To be clear, it is legal to buy a property in the name of a minor (someone under the age of 18). The Title Deed will simply note that the owner is a minor. It is a simple matter to change the deed when the youngster is of age.
If you're planning to buy a property for your child, here's what you need to know: It is legal for a minor to own property in Australia⁴. The Title Deed will simply include 'a minor born on…' after their name to identify the owner of the property.
Under Australian law, you can give real estate to a relative as an outright gift. When giving ownership to a third party, there is no exchange of money. The gifting process involves filing a Transfer of Land with your title office. Filing a gift deed may also be necessary.
As a rule of thumb, you should allow for between 8% and 10% of the purchase price of the property for all the other costs involved in purchasing a property. These costs will include bond registration fees, transfer duty, transfer costs, and other legal fees.
Gift the house
But you can gift a total of $12.06 million (in 2022) over your lifetime without incurring a gift tax. If your residence is worth less than $12.06 million and you give it to your children, you probably won't have to pay any gift taxes, but you will still have to file a gift tax form.
Estate Questions
To be clear, it is legal to buy a property in the name of a minor (someone under the age of 18). The Title Deed will simply note that the owner is a minor. It is a simple matter to change the deed when the youngster is of age.
Can I transfer property ownership to someone under 18? If your child is under the age of 18, they cannot own a property in their name. However, it can be held in trust until they turn 18, at which point the child will take ownership of the property.
Instead of drafting a Will, many people just put their child's name on the deed to their house. Their goal is to make things easier for their child by eliminating the need to go through probate. If the house is the only asset, this can be an effective way to avoid probate.
The most common way to transfer property to your children is through gifting it. This is usually done to ensure they will not have to pay inheritance tax when you die. Inheritance tax starts at 40%.
In order to transfer property to a family member as a gift, you'll need to execute a “Deed of Gift”. This is also known as a “Transfer of Gift”. This legal process ends with the family member(s) classified as the property's legal proprietors.
In a transfer of equity, the person being added to the deed must be represented by a solicitor. However, the person who already holds the deed doesn't have to. It's quite common for both parties to have their own representation. This means they can receive independent legal advice.
There is no legal impediment to registering property in the name of a minor. However, with regards to the contract (deed of sale) to purchase the property it must be noted that minors have no or limited contractual capacity depending on their age.
Capital Gains Tax Considerations
It's generally better to receive real estate as an inheritance rather than as an outright gift because of capital gains implications. That's because of cost basis, which is cost of the property used to determine the capital gain, if any, when it is transferred.
Gifting a second home or a rental property to your children can be a great way to pass an asset down a generation in a tax efficient way. However, there are number of points that you will need to be aware of before transferring a property to them.
Like we've mentioned before, the annual exclusion limit (the cap on tax-free gifts) is a whopping $16,000 per person per year for 2022 (it's $17,000 for gifts made in 2023).
Gifts above the nil rate band that are made within seven years of death are subject to inheritance tax (IHT). So, if your parents live for seven years after you buy their property for under market value, there will be no inheritance tax on this gift.
A gift of property is subject to capital gains tax (CGT), which is charged on any profit arising, or treated as arising, on the gift. It is the person selling or gifting the property who would be liable to pay the CGT and not the receiver of the gift.
Gifting property to family members with deed of gift
Despite the amounts involved, it is possible to transfer ownership of your property without money changing hands. This process can either be called a deed of gift or transfer of gift, both definitions mean the same thing.
A father is within his rights to give the self-acquired -property to his one son to the exclusion of other children. During his lifetime, his children have no right to claim it. He can pass the same to his one son by gift or by will.
Your parents can give their home to you as a tax-free gift if the transaction meets the Internal Revenue Service definition of a gift. Your parents must legally own the property and intend to give it to you as a gift. They must relinquish all rights and ownership of the house and retitle the house in your name.
In most cases, the fees will amount to between £100 and £500 +VAT. Your conveyancer may or may not include cover for additional charges within their service.
You will need to execute a transfer deed and complete the Land Registry form entitled Transfer of Whole of Registered Title, then send both documents to the Land Registry with their fee and identification documentation.
It usually takes four to six weeks to complete the legal processes involved in the transfer of title.
You can buy a property for your child to live in, with the intention that they will legally own it in the future. However, as it will be a second property owned by yourself, there will be tax implications.
If you give a gift of property such as jewelry or land to your spouse, you may be able to defer paying tax. If your spouse sells the property, tax will be paid by the transferring spouse on any capital gain made. The capital gain will be calculated by using your purchase price and the selling price used by your spouse.