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Estate Planning

What are Digital Assets?

By Mr Lee Chiwi
Excerpt from PreceptsGroup Succession and Trusts in Wealth Management (4th edition) Book

Digital assets comprise electronic records and information, documents, literary works, images and even money in electronic form stored in computers, hard disks, online cloud storage services, digital accounts and other forms of media capable of storing electronic information.

Examples of digital assets include the following:

Online accounts – bank accounts, payment gateway accounts, e-wallet, e-commerce accounts, investment, personal email accounts, gaming or cryptocurrency accounts.
Social media accounts – Facebook, twitter, Instagram or LinkedIn accounts.
Reward programs – airline miles, hotel credits.
Personal data – photographs, electronic books, music or videos in computer or kept on a cloud server.
Others – domain names, blogs, websites, cloud storage accounts like Dropbox or Google Drive or online business sites.

They can be of financial or emotional value. We cannot rule out that digital assets of emotional value may yet be exploited and have commercial value. But based on such categorization, it may be appropriate for separate persons to be dealing with them after death of the deceased.

We now see digital data everywhere and everyone is using less cash nowadays and instead using their digital wallets (which allows electronic credit and debit transactions) through their smart devices and mobile phones to make payments and engage in all kinds of transactions. Points and rewards are digitally stored and utilized for payments or to obtain benefits.

We cannot rule out that there will surely be digital assets that are employed in the family business. It can be expected that as Singapore strives towards being a leading smart nation, many business transactions within the private and public sector will increasingly become the norm.

The wide ambit of Digital Assets and non-uniform legal markers

In dealing with the succession of digital assets, one needs to be mindful that there might be the lack of established laws and uniform definitions when a person other than the deceased is to take over the administration of digital assets. The applicable laws concerning may be that of the laws of an unfamiliar jurisdiction where the service provider resides. The relevant laws and data protection and security regulations now widely prevalent may only recognize and allow only certain parties other than the testator to handle the digital asset after the testator’s demise. When the testator subscribed for the service, he would have consented to be bound by the terms and conditions of the service provider, which terms and conditions are to be ascertained by his executors. And in some cases, the perceived “ownership” of the digital asset is in fact only a license to use. Hence the license will no longer be available when the testator deceases. Where there is no ownership, the contents relating to the digital assets could not then be transferred to any beneficiary. Whether benefits associated with a digital account will survive death depends on the terms of the service provider. Some service providers may have some form of legacy contract or inactive account management service which allows the account to be closed or for submission of a request for transfer of data account of the deceased.

For more related content on Estate Planning, kindly go to https://www.preceptsgroup.com/book-purchase/ to buy this book!

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Estate Planning

Appointing the Executor and Trustee

By Mr Lee Chiwi
Excerpt from PreceptsGroup Succession and Trusts in Wealth Management (4th edition) Book

The spouse, children or immediate family members are often the logical choice for the appointment as executors and trustees. But today, many decide that an independent professional trust company may be preferred as an alternative to the appointment of a family member. This has often proven on hindsight to be the preferred solution. Another reason is the newly imposed regulations on individual trustees as discussed at 11.13 (Transparency and Effective Control Regulations). In any case, the newspapers are full of articles reporting cases where family members ended up taking each other to Court. Often, the disputes revolve around family members who act as joint executor and trustees.

Where joint executors and trustees are appointed, they must act unanimously in the discharge of their office responsibilities. Sometimes, they cannot agree and this can lead to delays in estate administration, potential litigation and other issues. See 4.9, the example in Lau Tyng Tyng v Lau Boon Wee, where a sister and her brother were appointed as the joint executors and trustees in the Will of their late father.

It is possible that a professional trust company be appointed as the default executor and trustee in the event that the family member who is appointed may himself be deceased or unwilling or incapable of acting as such.

Some criteria in selecting a suitable executor and trustee are as follows:
• Is the person responsible and trustworthy? Assess his character as manifested by his living habits and lifestyle.
• Is he in good health and likely to outlive the testator?
• The organizational skills of the person.
• His experience in managing and investing assets and also consider the types of assets to be managed.
• Does he get along with his family members?
• Would he be biased against certain beneficiaries?
• Is he likely to accept the job as it means taking up his personal time in administering the estate?
• Is he likely to expect a fee or remuneration as this is a voluntary role?

Lay Executor and Trustee of a Will

He agreed to be executor of an estate — it cost him seven years of his life and
$100,000

Toronto accountant Terry Dooley’s seven-years ordeal as executor of a client’s multimillion-dollar estate involved a protracted court battle, which began in 2011 (when the deceased’s daughter contested the will) and ended in 2018. It left him and the estate trustee on the hook for a combined $1 million in legal costs.

