Malcolm Finney looks at the use of deeds in relation to gifts of assets etc.
A transfer of property (real or personal) may involve a sale/purchase or a simple gift. A gift involves no consideration being provided by the recipient (donee) of the gift.
It might be thought that making a gift of property is simple and straightforward. What can be complicated about making a gift?
Moveable tangible property
At its simplest, a gift may occur by the simple delivery of possession of the property. This is possible where the property is moveable and tangible.
Example 1: Gift of a painting
Tom says to his son, Todd, ‘I would like to make you a gift of that painting of the Armada hanging on my study wall’.
Tom takes the picture off the wall and physically hands it over to Todd. The gift is complete.
However, if Tom had simply said to Todd “I would like to give you the painting” but did nothing further, Tom is making an oral gift, which in law has no effect and thus Todd cannot force his father to hand over the painting. Similarly, if Tom had in writing agreed to make the gift, Todd could still not enforce the gift against his father. However, what Todd could have done is to ask his father to transfer the painting to him by way of a deed of gift. Todd would then be able to enforce the gift against his father (despite having provided no consideration).
Intangible property
But, of course, not all gifts comprise movable tangible property capable of delivery by transfer of physical possession (e.g. shares, insurance policies). In such cases, some form of writing documenting the gift is needed. Even so, certain formalities may in addition also need to be observed.
Example 2: Gift of shares
Tom owns 100 ordinary shares in XYZ Plc.
To gift the shares to Todd requires Tom to execute a stock transfer form, and for Todd’s name to then be entered into the register of shareholders held at the offices of XYZ Plc.
Need for a deed
Certain transactions are required by statute to be effected by deed.
Although the number of transfers requiring a deed is small in number they often involve significant transactions. Perhaps the most significant is the transfer or creation of a legal interest in land (which would include buildings thereon).
On purchasing a home, for example, after contracts are ‘exchanged’, the home is conveyed from vendor to purchaser by way of a deed of conveyance (so-called ‘completion’). The obtaining of a mortgage from a building society to finance the purchase also requires that the mortgagor (i.e. the borrower) executes a deed under which the mortgagor declares that the home acquired is charged by way of a legal mortgage to the mortgagee (i.e. the lending bank or building society) as security for the mortgage loan.
But, not all land transfers require the use of a deed. Thus, an assent of land (i.e. a transfer of land from executors of a will to a beneficiary) does not require the use of a deed.
Although certain transfers do not necessarily need to be made by way of a deed, in practice a deed may, in fact, be required. For example, an insurance company will invariably require a transfer of an insurance policy from A to B (referred to as an assignment) to be effected by way of a deed (although this is not required by statute). Re-adjustments made post-death with respect to a testator’s will are required to be made only in writing but, again, invariably a deed is adopted (i.e. a so-called ‘deed of variation’).
Nature of a deed
A deed is a document in writing that is signed and attested and specifies that it is a deed. Attestation requires that the deed is signed in front of a witness who in turn then also signs. In the ‘old days’ (i.e. pre-1989) a deed had to be in writing and ‘signed, sealed and delivered’. Post-1989, there is no longer the need for sealing.
It is the witnessing that differentiates a document which is a deed from a simple document in writing.
A deed takes effect when it is ‘delivered as a deed’, which usually means it takes effect immediately if it is signed and delivered as a deed (unless the delivery is made conditional).
Tax consequences
Gifts, particularly amongst family members and on trust, are extremely common and are often integral to tax planning exercises. A gift which fails (e.g. where a deed should have been used but wasn’t) may thus invalidate the tax planning exercise.
Practical Tip:
Always check when making a gift first, whether a deed is legally required; second, whether the use of a deed is advisable (even if not legally required); and thirdly, that any additional formalities to perfect the gift are observed.
