Legal Provisions To Transfer Property To An Unborn Person

The Transfer of Property Act, 1882, governs the laws of property transfer between living persons, where Section 5 of the Transfer of Property Act lays down the rules that such transfers must occur between living individuals. However, there are provisions within the act that address the transfer of property for individuals who have not been born yet. This aspect of property law is primarily covered under Section 13 of the Transfer of Property Act.

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Section 13 of the Transfer of Property Act

Section 13 says, "Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property".

For example, person A transfers his property to person B for his (B's) life and after the demise of B, this property will go to B's eldest child. Now, during the transfer from A to B, B was unmarried. Section 13 of the Transfer of Property Act stipulates how such a property will be transferred to B's eldest child.

Underlying Principle In Section 1

The main underlying principle of this section is that the property owner cannot impose any restrictions on how future generations will handle or use or transfer the property. This section prevents the eternal ownership and control of a property by an individual.

Rules of Property Transfer

There are 3 major rules which govern the transfer of property to an ‘unborn person’, which are:

1. No Direct Transfer

The said property cannot be transferred directly to an unborn person, but it can be done for the benefit of the unborn person. The property must be transferred to someone who is existing and alive before it can be passed on to the unborn child.

2. Absolute Interest

The unborn child will receive only the absolute interest of the property that is transferred in his/her favour. No limited or life interest can be given to the unborn child. For example, if A transfers his properties to B for life, who is unmarried during the transfer, and then to the eldest child of B absolutely. The transfer in favour of the eldest child of B is valid.

3. Prior Life Interest

The transfer must be done for the benefit of the unborn child and must be preceded by a life interest in favour of the living person at the date of the transfer. To simplify, the property will be transferred to a living person as a life interest and they will hold onto it until the birth of the child. The property will be transferred to the child once the life interest—of the first person who was handed over the property in the very first place—ends, which is after their death.

According to Aaron Solomon, managing partner at Solomon & Co, a law firm based in India, "As per the provisions of the Transfer of Property Act, 1882, the interest created for the benefit of an unborn child must be preceded by a prior interest in favour of a living person. Since parents act as the natural guardians to an unborn child, they hold the property in trust until the birth of the unborn child and till the child attains majority. However, in case of any eventualities, the parents are unable to manage the property, a guardian or a trust could be appointed or created for the same as per the procedure mentioned under the law. The trustee/guardian to the estate is majorly responsible for managing and preserving the property, investing the property for generating income, protecting the unborn child’s interest in the property, until the child attains majority".

He also mentions, "Under the Transfer of Property Act, 1882, direct transfer to an unborn person is not permitted. Instead, the property must first be vested in a living person or a trust until the unborn child is born and is eligible to take possession. That being said, if the property is transferred to a trust for the benefit of the unborn child, any income generated by the property held in trust is taxable in the hands of the trustee".

Even though the direct transfer of property to an unborn child is not permitted under the Transfer of Property Act, 1882, the property can be transferred for the benefit of the unborn child.