Legal Issues to Note When Helping Your Child Buy a Property

Homeownership has a special place in the hearts of many Singaporeans, as it generally represents the first step that couples take in settling down and starting a family. It is therefore unsurprising that many young couples in Singapore look to buy a property when considering marriage. In this respect, parents may be interested to know how they can purchase property for their newlywed children, and whether there are potential legal issues that may arise if, for example, their child and their spouse end up getting a divorce.

Purchasing a property for your child is a different situation from buying a property on trust for your child. In that case, the child is typically under the age of 21 years old, and does not yet have the legal capacity to own property in their own name. The main differences can be summarised as follows:

In this article, we will discuss some common scenarios that may arise with regard to purchasing a property for your child:

1. Giving a share of money to your child to buy the property;
2. Buying a private property for your child and putting it in their name only, and not their spouse’s; and
3. Buying a private property in your name and letting the newlywed couple (i.e. your child and their spouse) stay in it.

Scenario 1: Giving a Share of Money to Your Child

The first scenario concerns parents giving a share of money to their child to buy a property, with the property to be held in their child’s name. The act of giving a share of money can be construed as either a loan or a gift from the parents to their child. This distinction is important because if you subsequently want to get back the money that you contributed or the property, you will only be able to do so if you successfully show that the contribution of money was a loan and not a gift.

However, the Singapore courts have demonstrated a preference for treating such acts as gifts rather than loans. For example, in a 2016 case, the parent (“A”) paid for a property when it was purchased, and the property was registered in the name of his child (“C”).

In that case, A argued that the property was held for A under a trust (i.e. while legal ownership of the property was with C, A was the beneficial owner of the property) because A had paid for the property. Thus, A sought an order for all the rights in the property to be transferred to him. On the other hand, C contended that the property was a gift, and so C was both the legal and beneficial owner of the property. In the end, the court decided that the property was purchased by A as a gift to C, and so A did not have any beneficial interest in the property.

In Singapore, the courts have accepted the concept of the “presumption of advancement”. This means that if there is a special relationship between a person who pays for the property and the person who is registered as the legal owner of that property, it gives rise to a presumption that the former intends to give the property to the latter. Such special relationships include familial relationships, e.g. parent-child relationships. The basis for such a presumption is that a parent would have intended to give the property to his/her child out of parental love and affection, and not as a loan.

That said, the courts are likely to give weight to any statements or written documents which indicate that the money contributed was a loan that ought to be paid back to the parent, as opposed to a gift to the child. In the event that the courts decide that the money contributed was a loan and not a gift, the court may order that the child pay back the money contributed, or transfer the title of the property back to the parent (if the parent paid the full purchase price).

Scenario 2: Buying a Private Property for Your Child and Only Putting It Under Their Name

The second scenario involves parents buying a private property for their newlywed child and the child’s spouse, but are thinking of putting the property only in their child’s name. One reason for doing so may be to make it easier for your child to retain ownership over the property in the event your child and their spouse get a divorce.

Apart from the legal ramifications of such a decision, such as the effect on the distribution of the property in the event of a divorce, it should be noted that doing so could create friction between your child and their spouse over why their spouse’s name is not included as a legal owner of the matrimonial home. Further, while your child’s spouse’s name can be included later, this may result in additional legal and stamp duty fees.

How the courts divide matrimonial assets in divorce proceedings

If your motivation for putting the property only in your child’s name is to ensure that your child will continue to retain ownership over the property in the event of a divorce, keep in mind that doing so may not guarantee such an outcome. This is because the spouse may be given a share of the property in divorce proceedings, especially if the divorce happens after a long period of marriage.

In this regard, the Singapore courts adopt a “structured” three-step approach in deciding the division of matrimonial assets in a divorce. The three steps are:

1. First, the court will ascribe a preliminary ratio to the parties based on the parties’ direct financial contributions to acquiring or improving the matrimonial assets (e.g. paying for renovation works to be done on the property)
2. Second, the court will then prescribe another ratio to the parties based on the parties’ indirect contributions to the family’s well-being.
3. Lastly, the court will generally take an average of the two percentage ratios to form the basis of the proportions, but may give a different weightage to either direct or indirect contributions depending on what would be fair and equitable.

You may refer to our other article on how the court divides matrimonial assets in a divorce in Singapore for more information.

Duty of full and frank disclosure in divorce proceedings

Another misconception that some may have is that in order to retain ownership of the property in divorce proceedings, one just has to not disclose his/her ownership of the property so that it will not be included in the matrimonial assets to be divided. However, in divorce proceedings, both spouses must fully and frankly disclose all known assets that they possess. If either party does not make a full and frank disclosure of any assets, the courts can and will draw an adverse inference against that party when dividing the matrimonial assets.

