Succession through Gift during the lifetime of an individual is another mode of inheritance, where during the lifetime of an individual, partition to his / her estate takes place and ownership is transferred legally. One can enter into Gift Deed for making such gift. When gift deed is entered into between relatives, there is minimal stamp duty charge and no implications of income tax.
Assets lying in estate of an individual such as immovable property, jewellery, cash, investments, movable property, etc, can be transferred through Gift deed, so as to make the donee enjoy the property immediately. A gift of a self-acquired property to anyone, as long as doner of the gift is competent to contract, as per the provisions of the Indian Contract Act, is allowable. Any person who is of sound mind and not a minor, can enter into any contract, as long as he/she is not an undischarged insolvent.
Considering such arrangement of Gift is possible, one must also take into consideration, adverse implications resulting pursuant to such an arrangement. Following are few of such examples,
- Chances of family members / donee leaving the doner without any money;
- Misuse of estate of doner during his / her lifetime such that entire wealth erodes, fully / partially;
- Pledge of wealth of doner by donee for obtaining liability;
- No financial security to doner during their sick days;
Although trust is the factor, based on which such gifts are been undertaken mostly. But there have been many examples, where children, now a days, consider taking care of their old aged parents as an obligation.
Gift versus writing a Will: Which option should a property owner choose?
Although the end result in both the options could be similar, both have its own consequences once effective. While a Will can provide security during the lifetime of the testator, under a Gift arrangement same is a very big question mark and depends highly upon loyalty of family members/ donee. Considering circumstances for everyone is different, all the aspects must be looked through before coming to any decision specially when it is about Succession.
A major question to deal here would be bequeathing during lifetime or after death? Even though Will has certain limitations, a properly executed Will can still provide transition of wealth in the smoother manner. Thus, it is always advisable to register the Will to ensure minimal hassle at the time of Probate procedure. On the other hand, transferring wealth just to save on taxes and stamp duty, is not advisable as it can clearly cause difficulty during critical times like sickness.
Any succession planning made after considering tax and stamp duty aspects only, without considering any such aspects of breach of trust, can result into inviting troubles in the old age itself. One must consider all the aspects of succession and take corrective steps.
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