The Pitfalls of Buying Real Estate for Your Kids

Thinking of buying an apartment for your adult children so that they can have a head start in life without the extra financial burden of mortgages?

- Tan Ooi Boon

Before well-off parents jump on the popular bandwagon of financial planning by getting their kids into real estate as well, they should realize that such moves are not without pitfalls.

One of the biggest risks is that such valuable investments will be shared by the kids' estranged spouses if their marriages fail.

Unlike other pre-marital assets that are usually excluded, it is often hard to keep property from being shared if it is used as the couple's matrimonial home.

People who already own residential property cannot apply for a Housing Board flat and they will have to foot the additional buyer's stamp duty (ABSD) if they buy another home with a future spouse.

So it is very likely that young couples will use existing properties that were gifted by their parents as their matrimonial homes.

Here are three important points parents should note before gifting properties to their children.

Inheritance Becomes Matrimonial Property

A recent divorce provides the starkest example of how family inheritance can end up being shared by people you no longer want to have any dealings with.