To illustrate how this second scenario can lead to many legal complications in terms of ownership of the property, in another 2016 case, the parent (“A”) purchased a property in joint names with his child (“C”). A contributed about $110,000 towards the purchase whereas C only contributed about $6,000 from his CPF. Subsequently, C married his spouse, but 30 years later, the couple sought a divorce.

In the divorce proceedings, the property was to be divided between the couple, as it was the matrimonial home of the couple. C consented to giving half of his 50% share (25%) of the property to his spouse in settlement of the division of matrimonial assets. To prevent C’s spouse from getting a share of the property, A argued that C held a 44.4% share in the property on trust for A from the time of the purchase, reflecting their financial contributions to the purchase of the property. As such, A’s position was that C could not consent to giving the equivalent of a 25% share of the property to his spouse.

Again, the court noted that in situations where parties share close ties (e.g., familial ties) and purchase properties in the other’s name, the law presumes that the purchaser intended for the property to be a gift to the other (discussed below). While the court did not make a decision on the parties’ respective claims over their share in the property, it noted that if the parties wanted to continue pursuing their claims, it would be financially draining and unbeneficial for all parties concerned.

Scenario 3: Buying a Private Property in Your Name and Letting the Newlyweds Stay in It

The last scenario concerns parents who are buying a private property in their own names and letting their newlywed children live in it. As compared to the above two scenarios, this would be the clearest indication that this is your property, and that you have no intention of gifting it to your child. In the event of a dispute, such as in the case above, if your child’s spouse claims that the property is a matrimonial asset to be distributed, it is likely that a court would also reach the same conclusion, as both the legal and beneficial ownership of the property still lies with you. Furthermore, the “presumption of advancement” mentioned above has no application here, as the property is not registered in your child’s name.

Do note that in this scenario, as you will be holding the property in your own name, you may be liable to pay Additional Buyer’s Stamp Duty (ABSD) if this is a second property that you own or have purchased in your name. This would also apply in the second scenario, when you are co-purchasing the property with your child, i.e. if the property is to be registered in both your and your child’s names.

The exact amount of ABSD payable will depend on your residency status. You may refer to our guide on buyer’s stamp duties in Singapore for a more detailed explanation of the ABSD rates and computation.

What Can You Do to Safeguard Your Legal Interests?

If you are still keen to help your child buy a property, there are a few things that you can consider to better safeguard your legal interests.

Document your intentions and wishes in writing

First, at the time of purchasing the property, you should document in writing your intentions and wishes pertaining to the property. For example, with reference to the first scenario above, suppose you wish to have the property registered in your child’s name but want to retain a share of the beneficial interest in the property. In this case, you should have this arrangement documented in writing, and if possible, signed by all parties involved.

While such a document may not be a contract per se, you may be able to rely on it subsequently to say that the other parties have clearly acknowledged your intentions at the time of purchase. This would mean that they cannot now claim that the property was held on trust for them, or that they have a stake in the property. Furthermore, as the document contains your contemporaneous intentions at the time of purchasing the property, even if it is not a legally enforceable agreement, the court might give weight to this piece of evidence when deciding how to resolve a dispute over who has an interest in the property.

Draft a will to set out your intentions/wishes upon your death

Second, you may also wish to draft a will to explicitly set out your intentions and wishes pertaining to the property upon your death. This is to ensure that your wishes on what happens to the property are fulfilled. For example, you may be purchasing a property for your child to be registered in both your names as joint tenants. However, an effect of joint tenancy is the right of survivorship. This means that if one of the joint tenants passes away, the surviving joint tenant obtains full ownership of the property.

If you wish, instead, to have your share of the property transferred to your own spouse, you may choose to include a clause in your will stating that upon your death, you wish for the joint tenancy to be severed. If you do choose to sever your joint tenancy, then both you and your child will hold the property as tenants-in-common in the proportion of your respective financial contributions to the purchase of the property. After your death, your share of the property will go to your estate, and your child will only be entitled to his/her percentage share in the property.

You should ultimately consult a property/conveyancing lawyer who can provide you with further guidance on how you can safeguard your legal interests in all situations.

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There are multiple ways that a parent can purchase a property for their child, and each way comes with its own unique set of legal implications. Therefore, it is important to be mindful of the potential legal implications that may arise before making a decision.

If you have any legal questions, you can consult a property/conveyancing lawyer for further advice and guidance on how to structure the potential transaction to better protect your legal interests. A property/conveyancing lawyer will also be able to assist you with preparing the necessary documents for the transaction as well as ensuring that you comply with any statutory requirements that may be involved, e.g. payment of stamp duties and other relevant taxes.