How to make your mortgage insurance not estate taxable

I refer to the letters by Ms. Maria Loh Mun Foong, "Exempt up to full value of main residence"(ST, March 3), and Ms. Fang Mei Ling, "Estate-duty laws unfair to the middle income"(ST, March 1).

The issue is that the mortgage insurance proceeds are listed as "other assets" in the estate duty computation, and hence it unfortunately bring up the estate duty payable for the widow. One simple way to get around this problem is to have the wife "owns and applies" the policy on the life of the husband. The wife will therefore be the owner of the policy on the life of the husband. This is allowed under section 57(1) of the Insurance Act (Cap. 142) on "Insurable interest required for life insurances".

In this way, the mortgage policy become an asset of the wife instead of the husband. When the husband dies, the insurance proceed will not be aggregated with the husband's estate and be taxable. The other advantage of this arrangement is that the insurance proceed will not be subjected to probate and therefore the widow can get the proceed very fast.