Using secret family deals to avoid taxes can exact a heavy price

Singapore Law Watch

18 hours ago

Using secret family deals to avoid taxes can exact a heavy price
Source: Straits Times
Article Date: 03 Aug 2025
Author: Tan Ooi Boon
The law always finds a way to make those using sham property deals pay a heavy price, such as losing the right to the real estate.
It might be tempting to use a secret family arrangement to save on real estate taxes but venturing into this legal minefield brings high risks, including the chance you could lose the property.
Hiding behind a 'secret trust' – getting a relative to hold a property on your behalf – so you do not appear on records as an owner seems easy at first glance, but such deeds don't stay hidden for long, especially if a family dispute flares.
Mother put home in children's name
In an Australian case that is often cited by judges here, a woman put her home in the name of her children because she wanted to get state subsidies meant to help widows of war veterans buy homes if they did not own any property.
But she did not count on falling out with her children, who sold her house for themselves. She won her case when she sued the children to stake her claim on the sale proceeds, but had to return her ill-gotten subsidies.
Property bought in son's name
A Singapore couple bought a $5 million home in July 2020 to be held in trust for their son.
About a year after the purchase, their marriage broke down and the wife filed for divorce. The adult son then applied to the court for the trust to be terminated so he would immediately become the legal owner.
He did this because he wanted to avoid further squabbles between his parents and to ensure that he, his mother and sister could continue to live in the house.
His father argued that the asset was his all along because the trust was a sham set up to avoid paying the additional buyer's stamp duty (ABSD).
The High Court ruled that the trust was not a sham because evidence showed that in their better times, the couple had intended to give the property to their son.
The fact that the trust arrangement additionally allowed them to save on ABSD was an incidental benefit that did not change the intention to gift their elder child and only son a legacy property.
After all, the parents had engaged a lawyer to help set up the 'irrevocable' trust for their son, so they would have been advised during that process that it would be impossible for either of them to stake a claim on the property.
The court allowed the son to end the trust and have the home transferred to him.
Father wanted to sell son's property
The parents in this case bought a $1.5 million apartment and put it under a trust for their elder son while they managed it as the trustees. All was well until their marriage failed and the husband staked his claim to the unit.
He argued that the property did not belong to his son because the trust was a sham to dodge ABSD. The man added that his former wife came up with the idea to hold the property this way.
But the High Court did not buy his story because the man, a civil servant, was educated and intelligent. It was most unlikely that he would have been ignorant of the potential ramifications of trying to evade taxes, given the impact this could have on his career.
During the trial, the man even provided a wrong amount for the ABSD that he allegedly evaded due to the 'sham' trust. This led the court to dismiss his claim, as he would have remembered the actual levy if he had plotted to evade the tax since it was quite a large amount.
As the father sought to undermine the son's interest, the court also approved the mother's application to have him removed as a trustee for the property.
So avoid the temptation to fool the taxman: The law always finds a way to make people using sham property deals pay a heavy price.
Source: The Straits Times © SPH Media Limited. Permission required for reproduction.
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