Understanding Gift Deed vs Will for Property Transfer

Gift Deed vs Will for Property Transfer: When it comes to transferring property, two common legal instruments are gift deed and will. Both serve different purposes and have unique implications. Understanding the difference between these two can help individuals make informed decisions about property transfer.

Gift Deed vs Will for Property Transfer

What is a Gift Deed?

A gift deed is a legal document used to transfer ownership of property from one person (donor) to another person (donee) without any monetary exchange. The transfer is immediate and irrevocable once the deed is executed and registered. Gift deeds are often used to transfer property to family members or close relatives.

Key Features of Gift Deed:

• Immediate Transfer: The property is transferred to the donor immediately after the execution and registration of the deed.
• Irrevocable: Once executed, a gift deed cannot be revoked unless there is a specific legal ground.
• Stamp Duty: Transfer of property through a gift deed requires payment of stamp duty, which varies from state to state.
• Registration: The gift deed must be registered at the local sub-registrar office to be legally valid.

What is a Will?

A will is a legal document that outlines a person’s wishes regarding the distribution of his property and assets after his death. The person making the will (testator) appoints an executor to ensure that the instructions given in the will are followed. Unlike a gift deed, a will can be changed or updated by the testator at any time before his death.

Key Features of a Will:

• Posthumous Transfer: The property is transferred to the beneficiaries only after the death of the testator.
• Revocable: A will can be changed or revoked by the testator at any time before his death.
• No Stamp Duty: There is no stamp duty required for making a will.
• Registration: Though it is not mandatory, registration of a will can help prevent disputes and ensure its authenticity.

Difference between Gift Deed and Will

1. Time of Transfer: Gift deed facilitates immediate transfer of property, while a will transfers property only after the death of the testator.
2. Revocability: Gift deeds are generally irrevocable, while a will can be changed or revoked at any time before the death of the testator.
3. Stamp Duty and Registration: Gift deeds require stamp duty to be paid and must be registered, while a will does not require stamp duty and registration is optional.
4. Legal Implications: Gift deeds are executed during the lifetime of the donor and are independent of the donor’s death, while wills become effective only after the death of the testator.

Advantages and Disadvantages

Gift Deed:

• Advantages:
  • Immediate transfer of property.
  • Can help avoid disputes among heirs.
  • Provides clarity and certainty about property ownership.
• Disadvantages:
  • Irrevocable once executed.
  • Requires payment of stamp duty.
  • Potential for abuse if the recipient does not respect the donor’s intentions.

Will:

• Advantages:
  • Flexibility to change or revoke the will at any time.
  • No stamp duty required.
  • Allows the testator to retain control over the property during his lifetime.
• Disadvantages:
  • Property transfer only happens after death, which can lead to disputes among heirs.
  • Probate may be required, which can be a lengthy legal process.

Tax implications

Gift deed:

• Gifts received from specified relatives (such as parents, siblings and children) are exempt from tax.
• Gifts received from non-relatives are taxable if their value exceeds Rs.50,000 in a financial year.

Will:

• Property inherited through a will is exempt from income tax.
• No estate duty is payable on property inherited through a will.

Choosing between gift deed and will

Choosing between gift deed and will depends on individual circumstances and preferences. If immediate transfer of property is desired, a gift deed may be the better option. However, if the donor wishes to retain control over the property during his lifetime and ensure a smooth transfer after his death, a will may be more suitable.

Frequently Asked Questions