Buying a house in a child's name has benefits but also drawbacks

[2] Compiled from: People's Daily, Xinhuanet
 
Case review
Ms. Zhou and her husband had no trouble signing the divorce agreement, but they clashed sharply over child custody—not because of blood ties, but because of a property registered under their minor child's name. It turned out that when the child was just five years old, the couple had purchased a property and registered it in their son's name.

 
 

[4] Both Ms. Zhou and her husband were businesspeople, and this move was carefully calculated. When they bought the house, they thought that if their business failed in the future, the property under their son's name would serve as a fallback. Additionally, it would be the child's premarital property when he got married, preventing his future wife from claiming a share. It also allowed them to save on taxes for future gifting or inheritance.
 
[5] However, no matter how much they planned, they never anticipated their own divorce.
 
[6] Regarding child custody, Ms. Zhou was initially willing to let the father have it, after all, he was the only son in his family, and it would be convenient for a boy to live with his father.
 
However, there is one thing that Ms. Zhou is very worried about: because her son is still young and a minor, the property under his name cannot be handled by himself. Once the man gains custody, he will certainly live with the child in that house. If the man remarries, the ultimate ownership of the house may remain uncertain.

 
 

Due to various concerns, Ms. Zhou began to hesitate and refused to give up custody at all costs. The man, for the same reason, was also uncompromising. The two had not even divorced yet, but they were already in a fierce dispute over this.
 
 
What are the benefits of registering a house under a child's name?
1. Tax evasion.Registering the house directly under the name of a minor child is both cheaper and more convenient compared to gifting or inheritance, saving a lot in taxes and fees, and eliminating concerns about future inheritance taxes.
 
2. Avoid the risk of family bankruptcy and leave a way out for yourself and your children.Some parents engaged in commercial operations plan ahead during good times to purchase property in their children's names, so that if they face business failure or insolvency, they can retain some capital to make a comeback, leaving a fallback for themselves and their children.
 
3. When a marital relationship faces a crisis, the property is registered under the children’s names to protect their rights and interests.When conflicts arise between spouses, they often refuse to yield and are unwilling to suffer losses in property. In such cases, some couples, out of love for their children, negotiate to register the property in their children's names.
 
4. Prepare premarital assets for your children in advance, so you don’t have to worry about those assets being divided by their spouses after marriage.
 
 
What are the risks of registering a house in a child's name?
1. You cannot get a mortgage to buy a home.
If the buyer specified in a house purchase contract is a minor, the transaction cannot apply for a bank loan and must be paid in full at once.
 
2 Disputes are likely to arise when parents divorce.
If a couple divorces, the ownership of property purchased in the name of a minor child often leads to legal disputes. If the property is not divided as joint property, it may belong to the parent who has custody and lives with the child, potentially triggering a custody battle.
 
3 It is difficult for parents to reclaim the property, and they cannot control the child from disposing of it arbitrarily after reaching adulthood.
If the adult child fails to fulfill their duty to support their parents, the parents will face significant legal obstacles in reclaiming the property. In practice, there are cases where the child sells the house after reaching adulthood, preventing their parents from living in it.
 
There are also cases where children add their spouse’s name to the property without authorization, undoing their parents’ painstaking efforts. When Mr. Zhang was a minor, his parents purchased a property in his name. After Mr. Zhang reached adulthood and got married, he added his wife’s name to the property without his parents’ knowledge. When his marriage hit the rocks and ended in divorce, his wife was awarded 50% of the property rights pursuant to their agreement. Mr. Zhang’s parents were devastated and deeply regretted their original decision.
 
4 If a child has an accident after marriage, the spouse has the right to inherit pre-marital property.
If the child unfortunately passes away after marriage, their spouse, children, and parents are all first-order heirs and have the right to inherit all of the deceased's property, including pre-marital property. This means that if the child co-owned a property with their parents while a minor, the portion of the property under the child's name will also be divided and inherited as part of the estate.