A gift is a transfer of property made for a personal reason as opposed to a business reason. In short, a gift is something that is voluntarily transferred to someone without compensation.
Gifts have a special place in the law. The law of gifts touches at least three legal arenas: taxation, property law, and estate law – i.e., wills, estates, and trusts.
For taxation purposes, courts look to see if a gift is detached with no interest to any legal or moral obligation, and without the intent of the donor (the person making the gift) to benefit from the gift in the future.
Furthermore, a person’s gross income typically does not include the value of property acquired by devise, bequest, inheritance, or gift.
Most states agree that a gift comes from a detached and disinterested generosity that stems from a person’s charity, affection, respect, admiration, or similar impulses. To determine if the property falls under the legal definition of a gift, courts will look to the intent of the donor.
For example, suppose someone says, I’ll gift you my grandfather’s Rolex if you paint my house. In this situation the watch then becomes property that was received for the purpose of payment for services performed and not a gift.
In this case, the Rolex would be considered taxable income because it was intended as payment for painting the house, and not a gift transferred without compensation.
Inver Vivos Gifts and A Causa Mortis Gifts
The law recognizes two categories of gifts: the gift inter vivos, which is a gift between two living persons, and the gift a causa mortis, which is a gift given in the contemplation of death.
For an inter vivos gift to be valid, three elements must be met:
- There is present donative intent. In other words, the donor intends to make a gift “now”. For example, if you say, I’ll give you my car someday – that would not be considered a gift – but a gratuitous promise in the future. When giving away something, the donor must feel the “wrench of delivery”.
- The delivery of the gift. Delivery can be a physical delivery or a constructive delivery (things that are not practical to be delivered by hand). Delivery can also precede the intent to give a gift.
- For example, suppose you leave a pair of sunglasses at a friend’s house. Your friend calls you to tell you about your sunglasses, then you gift the sunglasses to your friend, who is already in possession/delivery of the sunglasses.
- Acceptance. Once a gift is given to the donee, the delivery is complete. The law will presume acceptance even if the donee does not thank the donor for the gift.
For gifts a causa mortis, all three of the elements of an inter vivos gift must be met with an additional required element:
- The donor’s anticipation of imminent death. A gift a causa mortis is a gift of personal property given in anticipation of the donor’s imminently approaching death; however, if the donor does not die, the gift is revoked automatically and the donor gets the gift back.
- If the donor really wants the donee to have the gift, the donor has to re-gift it or put the gift in a will as a testamentary gift.
Courts tend to disfavor gifts a causa mortis because they are effectively substituting for a will without all of the legal safeguards that a will would require, such as certification of testamentary capacity, notarization, and witnesses.
How Can I Prove The Property I Received Qualifies For A Gift?
It can be difficult to prove that a property qualifies as a gift, and this is often a point of contention between the parties involved in a transaction. The best way to prove that a property qualifies as a gift is through evidence of intent from the donor
This can be done by providing evidence that the donor gave the property away freely and without expecting anything in return.
If you are trying to prove that you received something of value as a gift, it is important to have evidence of both the transfer of ownership and the giver’s intent. Without this evidence, it can be difficult to prove your case in court.
If you cannot prove that property given to you qualifies as a gift under the law, then you may be required to pay taxes on its fair market value.
If someone or the IRS disputes that the property you received was given to you as a gift, then there could be some legal as well as monetary consequences at stake.
If you think that you might not be able to prove that property given or to be given to you has met all the elements discussed above, then there are a few steps you can take to help you prove your case in the event of a dispute.
- Take photographs of the object in question. Photographic documentation is a good way to prove that a gift was delivered to you. If there is no evidence to prove acceptance, then a claim is much harder to prove.
- Write up a statement describing what occurred between you, the donee, and the person who gave you the property, the donor. Just like taking photos, having a journal entry or a written statement supporting your account could help strengthen your claim.
- This step is best to be done at the time of delivery, but you can also write down an account of the event after the dispute has been raised. Just be sure to add in as much detail as possible. If there were any witnesses, it would be a good idea to get their written statements as well.
- If it looks like a property dispute may go to court, It’s important to get an opinion from a lawyer due to the complexity of such cases.
If you’re trying to prove that, for example, a house or a car is a gift, you’ll likely need to provide some evidence that the giver intended to give it to you and not just loan it to you.
This could include things like a signed gift deed or bill of sale from the giver, as well as testimony from witnesses who saw the transfer of ownership take place. If you’re trying to prove that stocks or other intangible assets are gifts, it may be more difficult to do so without some concrete evidence.
However, if there are any written records or emails between the giver and receiver discussing the transfer of those assets as a gift, that could be evidence of an intent to donate or give you something of value.
Do I Need A Lawyer For Assistance With A Gift?
Generally speaking, an attorney would be helpful in proving that a property qualifies as a gift since there are often legal requirements that must be met in order for a gift to be valid.
If you are ever unsure about an object’s gift status, then it may be a good idea to seek the advice of an estate attorney. If anyone disputes your ownership of any property, then you will need their help to prove that a valid gift was made voluntarily without compensation.