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Wills and Probate Lecture 5 and 6

Wills and Probate Lecture 5 and 6

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03/18/2014

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Wills and probate lecture 5 and 6
COMMON PROBLEMS IN PROBATE APPLICATIONS
NB: The following acronyms: PAA = Probate and Administration Act, EDA = Estate Duty Act, Intestate
Succession Act = ISA, Inheritance (Family Provisions) Act = I(FP)A
OUTLINE
(i)
Liability of Accountable Persons
(ii)
Applicability of Intestate Succession Act
(iii)
Specific Problems in Probate Applications:
\u00b7
Insurance
\u00b7
Shares in Limited Companies
\u00b7
Accident Claims
\u00b7
Problems relating to the Will
\u00b7
Miscellaneous Assets
(iv)
Conflict of Laws
\u00b7
Assets outside Jurisdiction
\u00b7
Estate Duty payable on Assets Outside Jurisdiction
\u00b7
Assets within Jurisdiction belonging to Persons of other Nationalities
(v)
Income Tax
(vi)
Intestacy despite availability of Will

(vii)Issues pursuant to Inheritance (Family Provisions) Act
(viii)Required number of Trustees
(ix)

Summarised procedure for extracting Grant of Probate
Valuation of Assets
1. Bank accounts
-
If fixed deposit, clear how much cash there is \u2013 write to banks, CPF board, POSB, asking for letters of
confirmation
2.Stock/Shares in Public Listed Companies
In determining the value of such shares one would take the previous day\u2019s1 prices. The method normally used is
the quartering up method. This is set out below:
(Selling Price \u2013 Buying Price)\u00f7 4 + Buying Price
Or just write to registrar of comp on stock exchange for probate value of shares on partr day in qn
Public listed companies:
-
Shares easy to cal c. Values of shares published everyday in ST except Sunday and Monday; Tues to sat \u2013
there will be reports of transactions in shares
-
diff fig \u2013 oen set sowing how much buyer offering, another how much seller is asking for seling shares
o
buyer\u2019s bid lower than seller\u2019s bid
o
shares calc by taking highest bid fr seller and lowest bid to buy made by a prospective 0urchaser
o
subtract lower amt fr higher amount \u2013 the difference
o
divide this by 4
o
add to the lowest bid by buyer
o
this is the price which esttae duty will take as being the value of that artr share traded on the day
tt the deceased passed away
o
if no news ppr copy of the day of the death, then the day AFTER the death (figures are published
the next day)
1 i.e. the day before the death of the deceased.
1
o
or just write to SEX of sg and ask them value of shre in qn traded oin the date of death \u2013 fee
payable \u2013 abt $20 to get the info
3.S ole proprietorships/ public companies/ partnershi
ps
-
but sp and partnerships \u2013 value of shares depends on performance. Look at accounts to establish the value of
any partr item
4.Shares in a Private Company
-
Restricted membership.
-
Need balance sheets and profit and loss accts for at lesast 3 yrs preceding death of shr whose ahares
being valued
One would look at the following factors when determining the value of such shares:
a)Paid up capital of the company
b)Capital Reserves \u2013 the undistributed profits of comp over last few yrs
c)Net profit for the last years which was carried forward to the balance sheet
d)Goodwill of the company*
(*) Derived by calculating average of 3 years\u2019 profit/ loss before death
Add (a) \u2013 (d) up and divide by the total of issued shares ( not authorised shares). One would normally make
provisions for the immarketability of the shares and would divide such a total by a factor of between 20-25%.
Valuation of shares in a Private Company
[Net Asset Valuation Method (NAV Method)]
Add
i) Issued and paid up capital (fully paid up shares)
$50,000
ii) Reserve capital (Part of profits of the company \u2013 not yet spent
set aside for future use)( \u2013 may be later issued as bonus shares)
$20,000
iii) Surplus of profits carried from profit and loan account
to the balance sheet
$10,000
iv) Average of 3 years profit as goodwill immediately
proceeding the death of the deceased (referred to as gdwill)
$30,000

depends on person carrying out the business.
Every comp will have gdwill
( If negative entry, don\u2019t add but take away)

Total:

$110,000
The total to be divided by issued and paid up shares (e.g. 50,000)
The quotient \u2013 value per share - is about $2.20. As the shares in private limited companies is not marketable,

discount of abt 15 to 20 or 25 % normally grantd by commr to acct for non marketability oif shares.
existing shareholders have right of pre-emption.
The commissioner may or may not give you a discount (e.g. 20%). But only if you are a minority shareholder. If
20 percent discout given, net value for estae duty prupses wld be 1.76 -
2.20/100 multiply by 20 = 0.44
2.20-0.44 (the amt decductable fr value of shares.) =$1.76 cents at the end
2
This method is accetalbe to commr of estate duties. Adopted by most acctants. Knwn as net asset valuation

method.
Two other ways \u2013 price earnings ratio/ yield method (how mch comp can make by way of profits)
Note:

-
80 pecent shr and 20 percent shr.
-
Maj shr will have higher value for his shares \u2013 because can dictate comp policy with mahj shrholding
-
Go to item 4 immed \u2013 3 yrs balance sheet of proft and loss acct \u2013 commr will then work out value of shares
and amt of estae duty payable
-
If z agree with commr\u2019s decision, can appeal by fiing OS in HC \u2013 see proced in act itself . Higher deductin
may be allowed
5.jewellery, antiques, cars etc
-
write to those competent to assess
-
valuer/ registrar of vehicles/ jeweller
Value of assets payable
-
value of assets is tt prevailing at date of deceased\u2019s death, not tt of payment of estate duty
++> then extract grant of letters of repn
SPECFIC PROBLEMS
1. Insurance policies
\ue000s61 Insurance Act states that payment of policy moneys may be made to a proper claimant before grant of
probate.
Payment of life policy and personal accident claims without probate, etc.
61.\u2014
(1) In any case where the policy owner of any life policy or personal accident policy of an insurer dies, and
the policy moneys are payable thereunder on his death, the insurer may make payment to anyp rop e r
claimant a prescribed amount of the policy moneys of all such policies issued by the insurer on the

deceased\u2019s life without the production of any probate or letters of administration; and the insurer shall be
discharged from all liability in respect of the amount paid.
\u2026(6) In this section \u2014

(a) \u201cpolicy owner\u201d includes a part owner of a policy;
(b) \u201cproper claimant\u201d means a person who claims to be entitled to the sums in question as executor of 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.

\ue000Proper claimant
\ue001
Payment has to be made to the proper claimant.
\ue001
Next closest kin and personal representative.
\ue001
Personal representatives can ask insurers to release monies
\ue000Prescribed Amount
\ue001
No definition. To determine prescribed amount, refer to Regulation 28
\ue001
Depends on how much the policy is worth; but insurer can release up to $150k without grant of
probate.
Insurance Regulations Cap. 142, Regulation 1
3

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