Author: Anabelle Peh

The restrictive Covid-19 pandemic policies have created bottlenecks in administration processes that facilitate the distribution of assets to loved ones, say Henra Sensei and Tri Djoko Santoso of LN Consulting

The impact of the Covid-19 pandemic has been significant on the estate planning landscape in Indonesia. With 5,539,394 Indonesians infected, resulting in the deaths of 148,073 people (source: worldodometers February 28, 2022)and the numbers still rising, there have been numerous cases in Indonesian parents passing away and leaving their children behind, children dying and leaving their parents behind, as well as whole families dying.

Estate planners have had their work cut out for them as many Indonesians are typically negligent about writing their Wills. This means their loved ones cannot easily track their assets when they die. It is often the case that a bereaved family does not even know that the deceased parent had a life insurance policy or a Will, or where these Wills and life insurance policies are kept.

Matters are complicated for some Indonesian families who have assets or life insurance policies outside Indonesia. Loved ones of the deceased have to find the supporting documents, and if they are minors, there may not be any guardianship plan in place to get the ball rolling.

Bottlenecks in administrative processes

The lockdown policies and other pandemic restrictions across the country that were implemented during the pandemic have had a serious impact on public services, organized by both government offices and private entities in Indonesia. They cannot operate as per normal, causing delays in the issuance of death certificates and other administrative documents such as certificates of heirs.

Most of the time this process requires a district court or an Islamic religious court to be involved. However, trial schedules are frequently seeing postponements, which results in court decisions potentially taking longer. This includes courts’ involvement in determining who are the guardians of minors, or who are adults with legal disabilities.

This process is key as it generates legal documents and court decisions that are the main gateway to carrying out the next stages of the administration process when someone dies. A common occurrence is insurance beneficiaries who are minors failing to complete supporting documents that expedite insurance claims because there are delays in the appointment of a guardian.

Meanwhile, the claims process can also be delayed as the pandemic restrictions have forced some insurers to reduce their employee numbers and service hours to provide insurance claim services. In addition, the pandemic restrictions and uncertainties on individuals state of health have also affected the communication channels between notaries, financial planners and life insurance agents, and clients.

What lessons can we take from the pandemic?

The delays in the administration of important documents that expedite the distribution of assets to a deceased person’s loved ones have serious implications. This is typically exacerbated when heirs are unable to present written evidence, which is the main requirement. In such cases, it is difficult to estimate the duration of the process.

Against this backdrop, a comprehensive estate plan and a proper life insurance policy should be able to reduce the impact of administrative delays and help the distribution of assets to bereaved families. Liquidity planning is a must using various forms of liquid instruments, such as cash or near cash. Indonesian families must strive to have detailed records of their assets and debts that must be maintained for validity and accuracy.

We recommend that individuals write their Wills with us, clearly stating who the Executors of their will should be, and who should be the guardian of minors or those with special needs, including adults with dementia. The best option is to contact a notary in Indonesia. Or if your situation is not complicated, you may make your own Will (Olographis testamen). However, it must be submitted to a notary for legal storage purposes.

People also need to ensure that they keep up-to-date records about the professionals involved who their loved ones can contact in the event of their death — for example, notaries and lawyers, tax consultants, financial planners, and insurance agents both in Indonesia and overseas, wherever the assets are domiciled.

Many Indonesians have made efforts to diversify and allocate their global wealth for financial and family security. If they already have life insurance coverage somewhere overseas, they should also ensure that they have life insurance coverage in Indonesia. After a person dies, this will help loved ones to have easy access to liquidity, both in Indonesia and abroad. There should always be a Plan A or Plan B, as well as an entry and exit strategy in this risky life.

If you are a financial practitioner in Indonesia, we recommend you take the AEPP® course in Indonesia. Gaining global knowledge will help you in totally serving your clients in Indonesia. Henra Sensei, CFP®, AEPP® and Tri Djoko Santoso, CFP®, AEPP® are financial educators and are both facilitators of AEPP® courses in Indonesia.

The above article first appeared on EPPL’s The Custodian, Issue 21.

