The provisions of transfer for the benefit of unborn person is contained in Section 13 of the Transfer of Property Act and Section 113 of the Indian Succession Act.

As per Section 13:

Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.

The Indian Succession Act Section 113:

Where a bequest is made to a person not in existence at the time of the testator's death, subject to a prior bequest contained in the will, the later bequest shall be void, unless it comprises the whole of the remaining interest of the testator in the thing bequeathed.

Under Section 13 of Transfer of Property Act transfer cannot be made directly to an unborn person as the definition of transfer in Section 5 of the Transfer of Property Act is limited to living persons.

The transfer in favour of an unborn person can be made by machinery. It is intended to express this distinction by the words for the benefit of the trustees being the transferee’s who hold the property for the benefit of the unborn persons.

The estate must vest in some person between the date of the transfer and the coming into existence of the unborn person. The interest of the unborn person must, therefore, be in every case preceded by a prior interest.

Section 13 says that the interest of the unborn person must be the whole remainder.

Example: 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.

Section 13 of the Transfer of Property Act is almost identical with Section 113 of the Indian Succession Act, 1925. The difference between the two sections is that the former relates to the transfer of inter Vivos, while the later deals with bequest (legacy/inheritance) which take effect only on the death of the testator.

Section 113 of the Indian Succession Act can come into operation only when the bequest to an unborn person is postponed by the intervention of life or some other interest in the thing bequeathed.

This section has nothing to do with the postponement of possession; a failure to vest the whole remaining interest of the testator is repugnant to the section but when that is done, it has no application. Postponement of possession is not a retention of part of testator's interest and is not a fetter so as to prevent the whole of that interest being vested in the beneficiary. The expression the whole of the remaining interest of the testator does not mean the whole property of the testator but even a fractional interest in any property can be given to unborn person provided it is not subject to other conditions.

The principle underlined in Section 13 is that a person disposing of property to another shall not fetter the free disposition of that property in the hands of more generation than one. The Rule is quite distinct from the Rule against perpetuity, though their effects sometimes overlap.

What is given to unborn person need not necessarily vest in him at his birth. Vesting must, however, takes place other than the limitations prescribed by Section 14. Section 14 of the Transfer of Property Act controls Section 13 of the Transfer of Property Act and as such both these sections should be read together.

The Law relating to transfer inter vivos or by will of property by Hindu has been set out in Mulla's Transfer of Property Act, 1882, eighth edition.

According to pure Hindu Law, a gift or bequest in favour of an unborn person is void. But, this Rule has been modified by Statute, Madras Act 1 of 1914. The Hindu Disposition of Property Act 15 of 1916 and Act 8 of 1921 validate gifts to unborn persons.

These acts have been amended by Section 11, 12 and 13 of Transfer of Property Supplementary Act 21 of 1929 and amendments enact that subject to the limitations in Chapter II of Transfer of Property Act and Sections 113, 114, 115 and 116 of Indian Succession Act, 1925, no transfer inter vivos or by will of property by a Hindu shall be invalid and by reason only that any person for whose benefit it may have been made was not born at the date of such dispositions. The omission of the word Hindu in Section 2 makes this section directly applicable to Hindus.

The effect of these enactments is that a gift can be made to an unborn person subject to the following conditions:

1. that the gift shall be of the whole of the remaining interest of the testator in the thing bequeathed and not of limited interest; and
2. that the vesting is not postponed beyond the life in being and 18 years, being the rule against perpetuities as laid down in Section 114.

The position has been clearly explained in the case of Issac Nissim Silas and others Vs. Official Trustee of Bengal, AIR 1957 Calcutta 118 wherein it was held in Para-6 and 7 as follows:-

The legality of the gift in favour of the grand-sons has been questioned by Mr. Meyer appearing for the plaintiffs on two grounds. In the first place, it is stated that the settlor purported to make a gift of the estate to his sons after the death of himself and his wife, that is, he purported to make a gift of the remainder to the sons absolutely.

It was said that subsequent interest purported to be created in favour of the grand-children would be inconsistent with the absolute interest given to the sons and as such, the trust in favour of the grand-children must be held to get the remainder of the property under the deed absolutely. In the second place, it has been argued that the gifts in favour of the grand-children must be held to be void and the sons must be held to get the remainder of the property under the deed absolutely.

In the second place, it has been argued that the gifts in favour of the grand-children are bad inasmuch as the entire interest of the remainder has not been given to the grandchildren. The gift in favour of the grand-children is a contingent gift and is to take effect subject to two contingencies, namely, that the legatees, that is, the grand-children must survive the named persons, and must also attain a particular age. Hence the gift of the corpus of the grand-children are subject to double contingencies and under Sec. 13 of the Transfer of Property Act such a gift in favour of unborn persons is bad in law.