MANY people may wish to transfer their home or land to a child, spouse, relative or another loved one during their lifetime. One way of doing this is by using a Deed of Gift.
A Deed of Gift is a legal document by which the owner of property, known as the donor, voluntarily transfers the property to another person, known as the donee, without receiving payment. It is different from a will because the transfer takes place during the donor's lifetime.
Why make a Deed of Gift?
There are several reasons why a person may choose to give property to a loved one while still alive. For example, a parent may want to give a house to a child, or an elderly person may want to ensure that a particular family member receives the property rather than leaving the matter to be dealt with after their death.
One advantage is that the recipient becomes the owner during the donor's lifetime, once the legal requirements are completed and the deed is properly registered. It can also avoid the need for the recipient to obtain a Grant of Probate or Letters of Administration in order to receive property that was gifted during the donor's lifetime.
The pros
- The property is transferred during your lifetime.
The donor does not have to wait until death for the loved one to receive the property.
- It can provide certainty. A properly prepared and registered Deed of Gift makes the donor's intention clear and can reduce uncertainty about who is intended to receive the property.
- It may simplify estate administration.
Property transferred during the donor's lifetime would not have to be distributed as part of the donor's estate after death.
- The donor may be able to retain an interest.
In appropriate circumstances, the deed can be structured so that the donor retains a life interest and only after their death will the property transfer to their loved one. This allows the donor to continue living in or using the property. Other arrangements, such as transferring the property jointly with the loved one, may also be considered.
The cons
A Deed of Gift should not be entered into without careful consideration.
- You may lose control of the property.
Once you transfer ownership to another person, you generally cannot simply change your mind and take the property back without that person's consent.
- Family disputes can arise.
Other children or relatives may question why the property was given to one person and may challenge the transaction in certain circumstances, particularly where there are allegations of pressure, undue influence or lack of mental capacity. Where the donor is an elderly person, it may be wise to first obtain a medical assessment and report regarding that person's mental capacity before preparing a Deed of Gift.
- There are costs. Although the recipient does not pay the donor a purchase price, the transaction is not necessarily free. There may be legal fees, valuation costs, Stamp Duty and registration fees. Stamp Duty can apply to a voluntary transfer of property by way of gift and is generally assessed by reference to the value of the property.
- The donor must understand the consequences.
The donor should be mentally capable of understanding the nature and effect of the transaction and should be acting freely and voluntarily. A Deed of Gift may be challenged where there are allegations of mental incapacity or coercion.
What is the process?
The process should be handled by an attorney-at-law.
Step 1: Check the ownership.
The attorney will examine the title by ordering a search of the Land Registry to determine that the donor has the legal right to transfer the property and to identify any issues affecting the property.
Step 2: Obtain a valuation. A valuation of the property is generally required because the value is relevant to the stamp duty and other costs associated with the transaction.
Step 3: Prepare the Deed of Gift.
The attorney prepares the deed, identifying the donor, the donee and the property and setting out the terms of the gift.
Step 4: Sign the deed. The donor must properly execute the deed. Trinidad and Tobago law requires deeds to be prepared and executed in accordance with prescribed formalities, including witnessing and an affidavit of execution.
Step 5: Pay stamp duty and other fees.
A Deed of Gift is subject to stamp duty requirements, although exemptions may apply in particular circumstances. The amount depends on the applicable law and the value and nature of the property.
Step 6: Register the deed. Registration is a very important part of the process. Under the Registration of Deeds Act, Section 18, a Deed of Gift must be registered within 12 months of the execution, and an unregistered deed does not legally pass any interest or ownership until it is successfully registered. Think carefully before you gift
Giving your property to a loved one can be a generous and practical decision, but it should not be done simply because someone has promised to look after you or because you want to avoid future family disagreements.
Before signing, consider whether you need to retain the right to live in the property, whether you should transfer it jointly, and what will happen if your relationship with the recipient changes. Most importantly, obtain independent legal advice before signing any Deed of Gift. A gift of property is a serious legal transaction and, once completed, may be difficult to reverse.
In short, a Deed of Gift can be an effective way to transfer property to someone you love during your lifetime-but it should be carefully planned, properly executed, stamped and registered.
This article is not legal advice. Consult an Attorney-at-law for all legal issues
Excerpt from M. Joseph, Civil Legal Department, Legal Aid and Advisory Authority.
