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TOPICS OF THE DAY

• What is a Trust?
• Who can be a Trustee?
• Who can be the Beneficiary?
• Requirements of a valid Trust
• Powers and Duties of a Trustee
• Consequences of Breaching the Trust
• Procedure
• Scenarios

What is a Trust? What is a Trust?
• A legal arrangement that allows someone (known as the Trustee)
to hold a property for the benefit of another person (known as the
Beneficiary)
• Thus, the parents (legal owners) purchase the property and hold it
for the benefit of the child (the beneficial owner)
• Since the child has no existing property, no ABSD is payable
• “The Trustee declares that he holds the Property in trust for (name) (“the
Beneficiary”) and agrees that he will convey the Property to the Beneficiary
(upon the occurrence of an event).”

Who can be a Trustee? Who can be a Trustee?
• Anyone not incapacitated from holding title to a property can be a
Trustee
• I.e. a Trustee must be at least 21 years old and of sound mind
• No limit as to the number of trustees who may be appointed to a
trust
• Trustee(s) can only deal with the property in accordance with
their powers and duties as set out in a legal document known as
the Trust Deed / Declaration of Trust. Otherwise, they can be sued
for a breach of trust.
Who can be the Beneficiary? Who can be the Beneficiary?
• Anyone can be the Beneficiary of a Trust
• No age limit Creation of Trust

How is a Trust formed?

By way of Trust Deed / Declaration of Trust, which is a formal document that outlines the duties and powers of the Trustee.

Requirements of a Valid Trust Requirements of a Valid Trust
Formalities: Trust documents must be in WRITING
• Civil Law Act, s 7(1): “A declaration of trust respecting any
immovable property or any interest in such property must be
manifested and proved by some writing signed by some person
who is able to declare such trust or by his will.”

• Civil Law Act, s 7(2): “A disposition of an equitable interest or trust
subsisting at the time of the disposition must be in writing signed
by the person disposing of the same or by his agent lawfully
authorized in writing or by will.” Requirements of a Valid Trust
Formalities: Trust documents must be in WRITING
• Conveyancing and Law of Property Act, s 53(1): “A conveyance of
any estate or interest in land other than a lease for a period not
exceeding 7 years at a rack rent shall be void unless it is by deed in
the English language.”

Capacity
• Creator of the trust must have capacity to hold property
Powers and Duties of a Trustee Powers of a Trustee
• The default powers of a Trustee are governed by the Trustees Act
and they apply unless expressly excluded in the Trust Document
• Under the Act, a Trustee is empowered to make any kind of
investment with the trust assets as long as he obtains and
considers proper advice and carry out periodic review
• E.g. If the property market is booming, Trustee may sell the Trust
Property and put the sale proceeds in other forms of investment,
so long as he ensures that the Beneficiary’s interest is protected. Duties of a Trustee
• To take reasonable care in making investment with trust assets
• To act fairly between Beneficiaries (where there is more than one
beneficiary)
• To comply with the terms set out in the Trust Document
• To provide information and accounts to the Beneficiaries when
requested
• Not to make a secret profit from the Trust Consequence of Breaching the Trust Breach of Fiduciary Duty and Duty of Care
• If the Trustee fails to perform his powers and duties under the
Trust , the Beneficiary may bring a civil suit against him for breach
of duty.

• Beneficiary may claim for specific performance (i.e. to force the
Trustee to perform his duties under the Trust) or damages (i.e. to
recover from Trustee any losses due to his mismanagement of
trust assets) Criminal Breach of Trust
• Penal Code, s 405: When a Trustee, entrusted with a property,
dishonestly misappropriate or converts to his own use that
property, or dishonestly uses or disposes of that property in
violation of law or of the Trust Document, commits a criminal
breach of trust

• When Trustee commits a criminal breach of trust, he shall be
punished with imprisonment for a term which may extend to 7
years, or with fine, or both. Procedure Procedure
• Parents purchase the property, and execute a trust document,
declaring that they hold the property on trust for the child
• Trust document must be stamped (stamp fees of $10)

• The interest of the child must be registered
• Lodge caveat on behalf of child against the property

• Upon the occurrence of an event (e.g. the child turns 21), the
parents transfer the property to the child

Scenarios Scenarios
• We have received a number of queries regarding whether it is
possible for a parent to “purchase a property in their child’s name”
in order to avoid paying ABSD
• E.g. Parents own one existing property. If they purchase a second
property, they would have to pay 7% ABSD. However, their child does not
own any property, so if they could “purchase the property in their child’s
name”, ABSD is not payable

• What exactly does “purchase a property in their child’s name”
mean?

“Purchase a property in the child’s name”?
• Child is the purchaser, while parents finance the property

Or

• Parents purchase the property on trust for the child

Child is the Purchaser: Issues
• A child below 21 does not have legal capacity to buy a property
• Only possible if the child is aged 21 or above

• From 29 June 2013, borrowers must also be mortgagors
• Unless the child has the financial means to obtain a loan, the property has
to be paid in full cash

(Note: This is not a trust arrangement)
Child is the Purchaser: Issues
How can the parents’ interests be protected?

• What if the child keeps the property for himself?
• The child can execute a Power of Attorney in order to empower the parents to
deal with the property (renewable every 6 years)

• What if the child passes away?
• The child can execute a will and bequeath the property to his parents (no ABSD
payable for properties acquired via inheritance)

However, do note that the parents’ interests can never be fully protected.
E.g. the child becomes bankrupt.

Parents purchase the property on trust for the child
• If the child is below 21, the only way is for the parents to purchase
the property on trust for the child

• The parents purchasing the property on trust for their child
cannot use their CPF funds
• CPF funds can only be used for the purchase of your own property

• The parents will not be able to obtain a loan to finance the
purchase
• This is because the parents are only the legal owner, whereas the child is
the beneficial owner.
Vivien Mok
H/P: 90628592
Email: vvmok007@gmail.com

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