Can a Minor Own Property?

If you’re wondering, “Can a minor own property in Australia?”, the short answer is yes. However, before you make any decisions about buying property in a minor’s name or gifting property to a child, there are several important considerations, such as estate planning, tax implications, and, of course, the impact on your child’s future.

It is essential to seek objective legal advice from a qualified property lawyer before proceeding. While there are many schemes available, only a legal expert can help ensure you’re making the right decision for you and your child’s future. Read on to learn more or contact our experienced team of property conveyancers today for tailored advice.

Buying a Property in a Minor’s Name: What You Need to Know

1. Estate issues
   When asking, “Can a minor own property?” it’s important to understand the long-term implications of such a decision. While it is legally possible to buy property in a minor’s name (i.e., someone under 18), there are various estate planning issues to consider. A property title deed will note that the owner is a minor, but this does not preclude future complications.One significant consideration when buying property in a minor’s name is gifting rules. If you transfer a property to your child during your lifetime (as opposed to through a will), it may be deemed as a “gift” by the Australian Department of Human Services. Gifting property—which could involve selling it for less than market value—can have consequences on your ability to claim benefits such as the Age Pension. This can affect your financial position and that of your child, so it’s crucial to weigh these potential risks carefully.
2. Implications for kids and grandkids
   If you’re considering whether to buy property in a child’s name, be aware that while the property is legally theirs, they will not be able to sell, mortgage, or otherwise deal with the property until they reach adulthood (18 years of age). The property is considered legally held in trust for them, and any attempt to sell or mortgage the property before that time would require court approval, which is both costly and unlikely to succeed.In this context, gifting property to a minor may restrict your flexibility, especially if your circumstances change. For example, if you decide to transfer property to your child but later encounter financial difficulties, you cannot easily access the value of the property without going through a formal legal process.
3. Tax considerations
   There are several tax issues to consider when deciding to buy property in a minor’s name. Stamp duty, capital gains tax, and Goods and Services Tax (GST) are all factors that can affect the long-term value of the property.For instance, when the property is eventually transferred to the minor (once they reach the legal age), stamp duty will be based on the market value of the property at that time. Similarly, capital gains tax (CGT) will be calculated from the date the property is officially transferred, which could mean paying taxes on a higher amount than originally intended. These factors must be carefully considered to avoid unexpected costs.One option to avoid these complications might be placing the property in a trust, where you act as the trustee until the child reaches adulthood. This strategy can help you maintain control and avoid some of the tax issues associated with transferring ownership directly to a minor. It’s also worth considering whether you want the minor to have full control of the property at age 18, 21, or another age—delaying control can help mitigate tax and financial risks

Benefits of Buying Property in a Minor’s Name

There are several key advantages to buying property in a minor’s name. Here are some of the most notable:

1. Long-term Asset ProtectionBy transferring property to a child, you can create a strong foundation for their future, ensuring they have an asset that can appreciate in value over time. This offers long-term financial security and can be an effective form of estate planning.
2. Effective Estate Planning
   When buying property for a minor, you may be able to reduce estate tax liabilities upon your passing, especially if the property is placed in trust for the child’s benefit. This strategy can also help ensure that your assets are distributed according to your wishes.
3. Generational Wealth Building
   Gifting property to your child or grandchild can serve as an important step in building generational wealth, providing them with a valuable asset that can provide financial benefits well into the future.
4. Early Exposure to Property Investment
   By putting a property in a minor’s name, you can introduce them to the concept of property investment and ownership at an early age, which can help them understand the value of assets and real estate as part of their financial education.

Downsides of Putting a Property in a Minor’s Name

While there are advantages, there are also several potential downsides to putting property in a minor’s name:

1. Selling Complexities
   One of the major downsides to putting property in a minor’s name is the difficulty involved in selling or transferring it before the child reaches the age of 18. The property cannot be sold or mortgaged without court approval, which can lead to delays and legal complications.
2. Tax Implications
   As mentioned, capital gains tax and stamp duty could significantly reduce the long-term value of the property. These tax obligations should be carefully planned for, as they can be more burdensome than initially anticipated.
3. Potential for Family Disputes
   Gifting property to a minor may cause disputes among family members, especially if there are other siblings or relatives who feel the gift is unfair. This can lead to tension and legal challenges down the line.
4. Restrictions on Control
   If you buy property in a child’s name, you may lose some control over that property, especially once they reach the age of 18. This can complicate your financial planning if your circumstances change and you need access to the value tied up in the property.

Speak to the experienced property lawyers at Owen Hodge

If you have any questions about whether a minor can own property, buying property in your child’s name, or transferring property to a minor or family, our team of experienced property lawyers can help. Contact us online or call 1800 770 780 to schedule a consultation today. At Owen Hodge Lawyers, we are committed to helping you navigate these complex legal matters and find the best solution for you and your family.