Contents
1. Q&A
2. Discussion
1. Q&A
Facts: Mr. Honda owns a house and land on Diamond Head with a fair market value of about $6 Million. He would like to transfer the house and land to his grandson, Hajime, for his 15th birthday. The transfer is a birthday gift to Hajime.
Question: Is there any negative points in transferring property to a minor in the US?
Answer: Yes.
2. Discussion
The first major negative point is the Federal Generation-Skipping Transfer Tax. This tax applies to any gifts or transfers made by a grandparent directly to a grandchild or great grandchild.
Before any Japanese national intends to make a gift or transfer US property to his or her grandchild or great grandchild, the person intending to make such a gift or transfer ought to consult a CPA or zerishi, who is familiar with the Federal Generation-Skipping Transfer (GST) tax, before the transfer is made to be sure of any tax consequence.
The second major negative point is that if the minor child or grandchild transfers his property before he becomes an adult in Hawaii, such as a sale of the property, then a guardian must be appointed by the Court. In Hawaii, a minor child becomes an adult when the minor child reaches the age of 18 years old. The guardian who is appointed will then have the authority to sign the conveyance document transferring the minor’s property. A minor child does not have the legal capacity to sign any legal documents if he is not an adult. The appointment of a guardian takes time and involves an attorney and attorney fee’s and is a court matter.
Also, if the minor child owns property and is involved in an accident or causes bodily injury or death to another person, then the minor child’s property may be seized to pay for any damages caused to the injured person or results in his or her death, if the minor child is liable to the injured person or the person who dies.
Summary: It may be more prudent for the grandparent to transfer his property to his son or daughter, who in turn can transfer the property to the grandchild or great grandchild. This is to observe the grandchild or great grandchild’s behavior and conduct to determine that the grandchild or great grandchild is not reckless, or a spendthrift, or someone who wastes the property when he or she becomes an adult.
Author：Roy M. Kodani
Office：Law Offices of Roy M. Kodani
Career : Graduated from Lafayette College
Graduated from George Washington University Law School
Worked in the office of United States Senator Oren E. Long of Hawaii and in the law firm of Meyers & Batzell while attending in graduate school
License : Real estate broker (Hawaii), Lawyer (Hawaii)
Particular field : Real estate, Commercial law, Corporation law, Law suit, International law, Bank, Law of wills
Language : Japanese, English
Books : Open House: A Guide to Buying and Selling Hawaii Real Estate Published by University of Hawaii Press
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