It seems like a sound investment to transfer immovable property to your minor child. The property remains separate from your estate, away from potential third party creditors, and you do not run the risk of excessive capital gains tax that you face when transferring such property to a trust.

But be warned: Transferring the property to a minor child may be a one way investment.

The procedure involved in buying and registering immovable property in the name of a minor child is as simple as signing the transfer documents as the child’s parent(s) or legal guardian(s).

If you want to sell the property in due course, however, you may be faced with a costly High Court Application to do so, and no funds at your disposal.

The fact that the minor child had no say in the registration of the immovable property in his or her name, or that you paid the purchase price from your own pocket, will not come to your aid…

The reason for this is that the Administration of Estate Act 66 of 1965, section 80 states that  “no natural guardian shall alienate or mortgage any immovable property belonging to his minor child … unless he is authorised thereto by the Court or by the Master…”

In terms of section 80(2) the Act goes further to state that the Master may authorise such alienation of immovable property if the value of the property does not exceed the amount determined by the Minister from time to time. The value as at the date of this article was R250 000.

Any immovable property exceeding the value of R250 000 may only be alienated (i.e. sold or transferred to a third party) with the authority of the High Court having jurisdiction.

As such, you, the parent or guardian who purchased the immovable property and registered it in the name of your minor child, will have to apply by way of a High Court Application for permission to transfer the property to a third party.

To obtain the necessary authority you will have to furnish the court good reasons as to:

  1. Why the property is now being alienated; and
  2. Why such alienation will benefit the minor child in question.

In the circumstances, if your investment did not yield a good return, you could fall short of proving that the sale will in fact benefit the minor child and no authority to transfer same.

You will furthermore have to provide the court with details as to what will be done with the proceeds of the sale: if a new property is to be purchased, you will need to motivate why the purchase will serve in the minor’s best interests, alternatively, if the proceeds will not be applied towards the purchase of a replacement property, the monies must be paid to the Guardian’s Fund to be kept and administered on behalf of the minor child.

The courts have in exceptional circumstances allowed funds to be held in a different investment to the Guardian’s Fund, subject to such investment being shown to be more beneficial to the minor child.

Nevertheless, the funds are no longer yours to spend or invest as you intended, and what seemed like a sound investment, may, in fact, be a costly and unintended donation.

EUNICE

Eunice Pieterse is currently a associate in the Cape Town office of C&A Friedlander Inc.

Eunice specialises in matrimonial and family law.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

BEWARE OF TRANSFERRING IMMOVABLE PROPERTY TO A MINOR CHILD