The
Gifting Dilemma
By Shailendra Dubey
Partner, Planmyestate Advisors LLP
“Papa, do you want us go through the long legal process and subject us to property disputes after you, why don’t you transfer this flat to us now, don’t you trust us?”, upset Jatin bangs the phone on his father. The father and son fight on this subject are a regular affair now. Jatin’s father was still not sure if gifting his house to his only son is the right decision. He is worried if Jatin and his wife would continue to take care of him and give him the same respect after he gifts away his most valuable asset. Many elderly parents are caught in this age-old dilemma of gifting property during life vs passing it on through a Will.
Defining a Gift
As per Section 122 of Transfer of Property Act, 1882 ‘Gift’ is defined as the transfer of certain existing moveable and immoveable property made voluntarily and without consideration, by one person called the donor, to another, called the donee, and accepted by or on behalf of the donee. One can give away their assets to their loved ones either during life called as “Gift” or after demise i.e. through testamentary termed as “Will”. While the Gift takes place immediately, the Will is operational only after death.
Revocation of a Gift
Gift can be revoked but only under certain circumstances
a. By Mutual Agreement –Donor and Donee may agree that the gift shall be revoked on happening of an event and only on mutual agreement and not mere at the will of donor. The condition revoking the gift must be express; it should not be merely in the form of a wish or desire. In other words, the condition on the non-fulfilment of which the donor may revoke the gift must be expressly laid down in the gift. It is necessary that the condition of revocation is made at the time of gift and not afterwards.
b. By Rescission as Contracts – Section 19 of the Indian Contract Act provides that “Where consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so obtained”. As we know Gift is gratuitous transfer of ownership made voluntarily and if it could be proved that the transfer was not made voluntarily the Gift may be revoked by the donor.
Subsequent Conduct of donee irrelevant & Judgement by Karaikal District Tribunal
A father gifted his house in anticipation of his son staying with him, paying certain sum for living and taking care of him in old age. In case if son fails to take care of father and does not pay for his living the father solely cannot revoke the gift and take back the house. So, the subsequent conduct by donee cannot become ground for revocation of a valid gift. Having said that the recent landmark judgement may pave way for fight back to many such elderly parents who are suffering and repenting gifting their property to their children.
The case was filed by an elderly woman who complained that her son was not taking care of her and he was not even offering her basic amenities of life after she gifted him the property.
The tribunal bench of Karaikal district in Tamil Nadu passed the order declaring the transfer of property to the son void and restored it to the mother under sections 4(2) and 23(1) of the Maintenance and Welfare of Parents and Senior Citizens Act. 2007.
Gifting through Revocable Private Trust
The biggest dilemma of gifting asset to legatees during life is loss of control over the asset and losing power to call back the gift if need arises. A revocable private trust which gives power to recall the assets and wind up the trust as and when desired could be the perfect answer to this dilemma. The assets gifted in the private trust can be passed on to beneficiaries as per terms mentioned in the trust deed without going for any court order like probate or letter of administration. This will not only avoid the delays but will also minimise the chances of family disputes for deceased’s estate. While setting up a revocable private trust is good option to retain control on assets but one should evaluate the costs related to stamp duty on gifting assets, setting up and managing the Trust before taking any decision on this.
