4 days ago

Who Owns Property Bought for Parents With a Child’s Money?

If a child pays for a house but the parent’s name is on the sale deed, the parent is usually treated as the legal owner.

Paying the money does not automatically make the child the owner.

Courts may look at why the property was bought, who paid, who possessed it, and who kept the documents.

The arrangement may also be examined under the Benami Act.

Some family arrangements can qualify for an exception, but specific legal conditions may apply.

If the parent dies without a will, the property will generally pass under the applicable succession law.

The child who paid may not automatically receive the property first or receive it all.

The safest approach is to record the intended ownership and payment arrangements clearly in the legal documents.

Key facts

Ordinary legal owner: The person in whose favour the registered sale deed or conveyance is executed.
Effect of payment: A child’s payment of the purchase price does not by itself confer legal ownership.
Relevant law: The Prohibition of Benami Property Transactions Act, 1988 may apply when property is held by one person for another’s benefit.
Family exception: For a parent-child arrangement, an exception may apply when both appear as joint owners and the consideration comes from the payer’s known sources.
Potential challenge: A child’s ability to challenge a parent’s later sale, gift, or mortgage may be limited if the parent is the sole registered owner.
Inheritance: If the parent is the legal owner and dies without a will, the property ordinarily devolves according to the applicable succession law.
Recommended records: Ownership intentions should be reflected in the registered conveyance, with clear banking records showing the source and flow of funds.

financialexpress.com · 4 days ago