Dooley, 73, says he didn’t receive “one nickel” of the $375,000 in compensation he was entitled to as executor. And “false allegations” of wrongdoing during the trial tarnished his reputation even though he was exonerated, he says.

The case is an example of the contentious and onerous nature of the job as executor.

Source: By Carola Vyhnak Special to the Star, June 1, 2020

Not many people will want to assume the role of executor and trustee of his friend’s will if he realizes the legal implications and responsibilities that are associated with such an office. Typically, a person appointed under a will as executor is also appointed as the trustee as the provisions of the Trustees Act apply to a trust which is embedded in a person’s will. With the statutory duty of care now made law, a lay trustee under a will has to consider whether he can suitably discharge his responsibilities without getting himself sued for negligence. After all, he is a mere volunteer.

The office of trustee is also an onerous office as it imposes upon the trustee a fiduciary relationship with the beneficiaries. This requires the utmost diligence, good faith and loyalty in the trustee’s discharge of his duties. If the trustee acts without care and causes loss or detriment to the estate, he will be liable to be sued. The testator should also consider carefully the person he wants to carry out the trusteeship role.

Two women, who agreed to be joint executors and trustees of woman’s will in 2003 were found to be liable to the woman’s beneficiary, namely her son for around

$87,000. The figure was derived after deducting the son’s maintenance and education expenses. The son who is now 29 had sued the two women for breach of their fiduciary duties and for an account of the administration of the estate. His mother’s estate was worth about $148,000, which included a HDB flat then priced at about

$120,000 and bank accounts. Income from the deceased’s estate included rent from her HDB flat totalling $98,000 over the years.

Remarkably, one of the executors, a cousin of the testator was also the appointed guardian for the son under the will when the testator died in 2003 of cancer. The boy then 14 had lived with the guardian. The other joint executor was a social worker at a welfare centre and had agreed to be the other executor but had left the administration to the other executor as the latter was also guardian. The flat was handed to the son after he turned 21.

It is to be noted that as both women were jointly responsible for administering the estate and to hold assets on trust for the son, they were each individually liable to pay the $87,000 to him. The judge said the responsibilities of executors were onerous and even if the motive was out of benevolence, they should not have accepted the appointments if they were not able to perform them. (See Straits Times dated 29 May 2020 by K.C. Vijayan & Tan Tam Mei Executors of woman’s will liable to pay son $87k)

In another case, a not so honest individual trustee was tempted and abused his office as trustee. In 2012, a businessman Abu Bakar Said Ahmad Alhabsi, 72, who was a trustee of charitable trust, pleaded guilty to misappropriating $176,470 between 2004 and 2007 for his own pocket. He did not keep accounts. He could not explain what happened to the missing rental income that came from four properties that were held in the trust.

Engaging Professional Trustees and Singapore Trust Companies

There are merits for the appointment of professional executors and trustees over a lay-trustee, at least where a person’s estate may be complex or where the testator cannot find anyone suitable to discharge such office. Individuals will die and it could be cumbersome when the individual executor dies in the midst of administering the deceased’s estate. A trust company being a corporate entity that is appointed as executor will not face this problem.

Greater professionalism is demanded of a trust company compared to a lay-trustee as the trust company is required to have officers who have the necessary qualifications and track records, requirements to have in place proper internal controls, audit and professional indemnity insurance etc. There are severe fines and in serious cases, even imprisonment of the officer concerned for breaches under the Trust Companies Act. This can only be positive for clients because there is recourse for the client and his beneficiaries against the trust company should there be the need to enforce rights or to pursue remedies for loss or negligence.

Provisions under the Trust Companies Act in Probate and Administration

Under the Trust Companies Act, where a trust company is appointed executor of the will of any testator, it shall be lawful for the company to apply to the court for probate of the will and if probate is granted, to exercise and discharge all the powers and duties of an executor. A person who is entitled to apply for probate or letters of administration may authorize a trust company to apply in his stead.

Where a trust company is empowered to apply for probate or for letters of administration, any petition, declaration, account or affidavit or other necessary document may be made or sworn by a duly authorized officer of the company. Such officer of the company may on behalf of the company sign any petition, account or statement, take any oath, swear any affidavit, make any declaration, verify any act, give personal attendance at any court or place, and do any act or thing whatsoever, which may be required to be signed, taken, sworn, made, verified, given, or done on behalf of the company.

