EFFECTIVE PREP WORK
Even among us women, property ownership takes up a majority of our investment portfolios. One of our main reasons for buying properties is capital appreciation which can be passed down as part of our legacy plan for our children.
But many years down the road, the next generation may find themselves inheriting an ageing property which comes with common issues such as the cost and inconvenience of wear and tear. Potentially, there are also ownership and selling issues, particularly if there is more than one beneficiary to the said property. As such, families often get themselves embroiled in bitter legal disputes over inherited properties.
Since April this year, the government has raised the additional buyer stamp duties (ABSD) from 17% to 20% for Singaporeans and for foreigners, it is now a hefty increase from 30% to 60%. With this hefty increase in the ABSD, is buying properties still a good form of wealth and legacy planning in today’s environment? Is there an alternative option that one can look at?
And here comes the latest buzzword. REITS funds. Not just REITS.
So, what exactly are REITS funds?
REITS funds consist of baskets of Reits-related unit trust.
Investors get to tap on the expertise of big institutions—the ones who develop commercial buildings for offices, as well as light and heavy industries. And these are eventually rented out to tenants which run the businesses. In return, they collect rental, and we as investors, collect part of it in the form of dividends.
The important and interesting point to note about REITS funds is that the instrument can be sold at any time. They can also be assigned to another party or change the insured party when the need arises. This provides an important form of flexibility when it comes to structuring or changing strategies to ringfence and guard against unplanned circumstances, such as divorce of the children. For instance, your initial intention may be to collect dividends for your own retirement, and pass them down to your spouse, children or grandchildren by way of assignment or through instructions in your will or trust without incurring hefty ABSD or estate duty taxes.
Proper planning using REITS funds as part of your portfolio can help ensure your peace of mind when you eventually retire. Leaving sufficient funds to take care of your beneficiaries, especially the minors among them, those with special needs, or even aging parents.