Exempt up to full value of main residence

I REFER to the letter by Ms Fang Mei Ling, 'Estate-duty laws unfair to the middle income' (ST, March 1).

My family also has mortgage insurance with a private insurer. To avoid paying estate duty on any mortgage-insurance payout, we would have to assign the insurance policy to the creditor bank.

However, this is easier said than done. The bank officers were basically clueless when I enquired about the assignment procedures. I was bounced from one person to another until finally one officer informed me of procedures which I found too onerous.

I have procrastinated in taking action till today. So, whether out of ignorance or inertia, I believe many people with private mortgage insurance would not have made any assignment.

In contrast, the Home Protection Scheme, which insures HDB flats, automatically assigns the proceeds from the insurance policy to HDB, without attracting any estate duty.

However, I believe HDB flat owners who have mortgages with banks will also have to pay estate duty on any mortgage-insurance payouts unless they have assigned the policies.

To ensure more equitable treatment, perhaps the authorities can look into exempting estate duty up to the full market value of one's principal residential property, either on an insurance payout or an equivalent amount in liquid assets.

Consider this example: A and B each have $1 million in cash. A buys a $1 million condo and pays for it in cash, while B buys another unit for $1 million but takes a bank loan of 80 per cent.

When they die, A's estate does not need to pay any estate duty on his condo while B's estate has to cough up 5 per cent of his remaining cash (assuming he has used up the $600,000 exemption under 'Other Assets' as he had more than $600,000 in his CPF).

Many Singaporeans are already 'asset-rich, cash-

poor'. The present estate-duty requirements seem to have the perverse effect of encouraging people to channel money into property instead of maintaining sufficient liquidity to meet other needs, such as retirement.

If the Government wants to encourage Singaporeans to provide adequately for themselves, the gulf between the estate-duty exemptions for residential properties and 'Other Assets' should be re-calibrated.

Maintaining the status quo will only serve to penalise those who prudently keep more liquid assets, rather than tying them up in property.



Maria Loh Mun Foong (Ms)