The California Civil Code defines a “gift” as a voluntary transfer of personal property in which the giver receives nothing of value in return. This means that the transfer cannot be made if the giver is subject to any type of duress or coercion. The giver, or “donor,” cannot have made the gift because they were subjected to fraudulent misrepresentation.
California does not impose any tax on gifts. However, the federal Internal Revenue Service (IRS) may levy a gift tax under certain limited and specific circumstances. Under federal tax law, a donor does not pay an actual tax until they have transferred property with a total value of more than $13.92 million over their lifetime.
The federal gift tax applies to transfers of cash, real property, as well as personal property, and debts incurred or loans made that are not repaid. It should be noted that the recipient of these gifts does not have to report them as income and, under state and federal income tax law, would not owe any tax on the gifts they receive.
There is also an annual exclusion in federal tax law for gifts. The dollar value of the annual exclusion is $19,000 in 2025. For 2025, the annual exclusion amount is $19,000 for every person or entity who receives the gift.
This means that a donor may give up to $19,000 to one person or entity in one year without tax consequences of any kind. If a gift to one recipient has a value of more than $1,000, the annual exclusion amount, the amount by which the gift exceeds the annual exclusion is added to the donor’s lifetime exemption allowance. But there would be no federal income tax consequences unless the lifetime exemption of $13.92 million is exceeded.
Again, the lifetime exemption is $13.92 million. This is the value of the total number of gifts that an individual may transfer in their lifetime that escapes federal taxation. Only the amount a person transfers that exceeds $13.92 million is subject to taxation by the IRS.
If an individual gives gifts with a value of over $19,000 to one recipient in one year, they must file a federal IRS Form 709. This permits the IRS to keep a record of the value of the gifts made by the person in their lifetime. Again, however, the donor would not owe any tax on the excess amount reported until the total value of their annual excess amounts to more than $13.92 million.
The lifetime gift exemption also works with the estate tax exemption. Estate law and tax law regarding inheritance taxes may also play a role in the tax consequences of gift giving for an individual taxpayer.
An individual who is thinking of making gifts of significant value in whatever form during their lifetime would want to have a legal consultation in California with a California lawyer.
In California, How Can I Prove the Elements of a Gift?
Whether the transfer of property qualifies as a gift is an issue under federal tax law. Under California law, whether the transfer of property qualifies as a gift would also be an issue, if not in connection with California tax law, then for other legal issues.
For example, one individual might lend another individual money. The recipient of the loan may not repay it, saying that it was a gift, not a loan that had to be repaid. The donor may sue the recipient, claiming it was a loan that should have been repaid but was not.
The elements of proof for a gift must be shown in order to establish that a transfer of property was a gift. The first element is the donor’s intent to permanently transfer ownership of the donated property without the expectation of getting anything in return.
The second element that must be proven is the actual delivery of the property to the recipient. A promise to deliver some item of property in the future is not a gift. The transfer may be physical or constructive, e.g., giving another person the keys to one’s car.
Lastly, the recipient must show acceptance of the property they are given. The law allows this element to be presumed if the item given has value. It is assumed that a recipient accepts a gift of an item of property that has value and is given to them freely.
Proving the intent of the donor can be challenging as it requires what the donor was thinking requires evidence that shows the donor’s state of mind.
What Can Be Transferred as a Gift in California?
Property that can be given as a gift includes, of course, cash, vehicles, works of art, and jewelry. It can also include intellectual property such as copyrights and patents, as well as intangible assets such as shares of stock and bonds.
In California, both individuals and entities can give property as gifts. Individuals commonly give gifts to charities. Any adult individual who is mentally competent may make a gift of property. Of course, the individual should be the rightful owner of the property.
A person can make a gift of real property, but under California property law, there are special legal requirements that apply to such gifts. First of all, the donor must prepare a formal gift deed to effect the transfer. As with all transfers of real estate, a deed is the legal instrument for transferring interests in real property.
The deed should clearly express that the transfer is a gift and not a sale. It should also include such details, such as the legal description of the property and the names of the donor and recipient. A donor must sign the deed. It is crucial to file the completed deed in the office of the County Recorder in the county in which the property is located.
California law does not limit who can receive a gift of real estate, but the nature of the relationship between the donor and recipient should be noted in the deed. The IRS may scrutinize a gift if there is a family relationship between the donor and the recipient and there are tax implications, e.g., tax avoidance, as a consequence of the transfer.
Can I Legally Take a Gift Back in California?
Generally, a valid, completed gift cannot be reversed in California. However, if a gift was made on the condition that some future event would take place and the condition does not happen, the gift could be revoked. The giver could reclaim their property.
The classic example of this is an engagement ring. If a person makes a gift of an engagement ring and the engagement is broken, the recipient is supposed to return the ring to the person who gave it to them. The gift was conditional on the wedding, and it did not happen.
A gift that was made because the donor was subject to fraud, duress, or undue influence can be voided.
A gift can be revoked if the donor is proven to have lacked the required mental capacity when the gift was made. The donor must have understood the nature of their actions when they made the gift. It must be clear that they understood the value of what they gave and to whom they gave it. The individual must comprehend the consequences of giving away their property.
A gift is not valid unless the donor had the appropriate mental capacity to make it.
Do I Need a Lawyer for Assistance With a Gift?
If you are planning to make sizable gifts of personal property in your lifetime, you want to consult a California estate lawyer. Your lawyer can discuss your wishes and formulate a plan that will allow you to make the gifts you wish to make while paying the minimum in federal taxes.
If you wish to make gifts of real property, your lawyer can make sure that you comply with California law and complete all the documentation as required. Your generosity will be most successful if you have the sound legal advice that you need.
