Various jurisdictions restrict the powers that a person under eighteen (or twenty one in some jurisdictions) has concerning property, contractual powers, and freedom of action in various ways. This articles shall discuss California law on the issue of whether a person under the age of eighteen may own and/or purchase and transfer real estate.
Basic Law:
Under California law, a minor may own real property. Estate of Yano (1922) 188 Cal. 645, 649. However, a minor may not convey or make contracts relating to real property. California Family Code section 6701, subdivision (b). Therefore, a minor cannot sell, borrow on, lease, rent or purchase property held directly in his or her own name. The case law discussing Section 6701 is predominantly from the 1920s. There are no recent cases discussing the issue.
Most property owned by minors is held in trust with the trustees holding the property and the minor the beneficiary who will get outright title once he or she reaches the age of majority. See our article on Wills and Trusts. With respect to minors owning real property, it is typically as a result of a guardianship or trust.
As an alternative to creating a trust for the minor, in California, the California Uniform Transfers to Minors Act (California Probate Code section 3900, et seq.) (“CUTMA”) provides a statutory mechanism for transferring property to an adult “custodian” for the benefit of a minor. In other words, CUTMA is a mechanism whereby gifts, including money, real estate and inheritances, can be given to a minor. The CUTMA applies “if at the time of the transfer, the transferor, the minor, or the custodian is a resident of this state or the custodial property is located in this state. The custodianship so created remains subject to this part despite a subsequent change in residence of a transferor, the minor, or the custodian, or the removal of custodial property from this state.” Probate Code section 3902(a). This means that if the minor is a resident of California at the time of the transfer, CUTMA would apply.
Conclusion:
Trusts are the ideal vehicle in California for a minor to own property but that does require tax reporting and interaction with trustees that many find complex. In reality it is not difficult but for those who are adverse to the trust solution, the CUTMA is an alternative worth considering.