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Does adding children's names to the deeds of a Hong Kong flat involve any duty or tax?
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My husband and I have owned our flat here for more than 35 years. For succession planning, we would like to add the names of our two children (living and working abroad) to the title deeds of the property. Would this involve any duty or tax at any stage and, if so, would it be wise to do it in the current financial climate? We are about to start making our wills.
Adding your children's names to the title deeds for your home, even if no money changes hands, is thought a conveyance of rights and benefits. As such, stamp duty, based on the market value of the property and the portion transferred, is payable within 30 days of the transfer. Stamp duty rates are incremental and work out at around 3 to 4 per cent of the value of Hong Kong properties worth more than HK$6 million.
If your children are not permanent residents they will be exempt, as close relatives, from the new additional 15 per cent buyer's stamp duty payable on acquisitions of residential property by non-permanent residents of Hong Kong.
However, if your children sell their interest within six to 36 months of transfer, 10 to 20 per cent special stamp duty will be payable.
To avoid triggering stamp duty charges you should not add your children's names to the title of your home. This will also avoid possible ownership complications, including those that might arise if your children die before you.
If you wish to be certain your children will ultimately receive half each of the value of the property, you and your husband should both prepare wills that provide for this.
Assuming your home is held in the names of you and your husband, on the death of the first of you, the survivor will automatically own 100 per cent of the property. No stamp duty or other tax is payable when the property passes to the surviving spouse. On the death of that spouse, the terms of his or her will are brought into effect. Assuming no subsequent changes have been made, this will provide for your children to inherit the property as part of the estate of the deceased. Again, no stamp duty or tax is payable at that stage. It will only be payable when the property is ultimately sold.
As there are likely to be tax implications of owning the property within the jurisdictions in which each of your children live, you should discuss this aspect with your children and/or the solicitor preparing your wills. It may be that providing for estate assets (including the home) to be held in a trust set up under the terms of your will produces greater flexibility for your children. This flexibility might include deciding a preferred time to sell the property and providing protection against creditor and matrimonial claims.