The term gift denotes a voluntary transfer of real or personal property to another made without any particular cause and without consideration. The person who gives the gift is called donor and the one who receives the gift is called donee. A gift is generally made out of affection, respect, charity, or like impulses, and not from any moral or legal duty. Gifts enjoy tax exemption and a payment made without conditions and out of respect or charity or in anticipation of economic benefits is generally characterized as gift under tax law. A charity will normally issue a tax receipt for the gift amount and it can provide a tax receipt for gift- in -kind also.
A gift can be made during the donor’s lifetime (inter-vivos) or by will (testamentary). The two principal categories of gifts are inter vivos gifts and causa mortis gifts. An inter vivos gift is perfected and takes effect during the lifetime of the donor and donee and is irrevocable in nature. A gift causa mortis is one that is made in anticipation of imminent death. This type of gift takes effect upon the death of the donor from the expected disease or illness and may be revoked until the donor’s death. There is a third category called testamentary gift made by will. It operates to transfer ownership only subsequent to the death of the donor.
Essential elements of a gift include: capacity of the donor; intention of the donor to make the gift; completed delivery to or for the benefit of the donee; and acceptance of the gift by the donee. A gift can be made either in the form of cash or a gift-in-kind. A gift-in-kind means a gift of property other than cash and includes inventory, capital property, donations of real estate, stocks and bonds, and personal items. A donor can make a gift to a registered charity or other qualified donee. Services are not property and hence will not constitute the subject matter of gifts. Gift should be given voluntarily, of one’s free will and the donor who makes the gift should transfer the full ownership and possession to the donee. Generally a donor transfers property as a gift without expecting anything in return and donor cannot part with the gifted property in the name of a contract or court order.
The three elements which are essential to the making of a valid gift are delivery, donative intent, and acceptance by the donee. The delivery of a gift is complete when it is made directly to the donee. Delivery can also be made to a third party on behalf of the donee. The third person can be the donor’s agent, bailee, or trustee. In the case of delivery to a third party, delivery is deemed to be complete only when such person actually hands over the property to the donee.
A delivery may be actual, implied, or symbolic, and requires some affirmative act to take place. For instance, A wishes to gift a cow to his daughter B. The actual delivery takes place when A hires a person to bring the cow to B’s farm. A symbolic delivery of a car, for instance can occur when the donor hands over the key of the car to the donee. Delivery is complete only when the donor surrenders control of the property. For example, an individual who expresses the desire to make a gift of a car to another but continues to drive the car whenever he or she wishes has not surrendered control of the car.
If the donor and donee reside in the same house, the gift need not be removed from the house and can be kept in the same house. States do not require too many formalities to establish delivery and if it is proved that the donor relinquished all claim to the gift and recognized the donee’s right to exercise control over it, courts consider it as an adequate indication of a transfer by gift. In the case of a gift to an infant or an insane person who does not have legal capacity to accept delivery, such delivery can be made to an individual who will hold it for such infant or insane person.
If the donee is out of the country at the time of making the gift, delivery can be made to someone else who agrees to accept the property for the donee. However, if the individual accepting delivery is employed by the donor, it is presumed that the donor has not rendered control of the property and that delivery has not actually been made. “The individual accepting delivery must be holding the property for the donee and not for the donor.”
The second ingredient of a valid gift is donative intent, which is inferred from the “donor’s words, the surrounding circumstances, the relationship of the parties, the size of the gift in relation to the amount of the donor’s property as a whole, and the behavior of the donor towards the property subsequent to the purported gift.”
The intent must be present at the time the gift is made and is different from a mere expectation. For example, if one person promises to give a house to an artist “someday,” the promise is unenforceable because there is no intent to make an effective gift at the time of the promise.
The third element for a valid gift is acceptance. Acceptance means that the donee unconditionally agrees to take the gift. It is necessary for the donee to agree at the same time the delivery is made. The gift can, however, be revoked at any time prior to acceptance.