Gifting is very common, but a very few of us understand the legal implications of gifting process. The best way of gifting is to go through gift deeds. This process performs above drafting “Will” in some aspects.
A deed of gift is a signed legal document that intentionally and without reward transfers the ownership of the real, personal, or intellectual property – such as a gift of materials from one person or institution to the other.
A will is a lawful presentation of the goal of a deceased benefactor for his property, which he wants to be conveyed into impact after his demise. It incorporates postscript and each composing details in making an intentional reward after disposal of property.
A will can be changed by the executants as and when people like the same. By a deed, someone transfers ownership of a property but by a will, someone sets out how personal possessions and real property will be distributed upon someone’s death.
1. It must be well defined existing movable or immovable property.
2. It must be transferable.
3. It should exist today and should not be a future property.
4. It should be tangible.
Gifting process can be subdivided into three parts as described below:
1. Drafting the gift deed: A gift deed can be prepared with the help of a lawyer and it defines what is being transferred and to whom. Gift Deed is a commitment between donor and the receiver which characterizes concurrent and equal demonstration of giving and taking.
2. Acceptance: Acceptance of gift after the execution is a legal requirement and the done must accept the gift during the lifetime of the donor. In case if you as the donee fails to accept the gift, it becomes invalid. The acceptance is to be validated by acts such as taking possession of property.
3. Registration: According to the section 123 of the Transfer of Property Act, 1882 A gift of immovable property cannot pass any title to the receiver except if it is enrolled. Attestation by two witnesses is a must during registration and post registration, then the title transfer is possible.
Registration of gift deed can be done as mentioned in the provisions of the registration Act, 1908. Common steps which are involved in the registration process are:
1. valuation of property is gifted by an approved valuation expert.
2. payment of stamp duty and transfer duty: stamp duty varies for women and men. Stamp duty also varies from state to state and for latest rates one should visit official state government website.
Legally speaking, a person who possesses a property can make a gift to any other person. An exception to this rule is the case in which either of donor or done is a minor. Minors are not eligible to contract; therefore they cannot transfer property as gift. If the donor of a gift is minor, then people cannot make legal gift deed.
In case of done being a minor, a natural guardian can accept a gift on his behalf. Guardian acts as a manager of the gifted property, and if the gift is onerous, the obligation cannot be enforced on done until he/she is a minor. Once the done is an adult, he must either accept the burden or return the gift.
1. A gift deed is generally executed during the life time of donor and the transfer is done immediately whereas “will” is applicable after death.
2. Gift deed needs to be registered only then it is effective. Registration renders it less liable to litigation. “will” on the other hand is prone to litigation.
3. Transfer using gift deed are tax free.
1. Gift deed is irrevocable post execution but “will” can be changed as many times as you want.
2. There is extra cost of stamp duty for gift deed. Stamp duty varies from state to state.
For transfer of any property gift is one of the most cost efficient ways as in gift the stamp duty is less i.e. more or less 1% of the price of the property. In a gift the transfer is made by a registered deed in the office of the district registrar and the gift is valid. The gifted property is transferred to the person to whom the gift is made.
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