Transfer of Property Act (TPA)
Transfer to an Unborn Person under Sections 13, 14 and 20: The Complete Scheme
Section 5 requires a living transferee, so property cannot be conveyed directly to a child who is not yet born. The Act does not leave the matter there. It provides a route: an interest may be created for the benefit of an unborn person if it is preceded by an interest in favour of somebody living, and if the unborn person is given everything the transferor has left. Section 13 supplies that structure, section 20 says when the unborn person's interest vests, and section 14 fixes the outer limit of time beyond which vesting may not be postponed. The three must be read as one arrangement.
Figure 1: The arrangement the Act permits, and the three sections that govern its structure, its vesting and its timing
1. The Problem, and the Route Around It
A transfer requires a living transferee — there must be someone capable of taking. A child not yet conceived cannot take, and a conveyance in his favour would convey nothing. Yet settlors have always wished to provide for grandchildren not yet born, and the Act accommodates them by a device borrowed from the English law of remainders: the property is given to a living person for life, and the interest of the unborn person is carved out of what remains. When the child is born he takes a vested interest; when the prior interest ends he takes the enjoyment.
2. The Three Sections
Section | Question it answers | Substance |
|---|---|---|
13 | How must the arrangement be built? | An interest created for the benefit of a person not in existence at the date of the transfer does not take effect unless it is preceded by a prior interest created by the same transfer, and unless it extends to the whole of the remaining interest of the transferor |
20 | When does the unborn person's interest vest? | Where an interest is created for the benefit of a person not then living, he acquires on his birth a vested interest, although he may not be entitled to enjoyment immediately |
14 | By when must vesting occur? | No transfer can create an interest to take effect after the lifetime of one or more persons living at the date of the transfer, and the minority of a person in existence at the expiration of that period to whom the interest is to belong |
3. Section 13 in Outline
- A prior interest. An interest must be created, by the same transfer, in favour of a person living at its date — most commonly a life estate, and often through trustees.
- The whole remaining interest. Whatever the transferor has left after the prior interest must go to the unborn person. A life interest given to an unborn person is therefore void, and so is any interest short of the residue.
- The same transfer. The prior interest and the interest of the unborn person must be created by one instrument; a later deed cannot supply the missing pier.
- No direct transfer. A conveyance straight to an unborn person fails at the threshold under section 5, for want of a transferee.
4. Section 20: Vesting on Birth
Section 20, TPA 'Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.' |
Three consequences follow from vesting on birth. The interest becomes the child's property, so it is heritable: if he dies before the prior interest ends, it passes to his representatives. It is transferable, being a vested interest within section 6. And it cannot be defeated by the prior holder's dealings with the property. Note also the opening words — vesting on birth yields to a contrary intention in the terms of the transfer, though any postponement must still satisfy section 14.
5. Section 14: The Outer Limit
The perpetuity period in Indian law is the life or lives in being at the date of the transfer, plus the minority of a person who is in existence at the end of that period and to whom the interest is to belong if he attains full age. Minority is eighteen years under the Indian Majority Act, 1875. The rule strikes at remote vesting, not at postponed enjoyment: an interest that vests within the period may be enjoyed much later without offending the section. The topic is treated separately.
6. The Rest of the Block
Section | What it provides |
|---|---|
15 — Transfer to a class | Where an interest is created for the benefit of a class, and as to some of the persons it fails under section 13 or section 14, it fails only as regards those persons and not as regards the whole class |
16 — Transfer to take effect on failure of a prior interest | Where an interest fails by reason of section 13 or section 14, an interest created in the same transaction and intended to take effect after or upon failure of that interest also fails |
17 — Direction for accumulation | A direction to accumulate income is void beyond the life of the transferor or eighteen years from the date of the transfer, whichever is longer, subject to the exceptions for payment of debts, provision for children and preservation of the property |
18 — Transfers for the benefit of the public | Sections 14, 16 and 17 do not apply to transfers for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind |
19 and 21 — Vested and contingent interests | The general law of vesting against which section 20 is read |
7. A Worked Arrangement
The classic settlement, and where it goes wrong Good: A transfers property to trustees for B, a living person, for life, and after B's death to B's eldest son, absolutely, on his attaining eighteen. There is a prior interest in a living person; the unborn son takes the whole remaining interest; and he takes it within a life in being plus his own minority. Bad, under section 13: the same arrangement, but the unborn son takes only a life interest, with a remainder over. The son's interest fails, because it does not extend to the whole of the remaining interest. Bad, under section 14: the same arrangement, but the son takes on attaining twenty-five. Vesting is postponed beyond a life in being plus his minority, and the interest is void for remoteness. And then section 16 bites: in each of those failures, an interest intended to take effect after or on the failure of the void interest fails with it. |
8. Related Topics and Provisions
- Transfer for the Benefit of an Unborn Person, Section 13 — the essentials, examined in detail
- Rule Against Perpetuity, Section 14 — the period, and remote vesting
- Transfer to an Unborn Person vs Gift to an Unborn Person — the same child, different instruments
- Sections 15, 16, 17 and 18, TPA — class gifts, dependent interests, accumulations, and public benefit
- Sections 19 and 21, TPA — vested and contingent interests
- Section 5, TPA — the living-person requirement that makes the whole device necessary