A Deed of Gift is a formal legal document used to give a gift of property or money to another person. It transfers the money or ownership of property (or share in a property) to another person without payment is demanded in return. Please note - A gift is not a loan, it does not have to be repaid and the giver has no legal ownership to the thing given. If the person gifting is expecting to get repaid then this isn't a gift.
Generally, most Deed of Gift transfers are carried out between family members as the property and/or money transferred in this way is usually given out of the love and affection the giver has for the recipient.
The person who creates and executes a Deed of Gift to transfer money or property from himself to another person is called a Donor, and the person receiving the gift is called the Donee.
Transferring property or money by way of gift must be executed as a Deed because no consideration is given in return for the gift, thus the document has to be witnessed. Please note - Witnesses have to be disinterested parties, in other words they cannot have a stake in the transfer. If a witness stands to benefit or take a loss because of the gift, then he/she cannot be considered disinterested and cannot act as a witness.
The Monetary Deed of Gift – Home Purchase template shall be used where the Donor wants to make an irrevocable and unconditional gift of money to the Donee; as it is irrevocable once the Deed is signed and witnessed the Donor cannot later change his mind and reclaim the money he has transferred, the Donee takes immediate legal ownership of the gift.
This Monetary Deed of Gift – Home Purchase template has been drafted specifically to cover situations where parents (or grandparents) provide a cash gift which will be used towards the purchase of a home. Please note - When a cash gift is used for the purchase of a home a Deed of Gift must be executed, the conveyancing solicitor will require a Deed of Gift from the Donor confirming that the money provided is a gift and that he has no rights over the property. When a cash gift is used for the purchase of a home the conveyancing solicitor and the mortgage lender (if there is a mortgage) must be informed of the gift from the outset.
As part of Anti-Money Laundering (AML) rules during the conveyancing process the solicitor will ask for proof of funds to confirm where the money originated from, thus the cash gift will come to light. Where there is a mortgage the mortgage lender needs to know if the money is a gift or a loan. Mortgage lenders need to be satisfied that the money is a gift and that the donor has no claim over the title of the property, nor can they request for the gift to be repaid. Mortgage lenders do not want to have challenges from parents if they have to repossess and sell the property. If you do not inform the mortgage lender of the gift from the outset when the solicitor receives the mortgage offer he is required to inform the mortgage lender of the gift, and as a result the mortgage lender can either amend the mortgage offer or rescind it.
Please note - Even with a validly executed Deed of Gift mortgage lenders can still refuse to provide a mortgage because of the risks around the potential for donors to say that the money was in fact a loan and not a gift, thus having a claim over the title of the property. You should speak to your mortgage lender to see if they consent to the gift.
Giving a gift to someone can have some Inheritance Tax implications. Generally, any gifts made to any individuals will be exempt from Inheritance Tax payments if the Donor lives for a total of seven years or more after having made the gift. These kinds of gifts are usually known as Potentially Exempt Transfers (PETs). However, please note that if the Donor gives away an asset but keeps an interest in it then the gift will not fall within the category of a potentially exempt transfer.
If the Donor dies within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on the value of the gift usually by the Donee or by the representatives of the estate.
This Monetary Deed of Gift – Home Purchase template shall be given to the conveyancing solicitor as confirmation that the money provided is a gift and that the Donor no rights over the property. It will be used as proof that the Donor owns no interest in the property and is giving the money as a gift and not a loan, not expecting ever to be repaid.
This Deed of Gift also contains a Solvency Statement of the Donor. The reason for this is that if the person gifting becomes bankrupt within 7 years of the date of the gift, the gift could be clawed back to settle the liabilities due.
If you're using a cash gift to help buy a property this Monetary Deed of Gift – Home Purchase template is essential, it contains the necessary information to satisfy both the solicitors and the mortgage lender.
This Monetary Deed of Gift – Home Purchase template is in Microsoft Word format, written in plain English easy to use and edit.