In this video, I will talk about a few solutions on
The key is the word “Your” which refers to your family as a whole which I will be discussing on maximizing each individual in your family to own a maximum 1 property without ABSD
There are generally 3 ways such that we can reduce or pay no ABSD on subsequent residential property purchases as a couple or family.
Number 1 , Decoupling
As a couple, if you own one property under both name, you can consider to remove one of your names from the existing properties such that the other person can buy another property as his or her first property.
There are some potential costs to be taken into consideration in decoupling:-
* the Transferor may be subject to Seller’s Stamp Duty on the share transferred if the Transferor purchased the property less than 3 years ago;
* ABSD is payable on the value of the share transferred if the Transferee has more than one property;
* if the decoupling transaction is done within the lock-in period for the bank loan, then the bank may charge a penalty;
* if the Transferor had initially used CPF funds in purchasing the property, the CPF funds and accrued interest have to be refunded into his CPF account. Usually, the Transferee would obtain a fresh loan to pay for the purchase of the share transferred in his favour. From the proceeds of the sale, the Transferor would refund his CPF monies, pay for his share of the outstanding bank loan and retain the balance. The fresh loan obtained by the Transferee should be in a quantum that is also sufficient to refinance the Transferee’s own share of outstanding bank loan; and
* the total legal costs will be about $5000 to $6000.
Number 2 ; Purchase Under Trust
Another way of not paying ABSD as a family, is to purchase the next property on trust for a beneficiary (Usually your children) with zero property count. If the beneficiary has zero property count, no ABSD is payable.
Buying under trust means one of the parents would appoint themselves as trustees who have legal ownership and control of the property.
As trustees, they have duties to manage and administer the property for the benefits of the beneficiary.
There are benefits to this arrangement.
* The property held on trust is shielded from division upon the divorce of the trustor. i.e. the person who establishes the trust. This means the property set aside in the trust for the child will never be subject to division on the trustor’s divorce. This protection cannot be secured by a will, which can be revoked any time.
* It is also shielded from division upon the divorce of the beneficiary. This is useful for those who wish to give their assets to a child with assurance that the gift will not be distributed to unintended third parties if the child eventually marries and divorces.
* The beneficiary may be a minor i.e. below 21 years of age. There is no restriction on the minimum age of the beneficiary.
* The trust need not to be registered and hence confidentiality may be maintained.
* This arrangement is inexpensive.
Legal costs is about $2,500 onwards depending on the terms of the trust.
Number 3, Plan ahead, buy in the right name and shareholding
Whenever it is financially viable, properties may be bought in sole names.
If this is not possible (for example, the banks require justification of higher income or the CPF monies of a co-purchaser is required for down payment or monthly instalment payment), then consider purchasing your property as tenants in common in the proportion of 99% to 1%.
In future, if the 1% owner wishes to buy a second/subsequent property, the decoupling cost for the 1% would be insignificant.
Meanwhile, being the 1% owner does not restrict the amount of the 1% owner’s CPF funds that can be used for the purchase. This means that the 1% owner can use his CPF funds in a sum exceeding his 1% share in the property.
If you have intentions to enter the property market, you are welcome to contact me to arrange for a detailed financial assessment and to discuss what options are possible for your family
ALL INFORMATION PRESENTED IN THE VIDEO ARE BASED ON PERSONAL OPINIONS AND ALVINTAYSINGAPOREPROPERTYADVISOR IS NOT LIABLE FOR ANY LOSS OR EXPENSES WHATSOEVER RELATING TO INVESTMENT DECISIONS MADE BY THE AUDIENCE. THE IDEAS PRESENTED HERE ARE FOR REFERENCE AND EDUCATIONAL PURPOSE ONLY. ALL COPYRIGHTS RESERVED.
(Dated As of 2/1/2020)
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