Protect Your Future: The Hidden Risks of Property Trusts
Are you considering buying property under a trust for your child? Before you sign away your rights, understand the permanent legal implications that most agents won't tell you about.
As the settlor, you permanently surrender ownership of the property with no ability to cancel or modify the arrangement.
Loss of Control
You cannot sell, rent out, or live in the property once it's placed in the trust.
No Financial Benefit
You cannot collect rental income. The trustee manages the property exclusively for your child's benefit.
The Property No Longer Belongs to You
No Residence Rights
You cannot live in the property despite paying for it 100%.
No Financial Rights
You cannot sell it or collect any rental income.
No Legal Control
You cannot use CPF, change beneficiaries, or terminate the trust.
Permanent Transfer
This is not a loophole — it's a permanent transfer of legal rights.
65% ABSD Must Be Paid Upfront
Pay 65% ABSD Initially
Purchasing a residential property under trust requires paying 65% ABSD upfront based on the higher of purchase price or market value.
Apply for Refund
The trust must be irrevocable, with an identifiable beneficiary who owns no other property. Application deadline: 6 months.
Await Approval
Even after meeting all conditions, refund approval is not guaranteed. IRAS scrutinizes applications carefully.
Common Mistake: "I Just Want to Put It Under My Child's Name"
Tax Avoidance Intent
Using trusts primarily to avoid ABSD while retaining benefits can trigger serious legal consequences.
IRAS Scrutiny
Tax authorities closely examine trust arrangements to ensure they're not being used as loopholes.
Legal Consequences
Attempting to retain control or benefits can lead to tax penalties, legal issues, or complete loss of property rights.
Reality Check
IRAS is clear: only the beneficiary may benefit from trust property - not you as the parent.
When Might It Still Make Sense?
Genuine Gift Intent
You truly want to give the asset to your child with no strings attached
Long-Term Estate Planning
Part of comprehensive wealth transfer strategy spanning generations
Complete Surrender of Control
Prepared to permanently walk away from ownership forever
Property trusts make sense only when you have legitimate estate planning goals and genuinely intend to transfer assets to the next generation, with no expectation of personal benefit or control.
Upfront ABSD Charge (65%) Any residential property placed into a living trust is immediately charged 65% ABSD.
50% Anti-Avoidance Surcharge If IRAS finds the trust a contrived scheme (parents still controlling or drawing rental), an additional 50% of that 65% is imposed as a penalty.
No ABSD Refund All ABSD paid is forfeited. No remission is granted unless the child is the genuine, immediate beneficial owner.
Further Fines & Criminal Risk Failure to settle the surcharge can trigger:
A penalty of up to 4× the unpaid duty
Criminal prosecution, with possible fines and/or imprisonment for tax evasion
Civil Recovery & Forced Sale
IRAS will treat the parents as the true buyers, ignore the trust for stamp-duty purposes, and demand 65% ABSD + 50% surcharge
A statutory charge (caveat) is lodged on the title, preventing any sale until IRAS is paid
If duties remain unpaid, IRAS can obtain a court order, register a writ of seizure and sale, and force-sell the unit to recover all outstanding amounts (ABSD, surcharge, interest, and costs)
Trust arrangements are complex legal structures with permanent implications. A specialized lawyer can ensure your documents properly reflect your intentions and meet legal requirements.
Why speak with a tax advisor?
ABSD implications, potential refunds, and ongoing tax obligations require expert guidance. A tax advisor can help navigate IRAS requirements and identify potential pitfalls.
Why involve your banker?
Financing properties under trusts involves special considerations. Your banker can explain funding limitations, interest implications, and how trust structures affect your overall financial position.
Property trusts are high-risk structures if misunderstood or misused. The financial and legal consequences of mistakes can be permanent and devastating.