Transfer for the Benefit of an Unborn Person

The illustration to section 13

The Act supplies its own illustration, and it repays close reading:

A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor for the eldest son of the intended marriage for life, and after his death for A's second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A's remaining interest in the property.

Work through why. A and his intended wife are living persons and take life interests, so the first requirement is met. The eldest son of the intended marriage is unborn at the date of the transfer. He is given a life interest, with a gift over to A's second son afterwards. Because something is given after him, his interest does not extend to the whole of A's remaining interest, and the second requirement fails. His interest does not take effect.

Notice that the illustration turns on the words "for life" and on the gift over. Delete both, and give the eldest son absolutely, and the transfer is good.

Section 20: when the unborn person's interest vests

Section 20 provides that where, on a transfer of property, an interest 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 of it immediately on his birth.

Three things follow.

The interest vests at birth, not at the end of the prior interest. The moment the child is born, the interest is his.

Vesting is separate from enjoyment. He owns it while the life tenant is still alive and still in possession. He simply cannot enjoy it yet. This is the distinction between an interest vested in interest and one vested in possession, developed in [Vested Interest and Contingent Interest].

The consequence is practical. Because the interest is vested at birth, it is transferable and heritable at once. If the child is born and then dies while the life tenant is still living, the interest does not disappear: it passes to the child's own heirs, and they take when the life interest ends.

A contrary intention in the terms of the transfer can displace this, and where the gift is made to depend on a condition, the interest is contingent instead.

A worked example

Yashwant owns a building at Dadar. He executes one deed containing the following gifts.

Version one. To his son Ketan for life, and after Ketan's death to Ketan's first child absolutely.

Ketan is alive, so there is a prior interest created by the same transfer. Ketan's first child is unborn. That child is given the whole of Yashwant's remaining interest, because the gift is absolute and nothing follows it. Both requirements of section 13 are satisfied and the gift is good. When the child is born, section 20 gives it a vested interest at once, though it cannot enjoy the building until Ketan dies.

Version two. To Ketan for life, then to Ketan's first child for life, then to Ketan's second child absolutely.

The first child is unborn and is given only a life interest, with a gift over after it. His interest does not extend to the whole of Yashwant's remaining interest, so it fails under section 13. And the second child's interest, created in the same transaction and intended to take effect on the failure of the first, also fails, this time under section 16, taught in the next chapter.

Version three. To Ketan for life, then to Ketan's first child absolutely, but if that child becomes a doctor, then to Ketan's second child.

The first child's interest is absolute on its face, but it is liable to be defeated. The gift over means the transferor has not parted with the whole of the remaining interest to the first child, and the interest fails.

Version four. Yashwant conveys the building to Ketan absolutely today by one deed, and by a separate deed executed the same afternoon purports to give it to Ketan's unborn child after Ketan's death.

This fails on the first requirement, not the second. Section 13 requires the prior interest to be created by the same transfer. Two deeds are two transfers, and in any event Yashwant had nothing left after the first.

Now suppose version one operates, the child is born, and dies aged two while Ketan is alive. The interest vested at birth under section 20. It is not extinguished by the child's death; it passes to the child's heirs, who will take possession when Ketan dies.

What it does NOT mean

It does not mean an unborn person can never benefit. He can, through the machinery of section 13.

It does not mean the child must be conceived at the date of the transfer. Section 13 speaks of a person "not in existence at the date of the transfer", and the machinery works for a child not yet conceived.

It does not mean the unborn person must be born before the prior interest ends. That is a real requirement, but it comes from section 14 and from the general rule that the property must vest in somebody. Section 13 itself is about the size of the interest given.

A life interest to an unborn person is void, not merely reduced. The court will not read it as an absolute interest to save it. The interest simply does not take effect.

Vested does not mean enjoyed. Section 20 says so in terms: he acquires a vested interest although he may not be entitled to enjoyment immediately on his birth.

Section 13 does not apply where there is no prior interest. If a transferor purports to give property directly to an unborn person with nobody taking first, the transfer fails under section 5 for want of a living transferee.

Distinctions

Quick revision

• An unborn person cannot be a direct transferee, because section 5 requires a living person.
• Section 13 machinery: a prior interest in favour of a living person, created by the same transfer, and the unborn person must take the whole of the transferor's remaining interest.
• A life interest to an unborn person is void. So is an absolute interest followed by a gift over.
• The Act's own illustration fails on exactly that point: the eldest son of the intended marriage takes for life with a gift over to A's second son.
• Section 20: the unborn person acquires a vested interest on birth, unless a contrary intention appears, though enjoyment may come later.
• Because it vests at birth, the interest is transferable and heritable, and survives the child's early death.
• Sections 13 and 14 work as a pair; the consequences of failure are sections 15 and 16.

Test yourself

1. Why can property not be transferred directly to an unborn person? Because section 5 defines a transfer as a conveyance by a living person to a living person, and an unborn person is not a living person. There is nobody in whom the interest could vest.

2. State the two requirements of section 13. There must be a prior interest in favour of a living person created by the same transfer; and the interest given to the unborn person must extend to the whole of the remaining interest of the transferor.

3. A transfers to B for life, then to B's unborn son for life, then to C absolutely. What happens to the unborn son's interest? It fails. The unborn son is given only a life interest, which does not extend to the whole of A's remaining interest, so section 13 is not satisfied.

4. When does an unborn person's interest vest? On his birth, under section 20, unless a contrary intention appears from the terms of the transfer. He need not be entitled to enjoyment at that moment.

5. A transfers to B for life, then to B's unborn child absolutely. The child is born and dies at the age of three, B still being alive. Who takes on B's death? The child's heirs. The interest vested in the child at birth under section 20, and a vested interest is heritable, so the child's death before enjoyment does not destroy it.

6. Can the prior interest be created by a different document executed on the same day? No. Section 13 requires the prior interest to be created by the same transfer, so both interests must arise out of one transaction.