Do not buy a property in the name of your children
Humans are an inherently generous species. Oftentimes, the thought of gifting a property to your child or buying it in his/her name may have occurred to you.
Rob Balanda for the blog Property Update advises you to resist the idea.
You are on tight reins till the child turns 18
If you buy a property in the name of a minor, you cannot sell or lease out or mortgage the property until the beneficiary turns 18. There is also a grave danger that the beneficiary might turn out with a mind of his or her own.
Ah! Haven’t you heard about the new breed of 18-year olds who want to while away their time drinking, buying fashionable gadgets and all?
Make a company its trustee
You can take the sounder decision of becoming the trustee of the property yourself and handing it over to him or her not at 18 but at 21 years of age. However, this would still mean paying 21 years of stamp duty and capital gains tax at one go when the child turns 21.
Balanda suggests that making a company or organisation the trustee of the property may be the best bet available. This will save you a lot of capital gains tax and due expenditures (like stamp duty).
You can read the original article here.
Your PPR is not their PPR
I ditto Balanda’s recommendation completely. In fact, there are a few more angles worth evaluating. Let us say, the property you decide to gift your child is your principal place of residence (PPR) till then.
Now, if it is built on less than 5 acres land, you may have avoided capital gains tax safely on it. However, if you gift it away or make your child or grandchild its owner, they will have to pay capital gains taxes on the property. Yes, they will have to.
If the child loses his mental acumen
Let us budget for a very sad but practical turn of event. What if the child loses his or her mental capacity? In the given case, his attorney becomes completely eligible to sell the property to pay for his care fee or his medical expenses.
In fact, you cannot force an attorney otherwise if he makes up his mind that way.
Have you thought about the best course of action (for those of you who nurture this idea)?