As mentioned elsewhere, a licensed trust company that is granted letters of administration is not required to furnish any security for the due administration of the deceased’s estate.

For more related content on Estate Planning, kindly go to https://www.preceptsgroup.com/book-purchase/ to buy this book!

Categories
Estate Planning

Appointing the Executor and Trustee

Who do you engage?

The spouse, children or immediate family members are often the logical choice for the appointment as executors and trustees. But today, many decide that an independent professional trust company may be preferred as an alternative to the appointment of a family member. This has often proven on hindsight to be the preferred solution. Another reason is the newly imposed regulations on individual trustees as discussed at 11.13 (Transparency and Effective Control Regulations). In any case, the newspapers are full of articles reporting cases where family members ended up taking each other to Court. Often, the disputes revolve around family members who act as joint executor and trustees.

Where joint executors and trustees are appointed, they must act unanimously in the discharge of their office responsibilities. Sometimes, they cannot agree and this can lead to delays in estate administration, potential litigation and other issues. See 4.9, the example in Lau Tyng Tyng v Lau Boon Wee, where a sister and her brother were appointed as the joint executors and trustees in the Will of their late father.

It is possible that a professional trust company be appointed as the default executor and trustee in the event that the family member who is appointed may himself be deceased or unwilling or incapable of acting as such.

Some criteria in selecting a suitable executor and trustee are as follows:

  • Is the person responsible and trustworthy? Assess his character as manifested by his living habits and lifestyle.
  • Is he in good health and likely to outlive the testator?
  • The organizational skills of the person.
  • His experience in managing and investing assets and also consider the types of assets to be managed.
  • Does he get along with his family members?
  • Would he be biased against certain beneficiaries?
  • Is he likely to accept the job as it means taking up his personal time in administering the estate?
  • Is he likely to expect a fee or remuneration as this is a voluntary role?
Categories
Estate Planning

Challenges faced by Executor and Trustee

“I did not receive one nickel of the money and yet my reputation was tarnished!”- the voice of a Toronto accountant who acted as an executor and trustee for her client’s multimillion-dollar estate, as she burst into tears. If she was aware of the legal implications and responsibilities as an executor and trustee, she would not have agreed to it.

Generally, when a loved one passes away, a family member may be appointed in the deceased’s will as the “executor and trustee” of the estate. This person has the fiduciary and statutory duty of care to make sure that he distributes the assets to the beneficiaries of the estate according to the wishes of the will of the deceased. It requires his utmost diligence, good faith, and loyalty in the discharge of his duties.

Amongst his many duties, besides avoiding any conflict of interest while administering the estate, the executor is to prepare an accurate inventory of items in the estate to ensure that nothing of value is hidden from creditors, that one party has not unfairly taken a piece of property belonging to the estate at the expense of other beneficiaries. If he acts without care and causes loss or detriment to the estate, he will be liable to be sued. Even the closest families can be torn apart by problems that arise in the management of an estate.

Many newspaper articles have reported cases where family members ended up taking each other to court. In a recent case, two women had out of good faith and compassion, agreed to be joint executors of a woman’s will. They were found liable to the woman’s son for $87,000. In VJ and others v UVH and others and another [2020] SGCA 49, the brothers appointed as executors and trustees were sued in court for breaching their trustees’ duties in making personal gains by nondisclosure of material information to their sisters, trust funds under their care. In other cases, executors were found liable when they had acted dishonestly and obtained personal gain.

During the administration of the estate, there are also proper procedures for an executor or trustee who wishes to resign or retire. In Chan Chi Cheong v Chan Yun Cheong [2020] SGHC 43, the individual trustee had to resort to the assistance of the court in order to resign from the office.

What is the solution

The testator should carefully consider the person he wants to carry out the executor and trusteeship role in his will. Is the intended lay executor and trustee equipped with the skills of managing the assets? Is he a responsible and trustworthy person? Is he biased against certain beneficiaries? Is he likely to expect a fee or remuneration to perform his role?

Would it not be better to appoint professional executors and trustees over a lay executor and trustee? The administration of an estate can be complex and the person entrusted to carry out the role may himself be deceased or unwilling or incapable of acting as the executor and trustee. By appointing a professional trust company as the default executor and trustee, it will avoid or prevent the various undesirable disputes among the testator’s family members after his death.

Do not worry, call PreceptsGroup, our professional estate and succession practitioners and legal counsel will offer you the solutions to your estate planning concerns.
 
This article is first published on our newsletter, The Custodian Issue 15 on September, 2020. Click here to subscribe to our latest newsletter.

