In Singapore, a house is not just a home but also a popular choice for long-term investment. Many parents hope to secure a property for their children’s future through a trust, hedging against inflation and using this mechanism to provide optimal asset planning for their children, paving the way for their future.
Table of Contents
Why Choose to Buy Property Through a Trust?
Under Singapore law, individuals under the age of 21 cannot independently own private property. Through a trust, parents can act as trustees to hold the property, while the children, as beneficiaries, enjoy the actual rights. This method not only secures the children’s future assets but also effectively isolates them from risks such as debt or litigation—creditors of the parents cannot claim the trust property after a 3-year look-back period has passed.
ABSD (Trust) Refund Conditions (Must be Met Simultaneously)
Effective from April 27, 2023, transferring a residential property into a living trust requires an upfront payment of 65% Additional Buyer’s Stamp Duty (ABSD). However, if all the following conditions are met, a partial or full refund can be applied for, based on the beneficiary’s status:
1. The beneficiary must be an identifiable individual
- The beneficiary of the trust can only be a natural person who is in existence.
- For example, it cannot be an unborn baby.
2. Ownership of the property must vest in the beneficiary immediately
- When the property is transferred into the trust, the beneficiary must immediately acquire beneficial ownership, without any delays or additional conditions.
- For example, you cannot stipulate that “the child will only own the property after turning 21.” The trust must clearly state that ownership is effective immediately.
3. The ownership must be irrevocable and unchangeable
- The trust terms must not reserve any right to change the beneficiary or reclaim the property. Once established, parents cannot unilaterally alter the beneficiary’s rights.
- For example, you cannot include a clause stating, “If the child is unfilial, the parents can reclaim the house.”
4. The refund application must be submitted within 6 months
- The trustee must submit the refund application to the Inland Revenue Authority of Singapore (IRAS) within 6 months of paying the 65% ABSD.
Related Articles:
How is the Refund Amount Calculated?
Refund Amount = ABSD Paid (65%) – ABSD Rate Payable Based on Beneficiary’s Status
- For example, if the child is a Singapore Citizen or a US Citizen (who receives the same treatment), no ABSD is payable, and the full 65% can be refunded. If the child is a Singapore Permanent Resident (PR), a 5% ABSD is payable, so 60% of the tax (65% – 5%) can be refunded.
Key Practical Points for Buying Property Through a Trust
1. Funding Requirements
- Payment of 65% ABSD + 3-6% Buyer’s Stamp Duty (BSD), calculated based on the property price.
- Must be paid in full cash; Central Provident Fund (CPF) or bank loans cannot be used.
⚠️ For new launch projects (properties under construction), payments can be made in stages, so the full amount is not required upfront.
2. Trustee Responsibilities
- Parents, as trustees, are responsible for managing the property. If it is rented out, the rental income belongs to the child.
3. Property Type Restrictions
- Only private residential property can be purchased.
Special Advantages for Children with US Citizenship
Children with US citizenship enjoy the same stamp duty treatment as Singapore Citizens when purchasing property in Singapore. They do not have to pay ABSD on their first property, which significantly reduces the tax burden. This policy makes buying property through a trust a preferred option for many foreign families (such as Chinese-American families) to pass on assets.
Frequently Asked Questions
• When is the trust property transferred to the child?
The trust can specify an age or condition (e.g., upon turning 21), at which point legal ownership is automatically transferred.
• How do children with US citizenship prove their eligibility for ABSD remission?
A US passport must be submitted to prove the child meets the remission criteria.
• Can the trust property be mortgaged for a loan?
No, a mortgage or home loan cannot be applied for, as the property is legally owned by the child.
• How long does the tax refund process take, and when will the refund be received?
Most refund applications are processed within two months from the date of submission of complete information. Once the application is approved, the refund will be issued within one month of approval. Based on the past cases of all my clients, the refund is typically received within about 2 to 6 months.
• Does a US citizen child need to pay taxes in the United States?
The regulations vary across different states in the US. Parents need to confirm this with a US tax lawyer or accountant.
• If the trust property is rented out, how are property tax and rental income tax calculated?
If income is generated, it will be considered the statutory income of the trustee and taxed at the parents’ personal income tax rate.
• After buying a property through a trust, when can it be sold?
According to Singapore’s Bankruptcy Act, creditors still have the right to make claims on a newly established trust within 3 years of its creation. Therefore, the property can generally only be sold after the trust has been established for 3 years. In other words, if a buyer purchases a property held under a trust within this 3-year period, they face significant risks, and banks will not provide financing for such transactions. Consequently, buyers will only be willing to purchase after the 3-year creditor claim period has passed.
• If I want to sell the house before my child turns 21, are there any special considerations?
If you wish to sell the house before the child turns 21, there must be at least two trustees (e.g., both the father and mother).
• What are the legal fees for buying a property through a trust?
The legal fees for buying property through a trust typically range from S$8,000 to S$10,000. This includes conveyancing fees and the cost of drafting the trust deed. The specific fee depends on the property type and price; the higher the property price, the higher the legal fees.
• The upfront costs of buying through a trust are too high. Are there other ways to reduce the burden?
I would recommend purchasing a new launch project, as payments can be made progressively according to the construction schedule. You can also use the refunded tax amount to cover subsequent installment payments.
Purchasing property for children through a trust is a long-term strategy that combines asset protection with tax optimization. Especially for multinational families, fully utilizing Singapore’s trust mechanism and the special treatment for children with US citizenship can lay a solid foundation of wealth for the next generation.
For further enquiries, please get in touch:
WeChat: sgleokwek
Telegram: sgleokwek
WhatsApp: Message us
