Understanding the Costs of Transferring Property Ownership To Your Children

Understanding the Costs of Transferring Property Ownership To Your Children

Transferring ownership of property to your children can be a significant decision with various financial and legal implications. While it's a gesture of love and generosity, it's crucial to understand the costs involved in this process to make informed decisions.

Transfer Duty: Transfer duty is a tax levied by the government (SARS) on the transfer of property ownership. The amount of transfer duty payable depends on the value of the property being transferred and is calculated on a sliding scale. While certain exemptions and rebates may apply, transferring property to your children may still incur transfer duty costs, especially if the property's value exceeds the threshold for exemption. The current threshold is R1,100,000. This means that if the property's value is less than R1,100,000, you don't pay any transfer duty to SARS. You can view the current rates here.

Conveyancing Fees: Attorneys charge conveyancing fees to transfer property ownership legally from the seller to the buyer. These fees cover services like preparing transfer documents, searching for title deeds, and managing the registration process at the Deeds Office. Importantly, buyers are responsible for paying these fees, tariffed by the Legal Practice Council (LPC). It is the sellers prerogative to appoint the transferring attorney, giving them security over the legal process of transferring the property.

Valuation Fees: Before transferring property ownership, it's often necessary to obtain a valuation of the property's market value. You have one of two options. Valuation fees may be incurred to hire a professional valuator to assess the property's worth or our team of area experts can offer a Free comprehensive market analysis.

Other Taxes: In addition to transfer duty, other transfer costs and taxes may apply when transferring property ownership to your children. These may include VAT (Value Added Tax) if the property is being sold as part of a business or commercial transaction, capital gains tax (CGT) if the property has appreciated in value since the acquisition, and municipal rates clearance certificates to confirm that all outstanding rates and taxes have been paid up to date.

Donations Tax: The donor typically pays the donation tax, although, in some jurisdictions, the recipient may also have tax obligations related to the gift received. The threshold for donations tax is R100,000.00

Transferring property ownership to your children is a significant financial and legal transaction that requires careful consideration of the associated costs. By understanding the various expenses involved, you can better prepare for the transfer process and ensure that it aligns with your financial goals and intentions.

Trusts also offer a strategic approach to multi-generational property ownership, providing a blend of asset protection, estate planning advantages, and potential tax benefits. They enable a controlled and efficient transfer of property across generations while ensuring privacy and flexibility in management. By setting specific terms for property use and distribution, trusts can preserve family assets and align with long-term objectives, making them a valuable tool for families looking to secure their legacy and provide for future generations.

We can provide invaluable guidance and assistance in navigating the complexities of property ownership and minimising unnecessary costs. Get in touch here.