Transfer Of Property To Unborn: Rationale Behind The Creation Of Life Interest

Introduction

In the circumstances, to the extent and in the manner allowed and specified by any law, for the time being, any person may contract and have the right to transferable property, or may dispose of transferable property that is not his own, may transfer such property either wholly or in part, and either wholly or conditionally.

On a transfer of property, an interest is created there for the benefit of an unborn person, not in the 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.


Unborn Person

A person who has no current existence but has a specific reference to one and who may be born in the future is known as an unborn person. Although a child in the womb of a mother is not an actual person, it has been considered as a person under both Hindu and English law.[1] This should, therefore, be noted that the word ' unborn' applies not only to those who may have been conceived but have not yet been born, i.e., a child in the womb but also to those who are not yet conceived. Whether or not they are born at all is uncertain, but a transfer of property is available for their benefit. Whether or not they will be born is uncertain but property can be transferred for their benefit.


Transfer to an Unborn Person

Section 13[2] of the Transfer of Property Act, specifies a unique mechanism for the transfer of property for the benefit of non-existent persons. The procedure is as follows:

  1. The person who intends to transfer the property for the benefit of an unborn person must first create a life interest in favor of a person living at the time of the transfer and after this he must create an absolute interest in favor of the unborn person.

  2. The possession of the property transferred would remain with the person in whose favor the life interest is created till he is alive.

  3. When the person for whose benefit the property was being transferred takes birth, the title of the property would get transferred to him immediately but he will not get the possession before he attains the age of majority.


Creation of Life Interest and Its purpose

According to section 5[3] of TPA a transfer of property can take place only between living persons. Section 13 of the TPA has an intimate effect on the general rule that a transfer can be effected only to those who have the legal existence in the universe. A property cannot be directly transferred to a person who does not exist or is unborn. Therefore, the term “transfer for the benefit of unborn person” and not “transfer to an unborn person” is used in section 13. This is the reason why every transfer of property in favor of an unborn person includes a prior creation of life interest or successive life interests. As soon as the property is transferred the interest in the property also gets transferred from the transferor to the transferee. So for the transfer of interest to take place the transferee must be existing at the time of the transfer.[4] Otherwise the interest would remain in abeyance and wait for the transferee to come into existence. Such a situation would be against the very nature of the interest.[5] As interest in property cannot remain in abeyance it would revert back to the heirs of the transferor.

As far as the creation of prior life interest is concerned, at first, the property is transferred for life to a person existing at the time of transfer. It is not the concern that life interest should be there in favor of only one living person. The transferor can create successive life interests in favor of more than one living person at the same time[6]. For e.g. A transfers his property to B for life, after him to C and D for their lives and then absolutely to B’s unborn child UB.

The intermediary person or persons living at the time of the transfer must be given only life interest in the property while an absolute interest must be created in favor of the ultimate beneficiary. Giving life interest or creating life estate in favor of a person means giving him only the right of enjoyment and possession. He has to preserve the property like a trustee during his life-time on behalf of the unborn. If absolute interest is given to this person or he would be entitled to dispose it off to anyone. If he retains it, the property after his death shall go to his legal heirs and not to the unborn person for whose ultimate benefit the disposition was made.[7]

As far as an unborn person is concerned, no life interest can be created in his favor for his benefit. Section 13of the TPA specifically prohibits this by using the words “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." It means that the transferor must not retain with him any interest in the property and convey all the interests whatever he had in the property to the unborn person.


Conclusion

From the above discussion, it is very clear that in order to transfer property to an unborn person a prior life interest or successive life interests must be created. The reason behind the creation of a life interest or successive life interests is that a property can be conveyed only to a living person and not to a person who does not exist or is unborn. Also the interest in the property gets transferred along with the property as well. So if the interest in the property is to be transferred it is a must that the transferee must be in existence. Otherwise the interest would remain in abeyance and it would revert back to the legal heirs of the transferor.

Creation of lifer interest or successive life interests vests in the intermediary person/s only the right of possession and enjoyment. The intermediary person/s does not get the right of alienation in respect of that property. His/ their job is to preserve the property for the benefit of the unborn person. If absolute interest is given to this person/ or he would be entitled to alienate the property to anyone in any manner. If he retains it, the property after his death shall go to his legal heirs and not to the unborn person for whose ultimate benefit the disposition was made. Therefore it is necessary that a life interest or successive life interests be created with respect to transfer for the benefit of unborn persons.


References

[1] Shivani Gupta, Transfer of Property to an Unborn Child, Lawctopus, https://www.lawctopus.com/academike/transfer-property-unborn/

[2] Sec 13: Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of 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 transfer in the property.

[3] Sect 5: In the following sections “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons; and “to transfer property” is to perform such act.

[4] Aishwarya Gupta, Property Laws for the Non-Existent: A Study on Transfer for the Benefit of an Unborn Person, SSRN, (August 15, 2011), https://ssrn.com/abstract=21151777.

[5] R.k. Sinha, The Transfer of Property Act, 98-99 (Central Law Agency, 17th ed. 2016).

[6] Supra note 1

[7] Supra note 5


Submitted by,

Maitreya,

Year III,

National University of Study and Research in Law, Ranchi.


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