Buying Property in Trusts: What You Need to Know
In recent years, buying property in a trust has become an increasingly popular strategy among high-net-worth individuals and savvy investors in Singapore. While it may seem complex at first, understanding how property trusts work can open up powerful avenues for wealth preservation, legacy planning, and tax structuring.
What Is Buying Property in a Trust?
When you buy a property in a trust, it means the legal ownership of the property is held by a trustee on behalf of a beneficiary. The trustee is responsible for managing the property in the best interest of the beneficiary, according to the terms outlined in the trust deed.
This structure is commonly used by parents who purchase property for their children or by individuals who want to ring-fence their assets for estate planning.
Why Do People Buy Property in Trusts?
Here are some common reasons:
1. Legacy & Succession Planning
Trusts help ensure that property is passed down smoothly to the next generation, avoiding lengthy probate processes. It can also prevent disputes among heirs.
2. Protecting Assets for Minors
Parents may use a trust to hold property on behalf of young children. The trustee will manage the property until the child reaches a certain age or milestone.
3. Tax Planning (But Beware of ABSD!)
While some may attempt to use trusts for tax planning, Singapore regulations have tightened in recent years. From 9 May 2022 onwards, properties bought in trust are subject to Additional Buyer’s Stamp Duty (ABSD) of 65% upfront—regardless of the beneficiary’s profile. This makes such strategies less tax-efficient than before.
4. Creditor Protection
In some cases, placing property in a trust may help protect it from future claims by creditors (though this depends on timing and intention and should not be abused).
What Are the Key Requirements?
To set up a trust for buying property, you’ll need:
A trust deed outlining the terms and conditions of the trust.
A trustee (can be an individual or a trust company).
A beneficiary (often a child or family member).
A lawyer or trust advisor to structure and execute the legal documents properly.
Funds for the purchase must come from the trustee or settlor’s own money.
Stamp Duty Implications
This is where many buyers get caught off-guard. Effective from 9 May 2022, IRAS imposed:
65% ABSD on any residential property bought in trust (unless the trust is proven to be irrevocable with identifiable beneficiaries who would otherwise not trigger ABSD).
No remission or refund unless very specific conditions are met, and the Commissioner of Stamp Duties is satisfied.
Always seek legal and tax advice before committing to a trust purchase.
When Might Buying in a Trust Still Make Sense?
Despite the high ABSD cost, some families still proceed with trust purchases if:
They have long-term estate planning goals.
The property is meant as a gift for a child and the family has sufficient wealth to absorb the taxes.
They want to keep the property out of the settlor's estate or creditor reach.
Key Considerations Before You Proceed
Is the trust irrevocable or revocable? Only irrevocable trusts with specific beneficiaries may be exempt from ABSD.
Can your child legally own property? Under Singapore law, minors cannot hold legal title directly, hence a trust is needed.
Have you consulted a trust lawyer or estate planner? This step is essential due to the legal and financial complexity involved.
Do you have sufficient funds? Properties in trusts are not eligible for housing loans or CPF usage—only cash payment is allowed.
Final Thoughts
Buying a property under trust is not a shortcut to avoid ABSD or taxes—it’s a sophisticated strategy for those with clear estate or asset protection goals. It can be powerful if used wisely, but risky if misused.
If you’re considering this route, always engage a qualified professional to assess whether it truly serves your objectives.
Need clarity on whether a trust purchase fits your financial goals? Let’s have a chat—I’ll help you explore all your options with zero obligation.