#Wills #Estate Planning

Henra Sensei, CFP®, AEPP®

Tri Djoko Santoso, CFP®, AEPP®

Founder, LN Consulting

The Malaysian 2022 Budget announced on 29 October 2021 was passed into law as the Finance Act 2021 on December 31, 2021. There were a few major changes to the original budget proposals. A significant exception related to the budget proposal to tax Foreign Source Income.

In what may be regarded as a last-minute “stay of execution”, the Ministry of Finance (MOF) issued a press release suspending the full impact of taxing Foreign Source Income received in Malaysia by Malaysian residents.

MOF responds to concerns

The late change of heart was in response to concerns raised inter alia by economists, the wealth planning industry, as well as corporate and individual taxpayers on the potentially detrimental and far-reaching effects on the economy of taxing Foreign Source Income receipts.

One of the most worrying effects, even ignoring the difficulties involved in collecting the tax, would be to slow down foreign monies flowing into the economy at a much-needed time.

It is clear the budget proposal had not been fully thought through and the press release was greeted with a collective sigh of relief by Malaysian residents and quite possibly the international community which, when pushing for the change, may not have expected such a clumsy approach.

The MOF listened and introduced changes representing a significant watering-down from the original proposal:

Exceptions to the rules

For clarity, the new rules do not apply to

• Resident companies carrying on the business of Banking, Insurance, Air and Sea Transportation. Such companies will continue to be taxed on Foreign Source Income whether received or not.
• Non-residents of Malaysia will also continue to be exempt from tax on Foreign Source Income received in Malaysia.

There remain areas for clarification and the MOF will announce the conditions to be complied with to enjoy the exemptions. But deferring the budget proposal to 2026 allows the MOF time to formulate a more cogent and considered response to meeting its international commitments.

Notes of caution

Tax Resident Companies and Limited Liability Companies may explore the feasibility of re-characterising non-dividend income into dividend income by interposing a foreign subsidiary in a low-tax financial centre. But it will come as no surprise if the conditions require a headline tax of 15% in the location of the company paying the dividend.

A further note of caution to resident individuals is to expect claims to exempt Foreign Source Income will be heavily scrutinized. So, keep excellent records. As the saying goes “the sun may be shining but don’t forget to take your umbrella.”

We also provide trust to safeguard your Savings and distribute your wealth

The above article first appeared on EPPL’s The Custodian, Issue 21.

#Wills #Estate Planning

Mike Grover

Former Head of Tax at International Accounting Firm

The distribution of assets held in joint ownership following death is not always so straightforward and can be challenged, explains Persis Hoo.

People often assume that there is no need to provide for joint bank accounts or joint properties in their Wills due to the assumption that the asset will automatically fall into the hands of the other joint owner when one of them passes on.

While the law of survivorship holds true in most circumstances, it does not mean that the surviving ownership of the asset is insulated from a challenge. This is perfectly illustrated in the seminal High Court case of the Estate of Yang Chun (Mrs) née Sun Hui Min, deceased v Yang Chia-Yin [2019] SGHC 152:

Madam Sun, the deceased wife, and her deceased husband, Mr Yang, had been married for more than 50 years. Mr Yang passed away in 2012 while Mdm Sun passed away in 2016. Proceedings were brought by the Estate of Mdm Sun (her nephew) against the sole executor and representative of Mr Yang’s estate (his nephew).

The couple held multiple bank accounts in joint names. While Mr Yang wrote a Will, he omitted any reference to the joint accounts. The crux of the dispute turned on whether the monies in the joint accounts belonged to Mdm Sun after Mr Yang’s passing. In the course of administrating Mr Yang’s estate, the Defendant had allegedly used the monies that belonged to the Estate of Mdm Sun. Therefore, if the court ruled in favour of the Plaintiff, the Defendant had to return a sum of about half a million dollars to the Plaintiff.

The question then is who was the beneficial owner of the monies in the joint account after Mr Yang’s death? Was it the Defendant, who asserted that as Mr Yang was the main contributor to the monies, Mdm Sun held the monies in the joint accounts on trust for his estate? Or was it the Plaintiff, who argued that Mdm Sun was the beneficial owner of the monies by way of the law of survivorship?

The relevant legal principles

1. The law of survivorship: Joint tenancy

   Joint Tenancy refers to a form of co-ownership where parties own the entire interest in a particular property. Upon the death of a joint tenant, the surviving joint tenant will automatically take the entire interest in the property. This is also known as the law of survivorship.

