Buying Property Under a Trust for Your Child Under 21 in Singapore: What You Need to Know

Why Buy Property Under a Trust for Your Child?

Buying property under a trust for a child allows parents to secure a valuable asset in the child’s name, offering potential long-term capital appreciation. This arrangement can help circumvent ABSD for subsequent property purchases by the parent, as the child legally owns the property through the trust.

While Singapore’s residential property market is competitive, this strategy can provide stability and long-term benefits for the family. Since a minor under 21 cannot legally hold a property title, the trust structure allows parents or guardians to manage the asset until the child reaches adulthood.

Key Tax Considerations: ABSD and Remission for Trust Properties

One of the main tax considerations for purchasing property under trust is the Additional Buyer’s Stamp Duty (ABSD). In Singapore, trusts are generally subject to a 65% ABSD. However, ABSD remission is possible under certain conditions. For remission eligibility:

• The trust must be “irrevocable,” meaning the terms cannot be changed.

• The beneficiary (child) must have beneficial ownership, and the property must solely benefit them.

If these criteria are met, a remission application can be submitted to the Inland Revenue Authority of Singapore (IRAS) within 6 months of the property purchase, potentially waiving the ABSD amount. It’s crucial to consult legal and tax professionals to ensure compliance with IRAS requirements.

Advantages of Setting Up a Property Trust for a Child

1. Asset Protection and Control: The trust protects the property for the child’s future use, managed by a trustee until they reach legal age.

2. Avoiding Ownership Restrictions: Trust-owned properties bypass rules that prevent minors from owning property outright, allowing families to invest earlier.

3. Estate Planning Benefits: Property ownership in trust allows parents to gift valuable assets without transferring direct ownership, making it an ideal tool for family wealth succession.

Important Points to Consider

While a property trust offers benefits, there are critical considerations to keep in mind:

• No Mortgage Financing: Banks in Singapore do not extend loans for trust-owned properties. Therefore, the purchase must be fully paid in cash.

• Stamp Duties and Fees: In addition to ABSD (unless remitted), Buyer’s Stamp Duty (BSD) applies, calculated based on the property’s market value. Trust set-up fees and legal expenses can add to the total cost.

• Restrictions on Future Sales: If the child is listed as an essential occupier under an HDB flat or holds ownership in another property, it may impact their eligibility for future grants or loans when purchasing an HDB.

Setting Up a Trust for Property Purchase: Step-by-Step Guide

1. Consult with Legal Professionals: An irrevocable trust must be set up legally, with clear terms ensuring the property benefits only the child. Legal expertise helps ensure compliance with IRAS regulations for ABSD remission.

2. Complete the Property Purchase: With the trust established, parents can proceed with the purchase in full cash payment, registering the trust in the child’s name.

3. File for ABSD Remission: If the trust meets IRAS criteria, submit an ABSD remission application within six months to potentially avoid the ABSD. Remember to gather all documentation confirming the irrevocable nature of the trust and the child’s sole benefit.

4. Maintain Documentation: Keep all trust-related documents, including the deed, purchase agreement, and any tax filings, for future reference, especially as the child approaches the age of 21 and assumes full control.

Conclusion: Is a Property Trust Right for You?

Setting up a property trust for a child under 21 is an effective strategy for parents looking to secure long-term financial stability for their family. While there are upfront costs and strict regulations, the potential benefits—such as ABSD remission and a safeguarded asset—make it a worthwhile consideration for those who can commit to full cash payment.

For further guidance on structuring property investments and understanding trust ownership, explore expert resources at HomeAsset.sg. By making informed choices, you can better navigate Singapore’s property landscape and build a lasting financial legacy.