Implications of Transferring Properties to Testamentary Trusts (ABSD and Property Count)
Disclaimer:
The information provided herein is for general informational purposes only and is not intended to be, nor should it be construed as, taxation, property, and/or legal advice. While we strive to ensure the accuracy and completeness of the information, it may not apply to every individual situation or specific case. The rules and regulations regarding Additional Buyer's Stamp Duty (ABSD) and property count in Singapore can vary based on specific circumstances and may be subject to change. We strongly recommend that you consult with the relevant authorities or a qualified professional to obtain advice tailored to your specific situation. The Inland Revenue Authority of Singapore (IRAS) should be contacted for a case-specific review to confirm the applicability of the information to your particular circumstances.
There is no Additional Buyer's Stamp Duty (ABSD) for transferring property into a trust upon death (e.g. testamentary trust) nor any inheritance tax in Singapore. However, it may increase the property count of the beneficiary which can then affect their ABSD in buying future property.
For confirmation on the property count and stamp duties, you will need to check with IRAS to sight the documents and have a case-specific review to confirm on a particular case.
Separately, do note that HDB regulations do change over time and cases are reviewed on a case by case basis. Such an arrangement does not guarantee that it will not affect the beneficiaries' HDB eligibility. The trustee will have to work with the beneficiaries accordingly should such circumstance arise.
Under the First Schedule of the Singapore Stamp Duties Act 1929, a buyer's property count depends on whether he/she "beneficially owns … an estate or interest" in residential property in Singapore. For example, it defines:
“Singapore citizen owning one property” means a citizen of Singapore who, if not for the transaction which is the subject of the instrument to be stamped, beneficially owns (whether alone or jointly or in common with another) an estate or interest in a single residential property situated within Singapore;
A beneficiary's interest under a trust may add to his/her property count, and this should be confirmed with IRAS.
The following is extracted from IRAS website:
"The ABSD liability will depend on the profile of the buyer as at the date of purchase or acquisition of the residential property:
A. Whether the buyer is an individual or an entity
B. The profile of the buyer
C. The count of residential properties owned by the buyer (including residential property beneficially owned and held in trust) and
D. Whether the residential property is to be held in a living trust"
Where residential property is held on trust for an identifiable individual beneficiary, that beneficiary is treated as owning the property for their property count (First Schedule, Article 3(2)(aa)). A beneficiary who is not identifiable may still have the trust property counted towards their property count, depending on their interest under the trust. This should be confirmed with IRAS.
According to the MOF press release on ABSD for residential properties transferred into a living trust:
"An identifiable beneficial owner of a trust residential property refers to an individual —
a. Identified in the trust deed or document as a beneficiary of the residential property; and
b. Who, because of the trust, has beneficial ownership of the residential property that is not, under the terms of the trust, revocable, variable, or subject to any condition subsequent."
If you are allocating the property into a trust (e.g. to a living trust, standby trust or well described testamentary trust), you will need a trustee to manage the trust. Managing a property trust can be time consuming and having a professional trustee doing it properly can also help prevent unwanted disputes and disagreements. While you can appoint someone you trust as the trustee, you should consider engaging a professional trustee instead.
Any trustee holding property may not be personally eligible to buy an HDB flat
According to HDB website, a person holding a property on trust for another person/entity (i.e. the trustee) is also considered to have an interest in a property, thereby affecting his/her own eligibility to buy an HDB flat.
HDB eligibility requires the person to not own or have an interest in any local or overseas private residential property, and "You are considered to own or have an interest in a property if you and/or your spouse have acquired a property through purchase or when it is: ... Acquired by holding on trust for another person/ entity".
