Part three: final answers regarding the Bermuda Primary Family Homestead Exemption Certificate Application.

Readers who do not own homes, or are not eligible for the PFHC, may be bored to tears after three articles on this important topic. However, you may be a beneficiary of elderly relatives, have friends, or other people who do own property that may take advantage of this law. Tell them to take care of their estate planning, too.

More questions answered.

• The law says residential, what about apartments? It is the use of the property that determines the kind of residence: apartments cannot be individually owned, only within condominium structures where the PFHC is applicable.

• Can I change my mind? You must complete a cancellation form, also available at the Tax Commissioner’s website and remit with the original certificate. This cancellation also applies in the event of the sale of the property. See online at goo.gl/7K39hb .

• Should I do this if I will automatically get the marital deduction, as a Bermudian spouse? Yes; see Part 2 (August 20, 2017) relative to surviving spouse death duty exemption; however, you should also apply for the PFHC to protect children or other non-spouse beneficiaries.

• Multiple families owning the same property, one owning the land, others owning the real estate? Can both have PFHC? Our expert does not think this is legally possible except with condos and leaseholds.

• What happens if we file jointly (50 per cent each PFHC) and then divorce where settlement gives one owner 100 per cent of the property. The PFHC applies to all of the holder’s interest in the property, so there is no need to reapply for a new PFHC.

• Note that stamp duty on a transfer of property in divorce is not at the same rates as any other voluntary disposition or a conveyance on sale. There is a fixed duty of $200 (Section 38A of the Stamp Duties Act 1976) payable on the deed if the transfer is between the parties to the divorce only. Whoever then owns that property, i.e., the ex-husband or ex-wife will be entitled to designate that property as their PFH. If the property is sold in the divorce, please see cancellation procedures above.

• I am a status Bermudian married to a PRC. We own jointly. Can I take the whole value of the property? Yes, by way of gift or inheritance, otherwise no — only his/her percentage share.

• Life interest is handled as each individual’s percentage of the interest is declared on each PFHC individual application form.

• Tenants in common. Each individual must file for their applicable share of the property. Spouses regardless of kind of interest in property are exempt.

• Freehold versus leasehold – we live in a condo, what to do? It seems fairly obvious that freehold would be the condo owner (unit), but what about leasehold? Yes, if you have a 99-year or 999-year lease. That remainder of the term has a value upon which ‘death tax’ stamp duty is payable, thus leaseholds do qualify for the PFHC.

• I don’t have a will – how can I be sure the property is passed to the right beneficiaries? And what happens to the exemption? Two different questions. Government decides on apportionment to beneficiaries of your intestate estate. You can apply for the PFHC if you meet the application criteria without having a will.

• Trusts – the property is in a trust, is it too late? What about dissolving the trust? Property that has been transferred in its entirety to a trust cannot be designated as a PFH. Property held in trust is not subject to estate stamp duty. If the trust is dissolved or wound up, Bermudian status individual beneficiaries each have to file a PFHC application for share of property.

• Can a power of attorney apply for the PFHC? Yes.

• Title of property is unclear or cannot be determined, or deed is missing. Clear title must be resolved prior to any application.

• Elderly relatives are not of sound mind to apply, no power of attorney exists. An estate attorney can apply on behalf of such persons.

• Bermuda property transferred to a corporation is assessed a conveyance stamp duty tax. There is no death tax exemption because a corporation is not an individual. Corporations struck off the register are considered no longer legally in existence. Attorney advice needed here.

The Primary Family Homestead Certificate (PFHC) is designed to mitigate the onerous stamp duty on Bermuda real and leasehold property at the death of a Bermuda status individual. It does not solve all estate planning issues, particularly with respect to the designation of beneficiaries of the property owner.

In fact, what the process does is initiate conversations that all of us prefer not to have, but should have with our elderly relatives about just how loved ones’ estates should be settled.

“What will you leave me when you are gone?” said one bright young thing to her elderly parent?”

Special thanks to Michael J Mello, QC, JP, TEP, Counsel at Appleby and author of the The Laws of Wills & Estates in Bermuda. Michael is an estate expert and Leading Lawyer in Bermuda as well as listed with numerous other accolades from his peers in various legal registers, such as the The International Who’s Who of Private Client Lawyers, 2013 and 2014.

Note that at press time, various readers informed me that the PFHC application process at the Bermuda Government has been taking anywhere from 18 months to six years (2011-2017) for approval during which time elderly property owners have passed away before their application was finalised.

This news is very concerning indeed given that in the initial stages of the amendment’s passage, the PFHC approval process was less than a year. Further, these delays have serious adverse consequences to bereaved families:

• People do not plan to die before receiving the exemption, but life happens.

• Bermuda probate cannot be finalised (and the estate closed) with unresolved tax liabilities (or exemptions).

• Title to the Bermuda homestead cannot be conveyed to beneficiaries.

• Property cannot be sold without clear ownership (if encumbered by unresolved legal issues).

• The deceased’s will bequests and needed cash for the surviving family’s living expenses cannot be totally distributed.

Thus, the property remains in limbo. How are families coping if a mortgage still needs to be paid, maintenance and repairs are needed, and the property sits idle, possibly deteriorating irrevocably?

Readers, please keep in mind. I am not your personal financial planner. My goal is to provide you with answers, references, and thoughtful information that will help you make the best decision possible for your personal situation. This means if you have concerns or situations you cannot manage, you must consult with qualified Bermuda professionals, estate attorneys admitted to the Bermuda Bar, qualified accountants, tax and finance (CA, CPA), insurance advisors (ChFC), or investment managers (CFAs) to receive the appropriate advice that is in your best interests.

Part one: How stamp duty can sometimes be avoided was featured in The Royal Gazette on August 13. Part two: the process and many reader questions on August 20.

Martha Harris Myron CPA JSM: Masters of Law - International Tax and Financial Services, Pondstraddler Life, financial perspectives for Bermuda islanders’ domestic lifestyles and international connections on the Great Atlantic Pond. Contact: martha.myron@gmail.com