenancy-in-common (where each co-owner holds a separate and distinct share in the flat). Most HDB flats in Singapore are bought under the joint tenancy scheme.

“In the case of a joint tenancy, the surviving party will inherit the property. No will can change that. If it’s a tenancy-in-common, the deceased’s share can be distributed by a will, or through Intestacy without a will,” explains Alfred.

Things get more complex if the deceased has not fully paid off their property and there’s still an outstanding loan on the property. “[In this case], the bank has the first charge over the property,” Alfred reveals. “In order to inherit the property, the beneficiaries also inherit the loan.”

However, all borrowers in Singapore are subject to the Total Debt Servicing Ratio (TSDR) framework, that is, your monthly loan repayments (home, car or other personal loans) cannot exceed 60 per cent of your gross monthly income. This means that beneficiaries inheriting the property will also be subject to TSDR. “If the beneficiary has the income capability, they can take over the loan. If they can’t or don’t want to, the bank will auction off the property,” says Alfred.

In other words, if an 80-year-old mother who is retired and has no monthly income is a beneficiary to her deceased child’s property, she will not be able to service the loan, and in effect, not be able to inherit the property.

“If you’re using CPF to service your HDB housing loan, you’re required to buy the Home Protection Scheme (HPS), which is a very good feature that’s administered by HDB. If you’re covered under HPS, then the insurance will pay off the loan. If we’re using the example of the 80-year-old mother, then in this case, she can inherit the property,” Alfred explains.

But, wait, even if the loan is covered, prevailing HDB home ownership rules will still apply.
Essentially, you can only own one HDB flat at any one time. “Let’s say someone passes away and leaves their property to their children, but the two children also have their own HDB flats, then they would not be able to inherit one more HDB flat. In this case, they will be given the choice to inherit the property and sell their own flat, or sell the HDB flat that they inherit and keep their existing one. If they sell the flat that they inherit, then proceeds will be distributed accordingly to [beneficiaries],” says Alfred.

“Mortgage insurance is similar to HPS, but for private properties. For HPS, you can use your CPF Ordinary Account to pay the premium, whereas for mortgage insurance, you have to pay with cash, Alfred explains.

It's something that I think a lot of private property owners neglect to buy. We normally recommend our clients to buy mortgage insurance, and to buy the full outstanding loan amount. For example, if the outstanding loan is $1mil, they should buy $1mil. If they buy $500,000, then there’s still $500,000 outstanding.

Singapore Property Show 2020 is happening from Oct 10 to Dec 4 at https://sps2020.99.co/.

Photos: Unsplash/Amos Lee, Samantha Gades, Rigel, Chuttersnap