What happens to one’s credit card debt when he or she passes on? How about bank accounts? Shares? Mortgage? These may be questions that are seldom considered but important nonetheless. It could make the difference between whether your ‘inheritance’ in one of debt or otherwise.
In most cases, joint bank accounts and investments should be able to be accessed by the joint account holder without a need for applying for a grant of probate (if one dies with a will) or a letter of administration (if one dies without a will).
Similarly, if you are the joint applicant to a personal loan, line of credit or mortgage, you will in most instances assume the loan as a sole debtor upon the death of your co-borrower.
Therefore it is prudent to look at getting adequate mortgage insurance while one is still alive, to ensure that your loved ones are not suddenly saddled with the burden of an entire mortgage loan or have the bank knocking on your door or having your property sold at a fire sale.
Executor Appointed to Settle Affairs
For other accounts solely owned by the deceased, the executor will have to apply to the Court for a Grant of Probate (where there is a will) or a Letter of Administration (where there is no will) for legal authority to administer the deceased’s estate.
Thereafter, the executor may settle outstanding matters like credit card debt and personal loans and sell the investments owned by the deceased as well as withdraw balances from the deceased’s bank accounts. He may also cancel outstanding GIRO arrangements and utility bills.
Usually, debts will have to be paid before account balances can be withdrawn from the deceased’s bank accounts. The account opening forms usually come together with a set of terms & conditions from the bank with a clause on the right of set-off of your accounts, which means that the bank legally has the right to recover liabilities owed to it from one’s bank accounts upon events like death, incapacity or bankruptcy.
Beneficiaries of Trusts and Insurance Policies
If a living trust has been created, the bank accounts named will be owned by that trust and the trustee named will take over to manage the deceased’s accounts according to the deed of trust.
If beneficiaries have been named to insurance policies, the beneficiaries may inform the insurance companies to receive payouts from policies bought by the deceased.
For estates not exceeding $50,000 where the deceased passes on without a valid will, one may apply to the Public Trustee to administer the assets of the deceased, including bank accounts, CPF monies and shares of listed companies. The deceased’s assets will be distributed according to the Interstate Succession Act.
One may also apply to the Court for a Letter of Administration in which case the deceased’s assets will also be distributed according to the Interstate Succession Act.
What are some points of note for us who are living? One may consider:
- Making a will
- Adding joint account holders for bank accounts
- Deleting joint account holders for personal loans
- Naming beneficiaries to your insurance policies
- Making a CPF nomination
These steps will definitely make it easier for one’s loved ones upon their demise and ensure the assets they have built up over a lifetime are distributed according to their wishes.