Suppose a young couple gets married, and their parents gift them a certain amount of property. But before long, the couple’s relationship breaks down, and the parents — as the party who provided the money — claim that the money was not a gift and should be treated as a debt. What should the other party do? How can they protect the property they have received? In fact, signing a gift deed can effectively protect your property and prevent ownership disputes. Today’s article will discuss gift deeds.
1. What is a Gift Deed?
A Gift Deed is a document that evidences the transfer of ownership of property from one party to another, whereby the transferor or donor voluntarily transfers the property without requiring the recipient (or donee) to pay for it. For the transfer to be legally valid, both parties should sign this deed. Family members commonly use a gift deed to transfer gifts or property to other family members (for example, from parents to children).
The donor also needs to nominate an agent who will act on their behalf to ensure that the gifted property is delivered into the recipient’s hands. This process is especially important when the recipient is a minor.
A gift deed helps resolve disputes over who owns the property, because once a gift deed is executed it generally constitutes an irrevocable transfer to the recipient. A gift deed is legal evidence that ownership of the property has been transferred from one party to another. Therefore, for the young couple mentioned at the start of this article, if they had signed a gift deed at the time, it would effectively prove that the property was not a debt but a gift.
2. When is a Gift Deed Appropriate?
- The donor is giving a gift to the recipient
- No conditions are imposed on the gift
- The donor and/or recipient wishes to evidence that ownership of the property has been transferred from the donor to the donee by way of gift. As mentioned earlier, if the donor’s family members assert that the property was not a gift but a loan to the recipient, then it becomes critical to use a gift deed to evidence ownership.
3. What Types of Gifts Does a Gift Deed Apply To?
As mentioned above, a donor can use a gift deed to transfer money or property to their family members, friends, or certain organisations. Common types of property/gifts that can be transferred include the following:
1. Pre-estate bequests:
If, before their death, the donor uses an irrevocable gift deed to transfer money or items listed in their estate plan to an individual or organisation, those money or items will no longer be considered part of that estate plan.
2. Real estate:
A donor can transfer real estate or property (a house or land) to a recipient. However, it is important to note that the recipient may need to pay stamp duty and capital gains tax (CGT) based on market value.
3. Family heirlooms:
A donor can use a gift deed to transfer ownership of family heirlooms to their family members.
4. Charitable donations:
A donor can make donations to charitable organisations that are meaningful to them.
4. Who is Eligible to Use a Gift Deed?
Anyone who is at least 18 years old and owns property may use a gift deed to transfer ownership of their property. Minors cannot use a gift deed, but they can receive a gift through a gift deed via a legal guardian.
5. What Information Should a Gift Deed Contain?
- Whether you can revoke the gift deed
- The type of gift you are giving
- Information about the recipient, such as whether the recipient is an individual or a charitable organisation
- Information about the donor
- Information about the agent
6. What Should You Consider Before Signing a Gift Deed?
- If the gifted property is a residential house, you need to consider who will live in the property and what rights they will have.
- You need to consider who will handle the insurance, maintenance and other related expenses of the property.
- You need to consider what the potential tax implications of signing the gift deed will be.
7. Can a Gift Deed Be Cancelled?
As long as the donor has not yet transferred the property or gift to the recipient, the gift deed can be cancelled. The prerequisite is that the donor has signed a revocable gift deed, which reserves the right to cancel the gift at any time. However, once the transfer of the gift has been completed, it cannot be cancelled.
8. What Should Be Noted for Gifts of Different Types of Property?
Different types of property may have different requirements regarding the transfer of ownership when they are gifted.
1. Real Property
For real property such as real estate and houses, if the land is Torrens title land, then the registered owner of the property must record the transfer on the Torrens Register. Unless the landowner is from the Northern Territory or Queensland, they must also produce the relevant certificate of title to the local land titles office for the transfer to be valid.
2. Personal Property
For personal property, if the donor has not completed the steps necessary to transfer ownership — for example, has not completed a gift deed — then the transfer may later be found not to be a gift in the legal sense, meaning the recipient will not obtain lawful ownership.
Final Thoughts
In summary, if you are being gifted property and do not want ownership disputes to arise in the future, it is best to sign a gift deed in advance, stating that the property is a gift and not a loan. If you have any questions about gift deeds, we also recommend seeking legal assistance from a professional lawyer.