Categories
Estate Planning

Estate Case Sample: Estate of MMK

The Beginning of a 4-Year Long Legal Case

In one of the more prominent cases we’ve had in recent years, the Estate of MMK case ended after a long-drawn-out 4 years of legal proceedings. It began in January 2015, when the Deceased passed away after a 2-year battle with cancer. She named her best friend as her sole executrix in her last Will, signed in 2013. After her passing, her best friend, who did not reside in Singapore and without experience in administering estates, appointed PreceptsGroup to take over her role.

How The Will Dispute Started

Before filing for the Grant of Probate, PreceptsGroup made a surprising discovery – a “Mr. K” claiming to be the next of kin of the Deceased (he was not named as a beneficiary in the last Will of the Deceased), had applied for the Grant of Letters of Administration. This was done on the basis that the deceased had died intestate and that he was the sole beneficiary under Singapore’s Intestate Succession Act.

The Immediate Action Taken by PreceptsGroup

With the original last Will in hand, PreceptsGroup immediately filed for a Probate Caveat* to arrest the situation, preventing Mr. K from proceeding. If this had been delayed, Mr. K would have ended up taking over the entire estate.

A Questionable Revocation Document Was Produced

PreceptsGroup requested for Mr. K to withdraw his application. However, after 6 months of communication between solicitors from both sides, Mr. K sprang a surprise. In an unexpected turn of events, Mr. K produced a document, claiming that the Deceased had signed it 6 days before her demise, to revoke all her earlier Wills.

This newly produced revocation document was not an updated Will by the Deceased, but a one-liner to revoke all her earlier Wills. If it was valid, her last Will signed in 2013 would have been revoked and her entire estate transferred to Mr. K.

It was highly suspicious that the revocation document was produced only after 6 months. There was no logical reason as to why the Deceased would have signed it before her demise. She had lived through a continuously acrimonious relationship with Mr. K. To add to our doubt, the only witnesses present during the signing of the document were those related to Mr. K.

Handwriting Experts Were Brought In

With a genuine desire to protect and preserve the interests of beneficiaries named in the Last Will of the Deceased, PreceptsGroup commenced a legal proceeding against Mr. K for all the relevant issues to be tried in court. The revocation document was sent to a handwriting expert for examination, together with specimen signatures of the Deceased, which took 2 years to gather from her ex-employer, insurance companies, banks, court, and other authorities.

A Long-Awaited Victory for PreceptsGroup

The legal proceedings went on for another 2 years and in 2019, everything was eventually settled. After receiving favorable results from the handwriting expert, the other party agreed for PreceptsGroup to carry out the wishes of the Deceased stated in the Will.

The Key Takeaway

What could have been a simple estate matter turned into a complicated one. Many do not expect to face onerous responsibilities when taking on an executor’s role. In reality, the challenges can be massive in some cases. If the best friend of the Deceased handled this case without passing it on to PreceptsGroup, abandonment of the case is almost guaranteed when stress levels and legal fees surge. This would have resulted in all the beneficiaries named in the Will being disinherited by the revocation document produced by Mr. K. It is, therefore, advisable to appoint a suitable person to be the executor of your Will
 
This article is first published on our newsletter, The Custodian Issue 12 on September, 2019. Click here to subscribe to our latest newsletter.

Categories
Estate Planning

The Role of Executors and Trustee (Part Two)

Segregation of Personal Monies with Estate/Trust

One of the most common issues for the individual executor or trustee is the failure to identify, divide and segregate the assets accordingly from the deceased’s estate account and their personal account.

This is especially so if the individual trustee needs to manage the estate monies and properties for young children & vulnerable elderly beneficiaries for many years, even up to decades. If the individual executor or trustee passes away before completing the estate administration process , the estate of the deceased may be mixed with the individual executor’s estate.

Keeping Record of Estate Account

Another problem is the failure in keeping proper accounts and records of the deceased’s estate. The executor or trustee is required to keep records of the estate account to show the in-flow and out-flow of monies and assets received under the deceased’s estate. Failure in rendering a proper estate account could lead to legal action and the estate monies could also be depleted due to unnecessary administration expenses and legal fees.

Conclusion

Appointing a trustworthy, accountable and unbiased party to act professionally as the executor or trustee has become a serious concern for most people. When a person writes their Will, they should consider appointing a professional trust company as the main Executor or the substitute Executor in cases where the main Executor is unable or incompetent to act.

