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Considering Making a Deed of Gift?

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You may have heard about a deed. It is a legal document regarding the ownership of property. One particular type of deed, a Deed of Gift, does not require the recipient to pay money to the owner of the property because it is just that, a gift.  On the face of it, this may sound simple but there are several factors to consider when making a Deed of Gift.

What is a Deed of Gift?

A Deed of Gift is a legal document that transfers the ownership of real property from one person or persons, the donor(s), to another person or persons, the donee(s), without requiring any payment to the donor. It can frequently be recognised by the use of the words “in consideration of the natural love and affection that the donor(s) has for the donee(s)… ” in the deed itself. Section 18 (3) of the Registration of Deeds Act Chapter 19:06 (hereinafter “RDA”) defines a Deed of gift as:

“…any Deed, or any instrument under the provisions of the Real Property Act, whereby any real property is transferred from one person to another gratuitously”.

A Deed of Gift transfers property during one’s lifetime. It is different from a Will which only takes effect when the person who made the Will, the Testator, dies.

 

Why make one?

Since a Deed of Gift transfers property while the owner is alive, it avoids the need for a Grant of Probate from the High Court, to get property that a Testator has left to them in a Will.

 

What makes a Deed of Gift valid?

There are two main parts to validity; 1) Mental Capacity and consent and 2) The formalities.

Mental capacity means that the donor, the person gifting the property, must be of sound mind and capable of understanding what he is doing by executing the specific deed: Re Beaney [1978] 1 WLR 770. The donor must also sign of his own free will. A Deed of Gift can be challenged if one alleges that the donor was coerced into signing the deed and/or lacked mental capacity.

The formalities refer to specific legal requirements for such documents. According to Section 7 of the RDA all deeds must be:

  • Prepared by an Attorney-at-law;
  • Signed by the donor;
  • Executed in the presence of at least one independent witness and a qualified functionary, who is usually an Attorney-at-law. This means that the witness should not be involved in the transaction;
  • The witness must sign and include his business or home address and his occupation; and
  • The qualified functionary must sign and include his qualification.

Every deed must be accompanied by an Affidavit of Execution, which can be made before a Commissioner of Affidavits: Section 11, RDA.

A Deed of Gift must be registered within one year of its execution.  However, it may be registered after one year but this incurs a higher registration fee plus any other penalty imposed:  Section 18, RDA.

 

So, there is no money involved?

While the donee does not pay the owner for the property, payment is needed for other parts of the transaction.  The Attorney must be paid for preparing the deed. There must be a valuation of the property, which is also a cost.  It is important to get a fair market value of the property, and the valuation should be done by valuators certified by the Royal Institution of Chartered Surveyors.

The next step is to pay Stamp Duty. Stamp Duty is a State tax imposed on legal documents and it is calculated based on the value of the property.  After stamping, in order to register the deed, one must pay a Registration fee.

 

In certain cases, one can get an exemption from paying Stamp Duty for properties being used for residential purposes.  For those which consist of a house or both a house and land, first-time homeowners may receive an exemption of up to $1,500,000.  For, non-first-time homeowners a maximum of $850,000 may be exempted, for properties consisting of a house and land.  For properties comprising residential land only, up to $450,000 may be exempted. To get an exemption from Stamp Duty, one must usually furnish a Land and Building Tax Receipt paid up to 2009, a Certificate of Assessment, Town and Country Approval, as well as an up-to-date WASA Bill and WASA Clearance Certificate.

For details on Stamp Duty fees, please contact the Inland Revenue Division.

 

How can I protect my interest?

Let’s suppose Rita wants to give her house and land to her two sons, Mike and Robert.  She could transfer the property to herself and her sons jointly.  Or, Rita could transfer the property to her sons, while keeping a life interest in the property. These are just two possible ways that Rita can keep her interest in the property, and thus her right to live on and use the property. However, it must be noted that once you willingly transfer property to someone, you cannot remove their name from the deed without their consent.

 

In conclusion, a Deed of Gift can be quite useful, especially when someone wants to give property to a loved one.  If you are contemplating making a Deed of Gift, it is crucial to consider several factors and get advice from an Attorney-at-law.

 

This article is not legal advice. Consult an Attorney for legal issues.

Submitted by:

Civil Legal Department

Legal Aid and Advisory Authority,

23 Stanmore Avenue, Port of Spain.

Contact: 638-5222

Email: [email protected]

Website: www.laaa.org.tt