Legal Tips

Estate Duty

Document Date: 01-Mar-2011

1. What is estate duty and how does domicile affect estate duty?
2. When do I have to pay estate duty?
3. Will the relevant authorities inform my family members or my Executor(s) that estate duty is payable?
4. Are personal items such as jewellery and watches in a bank's safe deposit box subject to estate duty?
5. What is the rate of estate duty payable on my estate when I die?
6. What are the estate duty exemptions?
7. I purchased an individual life policy on my own life. When I die, will the proceeds be subject to estate duty?
8. Would a life policy be subject to estate duty if it is assigned to another person?
9. How is estate duty exemption calculated for insurance policies, created under Section 73 of the Conveyancing & Law of Property Act?
10. If a policyholder dies 5 years after creating the Section 73 Conveyancing & Law of Property Act trust, would the insurance policies be liable to estate duty?
11. How does the budget statement for fiscal year 2008 affect estate duty?
12. Does the removal of estate duty for persons dying on or after 15 Feb 2008 affect the cap of $150,000 of life or accident and health policy moneys payable by the insurer?

Please note that Estate Duty has been removed for deaths occuring on or after 15 Feb 2008. The Questions and Answers below apply to deaths occuring before 15 Feb 2008, unless stated otherwise

1. What is estate duty and how does domicile affect estate duty?
   
   When a person dies, all his assets (both moveable and immoveable) become his estate. If a person died domiciled in Singapore, all his moveable as well as immoveable assets will be subject to estate duty. If a person died domiciled outside Singapore, only his immoveable assets in Singapore will be liable to estate duty. A person's domicile is the place where he intends to make his permanent home even though he may be living in another country presently. If determining domicile is issue, you need to seek independent legal advice.
   
   

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2. When do I have to pay estate duty?
   
   Estate duty has to be paid on a deceased estate. The executor should pay estate duty immediately to avoid paying interest. For deaths occuring on or after 1 Jan 2005, interest will be imposed if estate duty is not paid beyond 6 months from the date of death. If you wish to have more details of the interest rates, see http://www.iras.gov.sg.
   
   

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3. Will the relevant authorities inform my family members or my Executor(s) that estate duty is payable?
   
   The Executors should ensure that estate duty is paid. Usually, estate duty has to be settled before the Court will issue the Grant of Probate to the Executors.
   
   

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4. Are personal items such as jewellery and watches in a bank's safe deposit box subject to estate duty?
   
   Yes, estate duty is payable on all moveable assets that belong to the deceased. Other moveable assets include the deceased's bank accounts, shares, motor vehicles and insurance monies.
   
   

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5. What is the rate of estate duty payable on my estate when I die?
   
   The present rate of estate duty for persons dying on or after 28 February 1996 is 2 tier:
   
   - For every dollar of the first S$12 million, the tax rate is 5%
   - For every dollar of exceeding S$12 million, the tax rate is 10%
   
   

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6. What are the estate duty exemptions?
   
   For dwelling houses, up to the value of S$9 million.
   
   For all other property (including CPF Balance), up to the value of S$600,000.
   
   If the CPF balance exceeds S$600,000, the excess of $600,000.
   
   

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7. I purchased an individual life policy on my own life. When I die, will the proceeds be subject to estate duty?
   
   Yes, your life policy proceeds will form part of your estate and be subject to estate duty.
   
   

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8. Would a life policy be subject to estate duty if it is assigned to another person?
   
   If the policy is assigned for valuable consideration as part of a commercial transaction, the policy will not be included as part of your estate which is subject to estate duty. eg. assigning the policy to a bank as security See also "Contract".
   
   Otherwise, the assignment will be treated as a gift. If the assignment is by way of a gift, it will be subject to estate duty if the assignment was made within 5 years of the date of death of the assignor. To be exempted from estate duty, the assignment by way of gift must satisfy 3 conditions:
   
   
   1. the assignment must be made more than 5 years from the date of the assignor's death;
      
      
   2. the assignment must be absolute (ie. the assignor must have no interest of any sort in the policy); and
      
      
   3. the premiums must be paid by the person who has been assigned the policy once it has been assigned. If part of the premiums had been paid by the assignor, then estate duty is chargeable on the portion for which the assignor had paid the premiums.
      
      

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9. How is estate duty exemption calculated for insurance policies, created under Section 73 of the Conveyancing & Law of Property Act?
   
   Exemptions for estate duty will be calculated based on number of beneficiaries, regardless of the number of trust policies. Each beneficiary would be treated as a separate estate qualifying for an exemption of $600,000. You must have no interest in the trust policy from its inception; and you must not reserve any rights for yourself.
   
   

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10. If a policyholder dies 5 years after creating the Section 73 Conveyancing & Law of Property Act trust, would the insurance policies be liable to estate duty?
    
    Policy effected by the deceased and kept by him is liable to estate duty under Section 7(1)(f) of the Estate Duty Act. Even if the policy is taken out more than 5 years before death, the policy is still subject to estate duty.  But each policy subject to the S.73 CLPA trust is treated as a separate estate for estate duty purposes and qualifies for the exemption up to $600,000 per policy.
    
    However, if it is a single premium policy taken out 5 years before the deceased's death, and the deceased had no interest in the policy from its inception and did not reserve any rights for himself, it will be considered as gift made more than 5 years before death. As such, no estate duty is payable.
    
    

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11. How does the budget statement for fiscal year 2008 affect estate duty?
    
    One of the highlights of the budget statement is the removal of estate duty from the Singapore tax regime from 15 Feb 2008. This means that estate duty is no longer payable for persons dying on or after 15 Feb 2008.
    (Source: www.Singaporebudget.gov.sg)
    
    

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12. Does the removal of estate duty for persons dying on or after 15 Feb 2008 affect the cap of $150,000 of life or accident and health policy moneys payable by the insurer ?
    
    No. Even though estate duty has been removed, an insurer is only allowed to pay up to S$150,000 of life policy or accident and health policy moneys to the proper claimant without the production of any probate or letters of administration. A "proper claimant" means a person who claims to be entitled to the sums in question as executor or the deceased, or who claims to be entitled to that sum (whether for his own benefit or not) and is the widower, widow, parent, child, brother, sister, nephew or niece of the deceased.