It appears that the Housing Development Corporation (HDC) will soon be implementing a higher fee for transferring property, which has been referred to as an “inheritance tax”.
One can appreciate the dramatic jump from a somewhat nominal fee to one that can be the difference between someone having the means to complete the transfer or delaying it in an attempt to save or accumulate the necessary funds.
Due to the publicity surrounding this announcement, certain members of the public are now aware of the difference in costs and are able to properly consider what they may need to do in the future. But, how many of us really consider the costs associated with transferring properties, whether it be HDC, private, commercial or any property we own, and weigh it against other necessary costs?
Over the past two or three years, I have discussed issues concerning the preparation of wills, the considerations to be given when transferring property to children and even the toss-up between outright gifts or retaining certain interests.
Sadly, there are few people who think about the future when it comes to inheritance and rely on what a friend says, the pressures placed on them by their children, or simply opt to do nothing. There is often no consideration or thought to the long-term ramifications of their actions. I cannot speak to the experience of all legal practitioners, but, from my experience, very few people request consultations to discuss or understand estate planning, inclusive of financial options. Most people simply decide without guidance what they intend to do.
The cost of HDC property transfers should be food for thought for people who do not own HDC homes. This is something important to consider for several reasons. There are many elderly people who would have considered preparing deeds to transfer property to their beneficiaries or simply add the names of intended beneficiaries.
The costs for preparing and registering a deed are based on the property’s value. The fees are found in the Legal Professions Act in the Rules of Attorneys at Law Remuneration (Non-Contentious) Business Rules. The other cost would be stamp duty. There are several exemptions that can be granted, one being a first-time homeowner exemption. However, these exemptions are capped at a certain value.
Many times, people who have consulted on the procedure for transferring property will pause, consider and then refuse to transfer due to the combined costs of preparing a deed and paying stamp duty. They will then consider the alternative, being the fairly reasonable cost of preparing a will, and believe they have easily and cheaply resolved their estate planning dilemma.
Sadly, they have simply passed on the dilemma to their beneficiaries because the cost of probating a will is also based on a scale fee. This fee will take into consideration the value of the entirety of the estate to be probated: land, vehicles, financial savings or any other asset.
The executor of the estate will pay the necessary fees associated with the probate costs, but these fees do not necessarily include the cost of the Deeds of Assent that need to be prepared to transfer property to beneficiaries.
Deeds of Assent do not attract the same stamp duty as deeds prepared by virtue of a sale or gift. However, the costs and time associated with probate may actually be heftier than those associated with an outright transfer during your lifetime.
There are various factors that should be considered and discussed by people estate planning or simply considering transferring their property. The question of whether a transfer of property or leaving behind for beneficiaries is more cost-effective arises.
It should also be considered whether the beneficiaries will have the funding available to ensure that probate is carried out and properties or assets are transferred to the necessary beneficiaries.
Many times, elderly people elect to prepare a will but upon their death, their beneficiaries are unable to afford the costs of probate and those wills are simply set aside until finances are available, often leaving property in limbo.
The headlines associated with the new HDC measures allowed people to properly consider and digest the new costs of transfers or inheritance. Few people actually take the time to have discussions and truly understand the costs that may one day be associated with the inheritance they wish to leave behind.
Instead of simply making decisions without guidance, it may be more prudent to have consultations which not only consider different forms of transferring or gifting assets, but the costs associated with the different approaches.
Pavitra Ramharack is head of chambers at Pavitra Ramharack Attorneys at Law and can be reached at ramharack_
pavitra@outlook.com
