A Property24 reader who currently possesses a property with a remaining bond is seeking advice regarding the transfer of ownership of her share to her children. Despite being divorced, the agreement states that she and her ex-spouse each own 50% of the property. She is now interested in transferring 50% of her share to her children or into a trust.
Tarryn Gravenor, attorney and conveyancer at Herold Gie Attorneys responds:
If you and your ex-spouse are registered owners of the property in equal shares and the Divorce Order is silent as to how the property is to be dealt with, then you are in principle free to dispose of your half share in the property as you wish. Given the fact that you want to leave your half share of the property to your children, it would be wise, however, so as to avoid potential conflict, for you and your ex-spouse to come to an agreement as to how the property will be dealt with going forward. If the children referred to are also his children, he may be amenable to this arrangement.
As the property is still encumbered by a small mortgage bond, the bond would need to be settled and cancelled prior to or simultaneously with a transfer of any share in the property. It may be a good time to discuss cancellation of the mortgage bond with your ex-spouse, so that an unencumbered property is transferred to your children.
As with any property transfer, the underlying legal basis for the transfer would need to be carefully considered and determined and there is tax (for example if your intention is to donate your share) and compliance considerations that would also need to be considered. The matter should be discussed in consultation with an experienced conveyancing attorney and the terms of the agreement for the disposal of your share in the property should be drafted by such attorney who is best placed to advise you on all the legal aspects based upon your particular personal circumstances, as well as on the costs of transfer.
An attorney would also be able to advise you on how the trust works, the costs of formation of the trust, managing the trust as well as management and compliance duties of trustees in terms of the latest legislation governing trust law. You may decide, depending on the additional administrative requirements of a trust, that you would rather transfer your share of the property into your children’s individual names.
There are also tax considerations which would need to be carefully considered, including Transfer Duty, Capital Gains Tax, Donations Tax, and Income Tax. Generally speaking, conventional trusts (other than special trusts) are taxed at higher rates than individuals.
It would therefore also be advisable for you to obtain appropriate tax advice from a suitably qualified tax expert (tax practitioner or tax advisor) of your choice before proceeding.
* Disclaimer: The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.
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