2. Resulting trust

   Notwithstanding the above, the law of survivorship can be displaced by resulting trust. A resulting trust arises where there has been a transfer of property in circumstances where the deceased did not intend to benefit the survivor. In this case, there was no clear intention by Mr Yang to retain beneficial ownership of the bank accounts. This brings us to the presumption of resulting trust.

3. Presumption of resulting trust

   The presumption of resulting trust kicks in where there has been a transfer of property to the surviving owner, for which the survivor has not provided the whole of the consideration (or value of the property) and there is no evidence that shows the true intention of the transferor. Therefore, an inference is made that the deceased did not intend to benefit the survivor. If this presumption arises and is not displaced, the survivor is deemed to hold the property on trust for the deceased’s estate.

   However, all is not lost. If the presumption of resulting trust arises, the presumption of advancement can be argued to displace the former.

4. Presumption of advancement

   Certain types of relationships attract this presumption, for example, the transfer of property from husband to wife or father to child. Within these established categories of relationships, transfers of property are intended to be gifts in favour of the recipient.

Application of the law to the facts

In this case, the High Court found that the presumption of resulting trust arose on the facts with respect to the joint accounts since Mr Yang contributed more monies to them. However, the presumption of advancement also arose because Mr Yang and Mdm Sun were married.

For a good part of their 50-year marriage, Mr. Yang was the sole breadwinner of the family and Mdm Sun remained financially dependent on him. The evidence also pointed to the couple having a loving and close marriage. Accordingly, together with other facts, the court held that the presumption of advancement applied, and on the basis of the law of survivorship, the monies in the joint accounts were beneficially owned by (gifted to) Mdm Sun. Hence, Yang Chia-Yin was ordered by the court to return the $500,000 of monies to the Estate of Mdm Sun.

Another case in point is Chye Seng Kait v Chye Seng Fong (executor and trustee of the estate of Chye You, deceased) [2021] SGHC 83. The plaintiff and the defendant in this recent estate dispute are brothers. Chye Seng Kait (Plaintiff) disputes that Chye Seng Fong did not perform his duty as Executor of their father’s Will in accounting for the joint bank accounts as part of the estate of their father — namely whether the joint accounts between the deceased and his daughter should go to the daughter by way of the law of survivorship, or whether it should fall to the estate of the deceased. The Plaintiff submitted that the latter should prevail based on the principle of resulting trust (that is the daughter is only holding the monies in the joint account in trust for their father).

Interestingly, the court held that the daughter did hold the joint accounts on the resulting trust for the father’s estate. However, the Plaintiff’s claim was ultimately rejected as the deceased had explicitly dealt with his joint assets in his Will. Clause 2 of his Will read as follows:

“I hereby declare that any immovable property held by me jointly with the co-owner as joint tenants shall belong to the surviving joint tenant absolutely by virtue of the right of survivorship. I further declare that any account held by me with any other person(s) jointly in any financial institution shall also belong to such joint account holder(s) absolutely by virtue of the right of survivorship.”

The court held that in construing a Will, the court will ascertain and give effect to the testator’s intention as expressed in his Will, read as a whole in light of any admissible external evidence.

Therefore, despite the plaintiff’s desperate attempt to lay claim to the joint accounts, the court ruled in favour of the deceased’s plain and ordinary intent to gift the joint accounts to his daughter, the co-owner of the accounts.

What does this mean for me?

As shown in these two cases, just because assets are held in joint bank accounts does not mean that the beneficial ownership of the asset is insulated from a challenge. In Singapore, the presumption of advancement is only limited to certain categories of relationships. Further, the presumption of resulting trust may arise in certain situations where one party is the main financial contributor to the asset.

To ensure peace of mind and to prevent any disputes or uncertainty, it is advisable to clearly lay out your intentions in your Will or Trust. Even if your assets are held in joint bank accounts, usually for the sake of convenience, it is best to clearly spell out your intention for distribution in your Will.

The above article first appeared on EPPL’s The Custodian, Issue 21.

#Wills #Estate Planning

Persis Hoo

LLB

Estate and Succession Practitioner representing

Precepts Legacy Pte Ltd