Trust Deed

What do you need to know.

When we take about Turst deed in property, we are referring to express trust.

An express trust is a trust which is expressly created to achieve certain desired consequences. The usual pattern of an express trust is as follows: a settlor transfers trust property to the trustee on trust for the beneficiaries and specifies the terms of the trust. 

a) Settlor – the person financing or putting assets into the trust.

b) Trustee (or legal owner) – person managing the assets, usually the parents, grandparents are possible but we wouldn't recommend due to their elderly age. The Trustee could also be the settlor.

c) Beneficiary or Trustor – the person entitled to the benefits of the assets in the trust ie the Child.

A Trust deed is usually professionally drafted by lawyers who effect a property purchase.

The trust deed should contain :

1) Name and identification details of the trustee(s)
2) Name and identification details of the beneficiary
3) Address of the property. 
4) Powers of the trustee. 

In order to be considered a validly constituted trust.

Firstly, the intention of the settlor to create the trust must be certain.
Second, the identity of the trust property must be certain.
Finally, the identity of the beneficiaries must be defined with some precision.

 

Here are some examples of the trustee powers :

Power to pay taxes

Ie allow the trustee to pay the stamp duty on the beneficiary behalf.

 

Power to allow occupation of property and enjoyment of chattels

Ie allow the trustee to reside in the house.

 

Power to insure property

Ie empower the trustee to insure the property against the possibility that something unforeseeable causes damage

 

Powers in relation to life insurance policies

Ie to link the property to the beneficiary life insurance

 

Power to appoint agents

Agents can be property agents or lawyers or any person who is offering a service with regards to this property.

 

Power to lease the property

The Trustee shall have the power to lease the Property or part thereof and the nett rent and income thereby received in respect of the said lease shall be given totally to the Beneficiary,

 

Power to sell the property

The Trustee shall have the power to sell the property at such valuable consideration as he/she deems fit and if he/she is of the view that it is in the interest of the Beneficiary to effect such sale, and will hold such proceeds of sale in trust for the Beneficiary.

 

Power to reinvest.

Ie to enter into another investment that is in the interest of the Beneficiary.

The stamp duty payable is based on the beneficiary, ie no ABSD if the beneficiary is a citizen and have not have his/her name in another trust deed before.

As far as the law is concerned, the real owner of the property is the beneficiary and not the trustee.

 

There are no age limits for the beneficiary as well, it can be a few months old newborn or a elderly person.

There's an gift element in buying property under a trust deed as settlor or trustee usually finance the property purely by cash as the minor lacks legal capacity to sign any mortgage documents and would not have any income to finance a loan anyway. Thus this trust deed will be affected by the bankruptcy and insolvency act 2018 for the first 3 years of setting up.

 

*The bankruptcy act 1995 have been updated to bankruptcy and insolvency act 2018, one noticeable change is it is 3 years now instead of 5 years.*

 

A trustee may find it hard to sell the property and get a buyer within the first 3 years of setting up this trust deed as the purchaser's bank will find out from the title search that this property was purchased under a trust deed and therefore will not provide any loan to the purchaser (risk that the trustee creditors comes and put a claim on the property).

 

The personal creditors of the trustee are not entitled to reach the trust property to satisfy the personal claims of the trustee (from the 3rd year onwards).

How do you buy a new launch property under trust deed?

The overall process of buying a new launch under trust deed is very much the same as a normal purchase.

Agents will need to inform the showflat IC that the client will be purchasing under a trust deed.

Only the trustee name will appear on the OTP, there's no need to put in the beneficiary name. Birth certificate, NRIC, passport will be required to furnish a copy to the developer for identification purposes.

The developer's solicitor will also amend the signing page in the S&P.

You need to inform the developer your appointed lawyer for them to send the S&P over to them.

The law firm will need the OTP, Birth certificate, NRIC and passport to draft the trust deed.

The law firm will then arrange to meet you and explain the trust deed to you once the S&P has been received.

Trustee will only need to be present at the law firm, and will be signing off the S&P, "Trustee name in trust for beneficiary name"

You may need to provide an alternative trustee in case the original trustee is no longer around.

Take note that some law firms may not want to do trust deed for beneficiary that are too young. ie a few days old new born.

How do you buy a private resale property under trust deed?

The overall process of buying a resale property under trust deed is very much the same as a normal purchase. 

Only the trustee name will appear on the OTP, there's no need to put in the beneficiary name. 

The law firm will need the OTP, Birth certificate, NRIC and passport to draft the trust deed.

The law firm will then arrange to meet you and explain the trust deed to you.

Trustee will only need to be present at the law firm, and will be signing off the OTP, "Trustee name in trust for beneficiary name"

You may need to provide an alternative trustee in case the original trustee is no longer around.

Take note that some law firms may not want to do trust deed for beneficiary that are too young. ie a few days old new born.