What is better between Gift Deed and Will as a method of transfer of property?

Any transfer of property in the family or to a loved one should be well planned legally. A Gift Deed and a Will are two most prevalent methods of transferring the property ownership. They have various purposes and are not equally relevant to the law. It is better to know the difference between them and guarantee the unproblematic transition and prevent the conflicts in the future.

What is a Gift Deed?

A Gift Deed is a legal document that is deployed to transfer voluntarily ownership of movable or immovable property to a different person (donee) owned by another person (donor) without any monetary compensation. It is carried out on the lifetime of the donor and it will take effect as soon as it is registered.

In Section 122 of Transfer of Property Act, 1882, the gift of property should be made freely and in the absence of consideration. The ownership rights are fully vested in the donee once the execution and registration is completed.

Features of a Gift Deed

1. Immediate Transfer: The ownership is transferred immediately the deed was registered.
2. No Money Change: The transaction is done out of love and affection particularly when it comes to gift deed blood relation cases.
3. Irrevocability: A deed of gift property under the law of England and Wales cannot be revoked once registered in certain circumstances such as fraud, coercion, undue influence etc.
4. Compulsory Registration: The transfer of property on the form of a gift ought to be registered as required by Section 17 of the Registration Act, 1908 to be valid.
5. Stamp Duty: Stamp duty is different in different states. Some states have concessional or low stamp duties in case of gift deed blood relation.

What is a Will?

A Will refers to a legal statement by an individual (testator) on how his property will be divided upon his death. It only comes into operation following the death of the testator. The document may be superseded or recalled at any point in time in the lifetime of the testator.

A Will is not binding to be registered (although it was registered under Section 18 of Indian Registration Act,1908), unlike a gift deed transfer of property.

Features of a Will

1. Takes Effect After Death: Ownership is passed only after the death of the testator.
2. Revocable Anytime: The testator is allowed to change or revoke the Will any time before passing away.
3. No Immediate Possession: The beneficiary only acquires the rights of ownership after the death of the testator.
4. Probate Requirement: In certain cities, particularly in metropolitan cities such as Mumbai, Chennai and Kolkata probate (court validation) of the Will has to be obtained before execution.
5. None Stamp Duty: A Will does not incur any stamp duty as in the case of a deed of gift property.

Gift Deed in Blood Relation

Gift deed blood relation has a number of legal and financial benefits. In cases where property is donated to a close family member like a spouse, child, parent or a sibling, the following are the benefits;

1. Savings of Stamp Duty: Most state governments such as Delhi, Maharashtra and Uttar Pradesh provide the savings of no stamp duty or less stamp duty on gifts given to blood relatives.
2. None Income Tax: According to Section 56(2)(x) of the Income Tax Act, gifts that are received by a blood relative are not taxable.
3. Similarity of transfer: Ease of transfer is also easier as both parties are related and therefore, the documentation and verification process is quicker.

Advantages of Gift Deed

1. Immediate Ownership: Beneficiary acquires complete possession of the property at the time.
2. Less Litigation: It is almost impossible to contest a registered one.
3. Legal validity: Registered gift deeds have powerful legal evidence of ownership.
4. Emotional Satisfaction: It gives the donor a chance to see himself or herself benefiting the property.

Advantages of Will

1. Retained Control: The testator has retained control of the property until death.
2. Modification: The Will may be changed several times according to the changing circumstances.
3. Cost-Effective: It has the lowest costs of preparation and registration (not mandatory) as compared to a gift deed.
4. Ideal: Post-Death Distribution Suitable: Suitable when the testator wishes to continue to hold the property during his lifetime.

What is better Gift Deed or Will?

The choice is made on timing, intent, and control.

Choose a Gift Deed if:

1. You desire to transfer ownership atonce.
2. You are giving out property to a blood relative.
3. You wish to minimize inheritance disputes.

Choose a Will if:

1. You would like to maintain ownership until the time of your life.
2. You will do changes or revisions in the future.
3. You desire to leave out several properties to various heirs upon death.

In short, a gift record of transfer of property gives immediate and uncontested ownership whereas Will gives posthumous transfer at a flexible time during one lifetime.

Conclusion

Gift Deed and Will are also legal methods of transfer of property. A gift property deed is however more appropriate to transfer immediately, particularly to blood relatives, as it has a well-defined ownership, fewer disputes, and concessional tax and stamp.

Will, in its turn, is most suitable in terms of succession planning and of having a control over the assets throughout the lifetime. Seeking the services of an expert in the field of law would make sure registration, stamp duties, and taxes are adhered to.

To safely and professionally draft a gift deed to be transferred to property or Will, contact the legal drafting services of Lawchef so as to be sure that your rights to your property have been guaranteed with the law and a sense of tranquility.