A gift of property to a child, under the age of 18 years is not a simple gift, the law (recognising that not all of us are ready to make such big decisions at a tender age) does not afford children or minors the right to own or hold land. As such, a gift of property can be made for the benefit of a minor, but the gift is not to them. If the intention is to transfer property to a minor beneficiary the property must be held in trust on their behalf.
Consider the following example: a widowed grandmother owns two houses and has only one child and one grandchild who is a minor at the time. The grandmother gives the house, which she does not live in, to her grandchild. But how does this work?
The grandmother in this circumstance must appoint two trustees, they will then hold or legally own the property. However, the rules that bind trustees and how they hold the property are stringent. Will the trustees be letting the property out? What will they do with the income? Can they pay this to the grandchild? What if the grandchild needs something very expensive, such that the property needs to be sold or mortgaged? Do the trustees have this power?
Also, when considering what powers to give a trustee she must also consider what precautions or restraints need to be included, whether by default or design?
Imagining the trustees are to be the parents of the minor. What happens if they should divorce?
Although it can be a nice idea for those who can to make such provision for grandchildren (and it may even be sound estate planning advice for a grandparent looking to mitigate inheritance tax liability) a gift of real property into trust can be very complicated and as land is permanent, so too may the effects of getting it wrong!
Whether it is the tax considerations, or the liabilities and obligations that run with the land (considering properties with positive covenants affecting them, or leasehold properties where there is ground rent and service charge) getting the right advice can make the difference between getting it right first time, or dealing with problems further down the line
SE-Solicitors have experts across a range of fields to help you decide if such a gift is right for you and your loved ones and how to get it right.
