In a legal sense, the term “gift” refers to a definite, voluntary transfer of property from to another. The transfer must be made without any consideration (that is, without an expectation of receiving compensation in return). A person or party who makes a gift is called a “donor”, while the one receiving the gift is called the “donee”.
Transfers that qualify as a gift are a usually exempt from various tax laws. Gifts can usually be made to persons or to qualified entities like a registered charity. Generally speaking, there are three types of ways that a gift can be transferred:
- Inter Vivos Gift: This is a gift that is transferred during the life of the donor, while they are still alive. These are irrevocable (i.e., the donor cannot reclaim the gift once transferred)
- Causa Mortis Gift: A gift that is transferred in anticipation of imminent death. The transfer is usually effective upon the donor’s death, and can be revoked up until the donor’s death
- Testamentary Gift: This is a personal gift distributed through a will. The gift is transferred to the donee after the donor’s death, and is often included in the overall distribution of the person’s estate
Not all transfers of property qualify as a gift. The term “gift” has legal significance and only transfers that meet all the elements of proof will be classified as a gift. Though laws may vary by region, in general the elements of proof for a gift are:
- Capacity of the Donor: The donor must have legal capacity to make a gift. This includes being of the majority age (usually 18 years old), and having the mental capacity understand that they are giving a gift
- Intent: The donor must intend to transfer the property as a gift. This can be proven through statements, writings, or conduct. Intent also means that the donor doesn’t expect compensation or consideration for the transfer
- Delivery to the Donee: Delivery of the gift can be actual, symbolic, or implied through conduct. In general an affirmative act must be made by the donor (such as handing over the keys to an automobile)
- Acceptance by the Donee: The donee must also affirmatively accept the gift, without any coercion or undue influence. Revocable gifts can be revoked up until acceptance
Thus, transfers that don’t satisfy these requirements won’t be classified as a gift. For example, the “donor” might not have intended to make the transfer a gift if they had asked for payment in return. As such, the donor might not be allowed to claim tax exemptions that cover gifts.
Basically any form of property can be transferred as a gift, as well as various types of assets. These include:
- "Gift in kind” (property other than cash, including real estate, inventory, stocks, bonds, etc.)
As a final note, services are generally not considered to be property, and therefore can’t be the subject of a gift transfer.
Transferring a gift can sometimes be a very formal undertaking, especially for property that is worth large amounts. If you need assistance with a gift, or have any questions, you may wish to contact an estate lawyer in your area. Also, disputes can sometimes arise over gifts, so it might be necessary to hire a lawyer if you need to file a lawsuit.