In this blogpost, Haridya Iyengar, Student, Jindal Global Law School, Haryana writes about what is a gift deed and the important points to be considered while drafting a gift deed.

This paper seeks to explain the procedures involved while giving a gift deed and the importance of a gift deed.

What is a Gift Deed?

According to Section 122 of the Transfer of Property Act, “Gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person called the donor, to another person called the donee, and accepted by or on behalf of the donee.
Acceptance when to be made – Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.”

Acceptance

Acceptance of the gift is a legal requirement, and this acceptance must happen before the death of the donee. It can be implied acceptance, for instance; the donee starts collecting rent from the property. Once a valid gift has been accepted it cannot be cancelled unless it is a conditional gift.

A conditional gift is when certain conditions need to be fulfilled before acceptance. On acceptance, the donee gains absolute right in the property depending on the rights set in the gift deed.

Acceptance in Case of Minor

While anyone who owns the property is supposed to be able to gift it, there is one exception. Minor are legally not eligible to form a contract. Therefore, they are not allowed to transfer the property. This means a gift deed where the minor is the donor is illegal and void.

However, a minor can be a donee. A legal guardian can accept the gift on the minor’s behalf. When the minor is of legal age, he will be given the option of either accepting the gift or returning it. Guardians act like the managers of the gifted property.

Conditional Gift Deeds

A conditional gift is where the gift deed turns invalid if a certain condition which, had to be fulfilled was not. Conditions have to be made before or at the time of making the gift; it cannot be added later. A condition has to be uncertain or something that is not in the control of the donor. However, a conditional gift where the donor has complete control over the condition is void. Furthermore, a condition cannot be immoral or illegal.

For instance, If Arjun gifts Rs.20, 000 to Bheem and sets a condition stating that, Arjun can take back Rs.5000 at his pleasure, it is void as to the Rs.5000 which continues to belong to Arjun.

Gift Deed in the case of Undue Influence or Fraud

Undue influence is when the donee uses his position of power or authority over the donor to acquire the gift. In such cases the burden of proving that there was no undue influence is on the donee. If undue influence is proven then, the gift deed becomes voidable. This means the gift deed can be declared void as per the discretion of the donor. The deed is valid as long as it is not declared void.

Fraud is when the gift deed is forged through lies and deceit. For instance, if A deceitfully gifts a property belonging to B, to C it is considered fraud. In such cases, the gift deed is declared void or invalid.

Points to Remember while Drafting a Gift Deed

• There should be a complete absence of monetary compensation while giving a gift. When there is money or something of equal value given in return for receiving a gift it becomes an exchange.
• A gift must be given by the donor to the donee without undue influence, fraud or coercion. It should be given through the sheer will of the donor.
• A gift has to be existing movable or immovable property. It cannot be something that will be transferred to the donor in the future.
• A gift can be absolute or limited. An absolute gift is the complete transfer of the property to the donee. He can do whatever he wants to with the property. However, limited rights only create a life interest. The property will go back to the heirs of the donor after the death of the donee. So, the donee only has the right to enjoy the property he may not sell it or destroy it.
• The donor must not simply execute the gift deed but must have the intention to gift the property. The deed must be executed voluntarily and with the intention to transfer the property.