It is no surprise that most of us are reluctant to talk about, or even think about, our own mortality.

In a perfect world we would have ample time to prepare for death but, unfortunately, we cannot choose which day will be our last. 

But what we can control is how well we are prepared for it. 

Some people are initially uncomfortable discussing death but this is quickly replaced by peace of mind from knowing that loved ones will be spared the stress and legal expenses that can arise when a person dies before organising his or her affairs. 

Under Bermuda law, a person has the right to dispose of the property they own at the time of his death in virtually any way they choose.

This right, known as testamentary freedom, is subject only to the obligation to make provision for a dependent, such as a spouse or child. 

To ensure a person’s wishes regarding the disposal of their property are respected, it is essential to have a will.

A will is a legal document in which a person expresses how and to whom he would like his property to be distributed after death.

To make a valid will, a person must be of sound mind and, as a general rule, at least 18. 

A will can be very simple or very detailed, depending on the wishes of the person making the will (known as the testator). 

Although no two wills are identical, it is important for the testator to consider the following:

• First, the testator must select a person or persons to manage and distribute his property after death. This person is known as the estate executor and may be a family member, friend, trusted advisor or even a licensed trust corporation. 

The estate executor should be trustworthy and capable of ­handling administrative duties. 

• Second, the testator must stipulate how and to whom the estate executor is to distribute his property. 

It is important not only to detail any specific gifts that the testator would like to give but also to name an individual who will receive the remainder of the estate assets once all of the specific gifts have been distributed.

• Third, if the testator has minor or dependent children, it is important to select a guardian to provide continued care for them.

With regards to selecting a guardian, two simple words of guidance — be practical. 

The best interests of children should be the guiding factor rather than the fear of hurting the feelings of a loved one who may expect to be named guardian. 

It is advisable to choose one person (or a married couple) who is near to the testator’s age, such as a sibling or close friend, and who shares similar beliefs and life goals. 

• Finally, due consideration must be given to estate planning that may be required for assets located abroad. 

Many Bermudians and guest workers residing in Bermuda own real estate and other valuable assets in other countries. 

In such circumstances, it is advisable to consult an estate planning professional in the jurisdiction where the property is located. It may be prudent to have an additional will prepared to deal specifically with foreign property, so as to ensure the will complies with the legal requirements of that jurisdiction.

When consulting an estate planning professional regarding the preparation of a will, it is important to discuss the matter of estate taxes. 

Although there is no inheritance tax for the beneficiaries of estate assets in Bermuda, the estate itself may be liable to pay stamp duty to the Bermuda Government. 

After death, it may be necessary to submit the deceased’s will to the courts before the estate executor can distribute assets to heirs. 

This process is called obtaining a grant of probate, or letters of administration if there is no will. 

A grant of probate or letters of administration is usually required when a person holds property, such as a home, a bank or investment account or shares in a company in his sole name. 

Depending on the degree of complexity of the estate and the location of the estate assets, the probate process can be lengthy. 

The assistance of an attorney is often required, so the process can become quite expensive. When a grant of probate or letters of administration is obtained, stamp duty will be payable upon all the Bermuda property held by the deceased at the time of death in accordance with the Stamp Duties Act 1976. 

The rate of stamp duty payable on the estate of a person who has died after April 1, 2010, is: Zero on the first $100,000; five per cent on the next $100,000, 10 per cent on the next $800,000, 15 per cent on the next $1,000,000 and 20 per cent on all amounts thereafter. 

Although the amount of stamp duty payable on valuable Bermuda property can be significant, the introduction of the Primary Family Homestead designation provides a means to greatly reduce the stamp duty payable for many Bermudians.

A property owner can apply to the Tax Commissioner to designate one residential property as his primary family homestead. 

If the designation is obtained, stamp duty will not be charged on the value of that property. 

The value of any other properties owned will be subject to stamp duty at the applicable rate.

There are various estate planning techniques which allow a person to reduce the amount of stamp duty payable on death. 

For example, if property is held with another person in joint tenancy, it will pass to the other person automatically by operation of law. Another estate planning technique commonly used in Bermuda is to acquire assets through a trust or to transfer previously owned assets to a trust before death. 

When a person transfers assets to a trust, the legal title to those assets passes to the trustee and therefore the value of those assets will not be included when calculating the total value of that person’s estate at the time of death.

Depending on the particular circumstances of each case, the potential tax savings for the estate may be much greater than the legal costs and stamp duty involved in using these estate planning techniques.

Taking the time to meet with a professional is an important first step in the estate planning process. But estate planning is an ongoing process.

Upon the occurrence of a major life event such as marriage, divorce, the birth of a child or the death of a loved one, it is important to review your will and any other estate planning documents you may have prepared to ensure that the provisions are still applicable and/or appropriate. 

In the absence of a major event, it is still a good idea to periodically review your plans with your estate planning professional to ensure no changes are required.

 

• April Thomas is a senior trust officer with Marshall Diel & Myers. This column is a brief ­summary of some basic estate planning concepts and does not constitute legal advice. To determine how these general principles would apply to your particular circumstances, you should consult an estate planning professional.