Recent Estate Administration cases by Precepts

  • Challenging the validity of a forged deed of revocation and obtaining forensic reports relating to authenticity of signatures on documents.
  • Successful claim for damages in reported decision in medical negligence in high profile case.
  • Estate administration involving mediation convened at the Singapore Mediation Centre with a view to settlement.
  • Settlement of estate duties with the IRAS for deceased person dying intestate prior to 2008.
  • Dealing with and payment of estate and trust income taxes to the IRAS.
  • Application for Beddoe orders prior to litigation.
  • Application of Benjamin orders where beneficiaries are presumed to be missing or deceased.
  • Appointment as administrators to sell real estate assets and distribution of joint property owned by deceased and a mentally incapacitated co-tenant.
  • Administration of insolvent estates and distribution according to the First Schedule of the Rules as to Payment of Debts Where Estate Is Insolvent under the Probate and Administration Act.
  • Administering estate with family disputes involving an Eviction Order and Write of Possession.
  • Distribution of estate property to the deputy/administrators of beneficiaries who are mentally incapacitated or deceased.
  • Sale of private residential properties as part of trust administration in Singapore and Malaysia.
  • Transmission of title of assets of deceased’s estates relating to real estate and company shares to beneficiaries.
  • Administration of estate with overseas properties in Cambodia, Hong Kong, Thailand and etc.
  • Appointment as administrator through Letter of Administration De bonis Non.
  • Estate administration relating to deceased persons dying domiciled in Singapore and resealing of Probate in Malaysia.
  • Estate administration relating to deceased persons dying domiciled in Malaysia and taking up probate in Hong Kong.
  • Estate administration of deceased dying due to unnatural cause with difficulties claiming from relevant insurer.
  • Handling estate with tax disputes and management of the tax liabilities.
  • Involvement in citation proceedings relating to upholding validity of a Will.
  • Purchase of Residential Property as trustee for occupation by estate beneficiary in exercise of powers under S12(3) Trustees Act and setting up of property trusts.
  • Provision of loan upon security of charge over property to estate beneficiary in exercise of powers under S9 Trustees Act.

 
This article is first published on our newsletter, The Custodian Issue 7 on October, 2017. Click here to subscribe to our latest newsletter.

Categories
Estate Planning

The Role of Executors and Trustee (Part One)

When a family member passes away leaving a Will, the appointed Executor will step in to act as the personal representative of the deceased to carry out the wishes under the Will.

“…the executor has the duties to “call in” the estate, i.e. collect and converts the assets into cash and thereafter, to settle all the funeral and testamentary expenses, estate duty, and debts. When the executor completed these duties, he/she has discharged the duties as an executor and steps into the shoes of a trustee. In short, both the executor and the trustee owe a fiduciary duty to the beneficiaries and also to creditors of the deceased’s estate.”

– Lee Yoke San & Another v Tsong Sai Cecilia & Another
[1992] Singapore High Court

https://www.preceptsgroup.com/will-writing-services/

Appointing an executor or trustee can be a cumbersome process. One may have to look into the aspects of credibility, accountability and availability of an individual in carrying out the duties of an executor or trustee to gather, transfer and distribute the assets of the deceased. Even after much thought by the Testator (the person who made the Will), the appointed executors may renounce their appointments if they were too busy, unfamiliar with the process or emotionally unable to carry out their duties upon the demise of the testator. The following are some illustrations where appointing a professional trust company is a better proposition than appointing family members as executors and trustees.

Licensed trust company | PreceptsGroup

Precepts Trustee as a pioneer in estate planning business with its expertise in estate and trust administration will continue to grow and be a leader in this industry in the region. We have regularly received enquiries on the appointment of executorship and trusteeship for the estate of the deceased or living trusts.

Checks and Balance

As a licensed trust company, Precepts Trustee is regulated by Monetary Authority of Singapore. There are multiple layers of checks and balances in the management of the Estate and Trust monies. There are controls exercised at many levels and all personnel, namely the Estate Officer in Charge, Resident Manager, Accounts Department, Senior Management and Trustee Board. Multiple signatories are required for any pay out from the trust. In contrast, if an individual is the trustee, the risks of misappropriation, mismanagement and fraud is significantly higher. This is especially critical when there are young children, vulnerable or elderly beneficiaries.

Effective Estate Administration Process

Delays in administering the deceased’s estate will attract higher legal fees. A professional trust company has the expertise and responsibility to administer the estate expeditiously. Individual executors may not have the technical knowledge to manage and administer certain estates. For instance, in a recent case Precepts Trustee was appointed as administor for a deceased’s estate, which involved initiating a legal action against third parties.

This article is first published on our newsletter, The Custodian Issue 7 on October, 2017. Click here to subscribe to our latest newsletter.