Estate-duty laws unfair to the middle income
While helping a widow with her insurance claims and estate-duty computation, I realised that Singapore’s estate-duty laws are unfavourable to the middle income.
On paper, the $9 million exemption for residential property assets looks good but, in reality, how many Singaporeans can take advantage of this? Generally, most Singaporeans do not even own their homes as up to 70 per cent of its value may still be mortgaged to the bank.
The widow’s prudent husband had taken up mortgage insurance of $320,000 to cover his loan with the bank but upon his death the proceeds were computed under ‘Other Assets’. While outstanding debts were allowed as deductions, the biggest debt most Singaporeans are likely to incur, the outstanding home loan, was not deductible.
As a result, the deceased’s estate enjoyed a miserly exemption of over $100,000 under ‘Residential Property’ (market value less outstanding mortgage) and ended up with an inflated value under ‘Other Assets’. The widow was slapped with a whopping $26,000 in estate duty, mostly contributed by the mortgage-insurance payout which she promptly used to pay off the home loan.
The laws as they stand seem unfair to the middle income, especially young families with huge mortgages who are unlikely to benefit from the exemption under ‘Residential Property’. Instead, they are likely to be penalised with a higher estate duty for being prudent when they buy mortgage insurance.
Source : Straits Times - 1 Mar 2007
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