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VIC House Transfer to Son by In-laws - Implications?

Discussion in 'Property Law Forum' started by fabio, 22 February 2015.

  1. fabio

    fabio Member

    22 February 2015
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    My mother in law wishes to transfer her residential house to my underage son of 10 years, and give it to him as a gift. What are the implications under property law for her and if any for my son. Can we (the parents) be the custodian of such property till he turns 18.

  2. Sarah J

    Sarah J Well-Known Member

    16 July 2014
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    Hi fabio,

    A minor can own property under their own name. The reason why people don't contract with minors is that the other party cannot enforce it against the minor until they turn 18. This means, if your mother in law has a mortgage over the property, she will need to get bank's approval before she assigns the property over (as is common procedure) and the bank may not wish to approve this unless an adult is also in the picture.

    One common way to do this is create a trust over the property, have the parents or someone over 18 as a trustee (they deal with the property and maintain the property until the trust is ready to vest) and your son is the beneficiary. A trust is flexible and your mother in law can have the trust end upon your son obtaining 18 or later.

    There are tax ramifications for this: (i) in transferring the property (e.g. stamp duty) ; (ii) in the income generated from the property under trust (e.g. capital gains tax; income tax); (iii) in expenses associated with the property (e.g. deductions). If it is directly transferred to your son, your son may need to pay this. If it is vested in a trust, the trustees deal with tax. Best to consult an Australian taxation/property lawyer or accountant for this.
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