What is a Gift Deed? (2024 Update)

gift deed

Gift-giving is a practice which many people across all cultures are familiar with. Whether at Christmas, for birthdays, or at any other time throughout the year, items are frequently given to others with no expectation of payment or anything else in return. While it is usually a joyous occurrence, the practice can present problems when ownership of the property allegedly gifted comes into dispute. In order to avoid this issue, the creation of a gift deed can make all the difference.

Table of Contents

What is a Gift Deed?

A gift deed is a document recording the transfer of ownership over property from one party to another, in cases where the transferor (or ‘gift-giver’) does not require any payment for it from the recipient. In order for the transfer to be effective at law, both parties should sign the deed.

Gift deeds are useful for making the gift-giver’s intentions clear to those who believe they have a claim to the property at hand. The gift deed is evidence of a transfer. A gift deed also provides a resolution for any misunderstandings as to who owns the property. This is because once the gift deed is exceecuted, an irrevocable transfer is made to the recipient. Thus, a gift deed holds the purpose of creating a valid and documented record of the gifting of a good or property. A gift deed may also be evidence of the legal transfer of ownership of the good or property from one party to another.

Does the type of Property in the Gift Deed Matter?

The type of property being gifted can create additional requirements for a legally-recognised transfer by a living donor to occur. A key distinction is between real property (or ‘realty’) and personal property (or ‘personalty’). Realty includes land and interests in land, such as fixtures or easements. However, any other type of property is generally classified as personalty.

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Real Property

For real property, it is important to consider its subcategories of Torrens title land and old system (or ‘general law’) land. For Torrens title land, the registered owner of the property must have the transfer recorded on the Torrens Register. Landholders must also present the relevant certificate of title to their local land titles office for an effective transfer unless they are from the Northern Territory or Queensland. As for old system land, it is only the deed itself which is of concern. For the deed to be valid, an indication of intention to sign the document as a deed must be clear. It must also have an appropriate attestation, by a witness to the signing of the deed for example.

Personal Property

Regarding personal property, the gift deed may be ineffective. This is if the gift-giver has not done everything necessary on their part to transfer ownership. This means that if the intended recipient requires further help from the gift-giver to complete the transfer, it will not be legally enforceable.

Example

Mark signs a gift deed stating he will transfer 100 of his company shares to Sarah. However, he does not lodge an instrument of transfer with the company, which is essential to complete the transaction. As only Mark can submit this instrument, and Sarah cannot, Mark has not done everything necessary on his part to transfer ownership. As such, Sarah does not become the legally-recognised owner of the shares.

Using Trusts to Transfer Property

An alternative method for gifting property is through the establishment of a trust. A trust exists when one party (the ‘trustee’) holds property for the benefit of another (the ‘beneficiary’).

Trusts have a range of advantages and disadvantages. For example, businesses and individuals can use them for tax benefits. However, establishing and maintaining a trust can be a complex process. Such factors are important to consider when deciding whether a trust is appropriate for your personal circumstances.

Conclusion

Property can be given as a legally recognisable gift in two key ways. Using a gift deed is the simpler method. However, establishing a trust is another method which can be quite worthwhile, depending on your personal circumstances.

For further information on either method, consulting with a property lawyer or trust lawyer may be beneficial.

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