As a business owner, you may be thinking of passing on your business to a family member or donating it to charity for them to manage when you retire. In these circumstances, a gift deed might be suitable for you. This article sets out what a gift deed is, the benefits of having a gift deed and how you can use one.
What is a Gift Deed?
A gift deed is a document recording the transfer of ownership over property between parties. Normally, parties do this voluntarily and without payment from the other party. However, you must take a few steps for the gift deed to be legally binding. First, both parties must sign the gift deed like any other typical contract. Note that there are specific rules to follow when executing a deed, including having someone witness your signature. However, a gift deed does not require any consideration. This is the difference between a deed and an agreement, as a deed is the most solemn indication that the parties intend to be bound.
How Does a Gift Deed Benefit Me?
As a business owner, a gift deed is useful for the following reasons:
- it allows you to transfer property to the intended recipient;
- it makes the intention of the parties clear regarding the ‘gift’ or property you are transferring; and
- it acts as proof of the parties’ legal transfer of property ownership.
How Do I Use a Gift Deed?
A gift deed is similar to a contract indicating the arrangement’s key terms between both parties. Crucially, you need to be clear on the type of gift you will be gifting to the other party before preparing the gift deed. In addition, depending on the type of property being gifted, you may need to consider additional requirements to ensure that a legally-recognised transfer has occurred.
For example, with real property, you must consider whether the land you transfer is considered Torrens title land or land under the general law. If you are transferring Torrens title land, you must record the transfer on the relevant Register.
A good rule of thumb is ensuring you have done everything necessary to transfer property ownership. If the gift recipient requires further help from you or cannot ‘own’ the gift fully, the chances of the gift being legally enforceable will be low.
When using a gift deed, you must use it only where you intend the property to be a gift. Accordingly, no conditions should be imposed in relation to making the gift.
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Key Takeaways
You can gift your property as a business owner through a gift deed. Generally, this differs from a typical contract as the other party does not need to offer any consideration in return for the gift.
Frequently Asked Questions
A gift deed or a deed of gift is a document that transfers property from one person to the other individual or an organisation as a gift. There are no conditions imposed concerning the making of the gift.
It allows you to transfer assets to individuals or organisations you would like. It sets out the parties’ intention regarding the ‘gift’ and acts as evidence of the legal transfer of property ownership between the parties.
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