LESS costly and quicker than other methods, love and affection transfers can be a useful tool in estate planning and, with an ageing population, they are becoming increasingly popular in Jamaica. But there are also a number of drawbacks that come with that approach to transferring property.

The Jamaica Observer’s Real Estate on the Rock turned to Christine Nunes, lead attorney at Christine Nunes Law Suite, for a deep dive into the topic.

What is a love and affection property transfer?

Christine Nunes (CN): That is one of the names for a ‘transfer not for value’. There are other ways persons refer to it, such as
inter vivos transfer or transfer by way of gift.

Once you hear those terms, what it entails is a transfer of ownership from one individual — usually the registered owner — choosing to give interest in a property (whether all of it or a portion) without any monetary exchange. This transfer is done during the registered owner’s lifetime. It is something that more persons are tapping into, especially as an estate planning tool. There is no limit to the number of people you can add to a title.

What are some of the benefits of a love and affection transfer?

CN: Compared to other methods, there is immediate transfer of ownership [the process takes about three months]; no waiting on death or the estate process. It also provides security for the recipient. For example, there is a daughter from the wife’s side; she’s now giving her daughter her interest during her lifetime and taking herself off the title. So that is a mother trying to provide security for her child who, if the mother should pass first, may not be able to benefit.

Another advantage is that persons can always change the tenancy during their lifetime. So, if it’s joint tenancy, you have the option of changing it to tenants in common so that the right of survivorship doesn’t take place. Or there might be a 50/50 interest but persons may agree to change it to a 40/60, but there’s no money passing hands. We’re changing the dynamic of the ownership, the structure of how it is, and possibly adding or removing persons.

Another benefit is that it simplifies the estate administration process and eliminates some of the estate costs upon death. For example, if you are doing a transfer not for value and it’s a family member — any family member — you would be able to benefit from the waiver of transfer tax using the Land Administration Management Division (LAMD) or an attorney who is certified by LAMD. This is not applicable to all areas in Jamaica. A lot of the rural parishes often benefit from this but, for the most part, most of Kingston [and St Andrew] would not benefit.

What are some of the disadvantages?

CN: It’s irreversible. So once it is done, it is done. If you need to undo it, you’re going to need the other person to sign. Once a transfer for value is done, you lose control — especially for joint tenancy.

In addition, unclear intentions can be problematic. Some people do it out of mere convenience — for example, a father seeking to absolve himself of liability, gifts his interest to a friend in order to protect his asset so he can later pass it on to his child. There are challenges with doing that because, God forbid, that friend dies, how do you then explain that it was really yours?

In addition, family disputes sometimes arise. [You may have] kids, or a spouse, or outside children deeming the transfer unfair. There is also exposure to the transferee’s risk. ‘B’ now owns half of the property that ‘A’ would have given her an interest in. ‘B’ has debts and uses the interest in the title as collateral. Yes you would need ‘A’ to sign, but there are instances where the other person does not realise what they are being asked to sign off on.

Another thing to note is that if you have a mortgage property and you’re seeking to add another party to that property, you will need the consent of the mortgage institution.

What are the fees involved in doing a love and affection transfer?

CN: Sometimes I recommend persons do a valuation report so you at least have an idea of your asset value — and it allows for quicker completion at the stamp office stage — but you don’t have to do one.

There is, however, transfer tax of two per cent on the interest [property] being transferred.

That’s not on the entire value of the property; it’s only the interest. So if it is five people on a title and you’re taking off one, it will just be 1/5 of whatever that value of the property is.

Please note that going through LAMD doesn’t mean that you’re not going to pay any cost. You may save on the transfer tax — which is only applicable if it is passing among family members — but there’s still an administrative cost to process the application. However, it’s always going to be lower than what the transfer tax would have been, and they actually have a fee schedule that they use to determine the administrative cost.

Doing a love and affection transfer does not mean that you are not going to pay anything when the person dies and that you don’t have to go through any administration. That is a false narrative that I’m often hearing. You may not have to go through the court but there is still the assessment of the death duties on the interest [property] of the deceased person that has to be done via the stamp office. If the interest is more than $10 million then death duties would be payable on that interest that is to pass [to the other person].

There is also a $5,000 registration fee at the titles office and legal fees, which will vary. Some attorneys charge a percentage of the value that is being transferred; some – like me – charge a flat rate.

NUNES…if you need to undo it, you’re going to need the other person to sign