What is a Living Trust?
A living trust is a legal document or a trust, created during a trustor’s lifetime where a trustee is given responsibility for managing the trustor’s assets for the benefit of the eventual beneficiary.
In the process of creating the trust, ownership is split this way:
Buying Property in Trust.
The property will have to be fully paid for in cash.
CPF monies cannot be used for the purchase.
Banks will not extend a loan for the purchasing of property using a trust structure.
Trust can be set up over an existing property via formal legal procedures.
The trust can also be set up right at the purchase of a new property.
Is There ABSD Payable?
In the past, buying a property in trust, especially for their children under 21, was a method for people to acquire another property without paying ABSD on 2nd residential property.
With effect from 9 May 2022, the government announced that an ABSD of 35% will be applied onto any transfer of residential property into a living trust. Ministry of Finance states that this move “aims to promote a stable and sustainable residential property market”.
Who Can Apply For an ABSD Refund?
ALL of the following conditions must be met:
1. All beneficial owners of the residential property are identifiable individuals. Example: The child cannot be unborn.
2. Beneficial ownership of the residential property has vested in all of these beneficial owners at the time of property transfer into the trust.
Example: If the property is held in trust for a child whose interest will only be vested when they turn 21, the condition is not met because this would mean that the beneficiary would only own the property in future.
3. The beneficial ownership cannot be varied or revoked, or be subject to any condition subsequent, under the terms of the trust.
Example: The condition is not met if the beneficiary needs to fulfil certain conditions before being entitled to the interest in the property, such as graduating from university or getting married by a certain age.
ABSD Refund.
The application for a refund of ABSD must be made within 6 months from the date of the transfer.
The amount refunded is calculated by deducting ABSD payable from 35%, based on the profile of the beneficial owner.
For example, if the beneficial owner is a Singapore Citizen who already owns a property, the usual 17% ABSD on 2nd residential property applies. Therefore, the total ABSD refund will be 35%-17% = 18%.
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