1. Introduction

In Singapore, the transfer of assets during one’s lifetime as part of an estate planning strategy is a key aspect of wealth management for high-net-worth individuals (HNWIs). A deed of gift (“Deed of Gift”) is a formal legal document that facilitates the voluntary transfer of ownership of assets from one party (the donor) to another (the donee) without any exchange of consideration.

While the gifting of assets may appear straightforward, satisfying the necessary legal requirements is essential for the transfer to be valid and enforceable under Singapore law. Understanding the significance of a well-drafted Deed of Gift is crucial because it protects the interests of the donor and the donee and ensures the proper transfer of ownership, which might otherwise remain with the donor if not explicitly stated.

The process involves more than just intention – it also demands precision in drafting and adherence to applicable laws to avoid potential future disputes or unintended outcomes.

The focus of this article is to provide you with an overview of the legal framework and execution process of a Deed of Gift in Singapore. It highlights the legal requirements, the types of gifts that can be transferred, and the steps involved in completing the process.

We hope that this article can guide you in understanding how a Deed of Gift should be drafted and executed under Singapore law.

If there are any suggestions and/or legal queries on executing a Deed of Gift in Singapore, please contact the author, Waltson Tan, at: waltson.tan@28falconlaw.com

2. Legal Requirements for a Valid Deed of Gift

A Deed of Gift must satisfy certain legal requirements to be enforceable in Singapore. Some of these requirements are highlighted below:

     (i) Donor’s capacity

The donor must be at least 21 years old and has the requisite mental capacity to fully understand the nature and consequences of their actions. A legally competent donor can accurately identify the donee by name and address in the deed, ensuring the transfer is directed to the rightful recipient.

(ii) Certainty of Gift

The subject matter of the gift must be clearly defined. The Deed of Gift should include detailed descriptions such as the nature of the asset, its location, value, and distinguishing features to avoid ambiguity. For monetary gifts, the exact sum or number of shares must be specified to ensure that the donee can lay claim to the intended asset without dispute.

(iii) Donor’s intention

The donor must explicitly demonstrate their intention to relinquish the ownership of the gift to the donee without attaching any conditions in establishing the validity of the gift.

(iv) Delivery and Transfer of Possession

The donor must then objectively do everything in their power to effect the gift to the intended donee, which could be delivered in various means depending on the nature and type of gifts.

3. Some Common Types of Gifts Under a Deed of Gift

A duly executed Deed of Gift in Singapore can encompass various asset types with distinct legal considerations and execution requirements. We outline below the types of gifts commonly transferred under the Deed of Gift.

(i) Cash and Shares

For monetary gifts or shares, the mere intention is not sufficient for a valid execution of the gift transfer. The donor must perform all necessary actions to legally effectuate the gift by demonstrating clear steps taken to complete the transfer. A stated intent would not be sufficient under the law. For instance, this could include signing bank transfer forms for cash gifts or executing share transfer instruments for gifts of shares with the share certificate presented. Without these actions, the legal requirements for the transfer are likely to remain unfulfilled.

(ii) Physical Assets

It is important to identify the gifts involving tangible items such as jewellery, artwork, collectibles or other valuables. If a donor wishes to make a gift out of a bundle of items, the donor must demonstrate the specific object and relinquish ownership at the time of transfer of the possession to the donee. Therefore, it is highly recommended to document the transfer formally or involve credible witnesses to enhance the validity of the gift.

(iii) Real Estate

Gifts of real properties require compliance with regulatory requirements, including registration with the Singapore Land Authority (SLA) and payment of applicable stamp duties. For Housing & Development Board (HDB) flats, gifting is limited to immediate family members and only allowed under limited circumstances. However, do note that properties held in joint tenancy cannot be distributed through a Deed of Gift due to the law on survivorship. Additionally, mortgaged properties may require the redemption of mortgages and clearance of CPF charges before they can be transferred as gifts.

(iv) Assets Overseas

Assets situated outside Singapore are likely to be subject to the laws of the jurisdiction where such assets are located. Dealing with such assets often involves engaging foreign legal counsel to facilitate the transfer in compliance with local legislation.

4. Execution of a Deed of Gift in Accordance with Legal Formalities

Once the deed is drafted, it must be executed in accordance with the formal requirements under Singapore law. As recommended practice, both the donor and the donee should sign and seal the deed, and the signing should also be witnessed by at least one person who is not related to the parties, independent and not a beneficiary of under the Deed of Gift. The witness must attest to the authenticity of the signatures, which provides a safeguard against future disputes.

For transfers of real properties, taxes such as stamp duties are required to be paid to formalise the transaction. Notwithstanding that the transfer is gratuitous, buyer’s stamp duties will be incurred and it is calculated based on the property’s market value. Donors should obtain a valuation report to accurately determine the real property’s market value and comply with the requirements of the Inland Revenue Authority of Singapore (IRAS).

5. Risks Relating to a Deed of Gift in Bankruptcy and Insolvency

(i) Unfair Preferences

While a Deed of Gift is useful for asset transfers, it carries certain risks, particularly in the event of insolvency or bankruptcy. In Singapore, a valid Deed of Gift may be subject to clawback within the period starting 2 years before the commencement of a bankruptcy application, judicial management or winding up, as the case may be.

(ii) Transactions at Undervalue

If a Deed of Gift is made within three years before the commencement of a bankruptcy application, judicial management or winding up (as the case may be) involving an entity affiliated to or a person associated with the donor, it may be scrutinised to determine whether it was a transaction at undervalue. This means that if the Deed of Gift is determined to be a transaction at undervalue, creditors may seek to challenge such transfers. Therefore, a valid Deed of Gift should be executed in good faith and comply with the applicable legal requirements.

6. Conclusion

Having a valid and enforceable Deed of Gift executed according to your wishes provides legal certainty for asset or property transfers. Engaging an experienced legal counsel increases the likelihood that your deed is not only valid and legally enforceable but also tailored to reflect your exact intentions and circumstances. This approach reduces the risks of disputes and safeguards the legal interests of all parties involved.

Given the complexities that can arise in the preparation of a Deed of Gift, we would recommend that you consult a Singapore-qualified lawyer for assistance to ensure proper structuring, and addressing the potential issues, and ensure that the deed is executed is in compliance with applicable Singapore laws.

Our team has the requisite experience to service our clients and guide them through the process estate planning to deliver bespoke solutions according to their objectives.

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Our firm has the requisite expertise in drafting Deed of Gifts and Wills for our clients, including those with complex wishes and multiple classes of assets.

The author, Waltson Tan, is a corporate lawyer trained in London and Singapore. He is qualified as an advocate and solicitor in Singapore, and has more than eight years of post-qualification experience.

Waltson focuses his practice on mergers and acquisitions, private equity, joint ventures, investment funds and other general corporate and commercial transactions. He has also represented numerous leading multinational organisations on a broad spectrum of corporate, regulatory, cross-border restructuring and employment matters.

Waltson also advises clients on a monthly and yearly retainer basis, where he provides dedicated services to each client in relation to the issues which clients face, including general corporate and employment related matters.

Prior to founding the firm, Waltson practised at some of the top law firms in Singapore and thereafter, at a leading international law firm, which was the second largest law firm in the United States and one of the ten largest in the world.

 

Waltson Tan Director +65 8079 0028 waltson.tan@28falconlaw.com

Office address: 101A Upper Cross Street #13-11, People’s Park Centre Singapore 058358