Don’t Give Your House to the Kids!
In the emotional chaos that reigns during divorce negotiations, the parties often (usually, in fact) lose sight of common sense. One example of this, is when one or the other – and sometimes both of them – suggest that their family home was acquired for the children and should, therefore, be given to them at this time. This is often the attitude of parents, when children are very young. It reflects a serious lack of forethought. Here are reasons why it is not a good idea to ‘give the house to the children’:
1. Usually, the children are very young. It is possible to transfer a property into the names of young children, but the cost can be high; while divorcing parents do not pay transfer duty when the house, or a share of it, is transferred from one to the other, this discount does not apply to children. In fact, the transaction will probably attract donations tax, which costs far more than transfer duty!
2. The property must be fully paid for, as a child cannot get a home loan (a.k.a. a ‘bond’).
3. How will a child, or children, take care of a house and pay the rates, insurance, maintenance and utilities bills?
4. Once transferred to the children, the house is no longer ‘yours’ – it belongs to the children. You cannot live in it (unless you pay rent), sell it, rent it out, renovate or add another room, pool or patio. You cannot use it to fund the purchase of a larger home; no property, or interest in a property, that is in the name of a minor child, can be sold or encumbered (e.g. by a bond) without the permission of the High Court and an application to the High Court will cost plenty.
5. If none of this bothers you because money is no problem for you, think of this – when the child reaches the age of 18, she becomes an adult, in law. She can do what she pleases with her property. She might give it to her boyfriend, or invite him and a group of friends, to move in with her. Or she might just kick you out, or sell, or even abandon the property. One way or another, she probably won’t keep paying the expenses; Mom or Dad can do that!
There are other reasons not to give your house to your kids, but the above should do the trick of dissuading you from being overly generous to your kids!
Written by: Roger Knowles
20th December, 2017