The following story is based on an actual series of events, with some names and circumstances fictionalised. Any similarity to any person’s name, character, or history is coincidental and unintentional. It is about a property tussle, then being left homeless after her sister’s death.
Chung was unable to get a loan from any financial institution to purchase a house. The easiest way out was to purchase the house under a name of his sister who would be eligible to obtain a loan. Nancy did not mind this arrangement as Chung gave the undertaking to pay the monthly loan payments.
The arrangement worked well until Nancy passed away suddenly. She had no Will and since the house was under her name, it was considered her asset. Under the Distribution Act, Nancy’s husband, Jay, and children are entitled to her properties, which include the house that Chung bought and is living in.
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Property Tussle Begins
Jay, who is not on cordial terms with Chung, would not want to hear anything from his brother-in-law that he had been servicing the housing loan and the house rightfully belonged to him. Chung’s pleas that Jay returns his house fell on deaf ears.
Chung was left with two choices; either goes to court and fight for an equitable interest which may take a long time and the outcome, uncertain; or to stop making instalment payments which will result in the bank claiming from Nancy’s estate for the loan amount.
Either way, Chung is at the losing end with a certainty of incurring losses.
The above scenario of purchasing an asset under another name is quite common, especially among business partners, close friends or relatives for various reasons. Most of them do not realise or appreciate the seriousness of the problem that would occur upon the death of the person whose name is used to register for the asset if no proper estate planning is done – and an ugly property tussle will ensue.
In the event the entrusted person dies or goes into a coma or becomes of unsound mind, his/her representative may not be as cooperative, especially when something of value is involved – that’s when the property tussle will rear its ugly head.
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Declaration Of Trust To Prevent Property Tussle
What Chung could have done was to get Nancy to sign a Declaration of Trust. Under this Declaration of Trust, Nancy will hold the house for Chung as a main trustee and an appointed licensed trust company shall be the substitute trustee in the event of her death.
All Nancy needs to do is sign a trust deed which is irrevocable power of attorney with the trust company. Upon Nancy’s death, the trust corporation will take over as substitute trustee and follow the terms and conditions of the trust deed to transfer the house to Chung. From this arrangement, Chung has established a legal right to the house, and the problem with Jay could have been circumvented.
The main benefit of a Declaration Trust is that though the house is under Nancy’s name, the rightful heir to the house would be Chung. Moreover, there is no need to transfer the house to another trustee, and thus there are no transfer fees payable.
The fees are only payable upon the demise of Nancy. The transfer of the house of Chung’s name is hassle free since there is no need to wait for letters of representation over Nancy’s estate.
Furthermore, with a trust company, Chung and Nancy will have peace of mind and their rights and obligations are well preserved without any third party interference since a trust company is duty bound to follow the trust provision and therefore more reliable than an individual.
Moreover, the trust company has continuity compared to a natural person liable to die, fall ill, meet with an accident and be incapacitated, become of unsound mind or go bankrupt. When an individual trustee passes away, his assets are frozen until the necessary legal estate administration processes are completed, which means the asset is frozen too.
And that’s how you can prevent a property tussle with the right tool, a Declaration of Trust.
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About Rockwills International Group
Rockwills International Group, now in its 28th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management, and distribution of wealth. It has done over 300,000 wills and 16,000 trusts and holds more than RM25 billion in assets under trust.
