The making of a gift has potential implications for Inheritance Tax, Nursing Care and can also impact upon a deceased person’s family. To ensure that any gift or gifts which you make are properly treated as such, we would advise the following action:-
1. Personal Possessions / Household Goods
The best way to gift any of these items is for the recipient to remove them from the donor’s (the person giving the gift) property, with the donor’s consent.
It may not be sufficient to simply say “when I die this [particular item] is yours”. This could cause further difficulties if there are subsequent instructions to the contrary in the donor’s Will. To avoid doubt, either you should ensure that your Will properly covers the gift (in the event that it is to remain with you until death), or you should draw up a written document, signed by both the person making the gift and the recipient and place this with your Solicitor.
It may sound obvious, but a gift by way of cheque is only valid when the cheque clears. Simply writing someone a cheque is not sufficient for the gift to pass.
It is not sufficient to simply give the Share Certificates to the recipient or to tell them that the Share Certificates are to go to them, when the donor dies. The Shares legally remain in the property of the named owner until death and thereafter form part of his/her estate.
If you intend to gift Shares, you need to arrange for a Stock Transfer Form to be completed and effect the transfer of Shares with the relevant Share Registrars. Once the new Share Certificate is issued in favour of the recipient the gift has been made.
Land must be transferred by way of Deed and, if applicable stamped, for the gift to succeed. The case law in this area works on the simple premise “no Deed equals no gift”.
5. The Family Home
Gifts of the family home are possibly the most contentious one of all and have become increasingly common, particularly in the last 20 years or so.
The popular misconception is that once, say, the parents transfer the family home (usually by way of a voluntary transfer with no money changing hands) it is only a matter of waiting seven years for the gift of the home to fall out of that person’s Estate when they die.
Regrettably this is not the case, where the parents continue to live in the property on the same basis as before.
The basic rule is that any gift of the family home will be under scrutiny by HMRC on death and they will usually regard this as a “gift with reservation”; the market value of the same at date of death falls back inside the estate.
The gift of the family home can potentially be set aside, if having made the gift, the donor requires nursing or residential care at any stage prior to death.
In my next article on gifts, I will be taking an in-depth look at gifting the family home, and the considerable risks involved when such a gift is made.
If the donor and the recipient are members of the same family partnership, a gift can be made by transferring part of the donor’s capital account to the recipient. The gift is only effective if the annual Partnership Accounts showing the transfer are signed by all of the Partners.
Too often clients consult us after they “think” they have made a gift. If in doubt, you should contact us in order to ensure that, either the gift has been made properly, or that you are fully aware of the potential pitfalls when making a gift.
“This material does not give a full statement of the law. It is intended for guidance only and not as a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by Murray Kelly Moore Solicitors.”
© Murray Kelly Moore Solicitors.