Investing in real estate is the most promising option these days. Generally, there are two ways of transferring property ownership. The first way is through a will, and the second way is through a deed of Gift. In Will vs. Gift deed, both are done legally and registered under the law but have their own pros and cons.
The individual must be thoroughly aware of both options before choosing one to bequeath their property to a loved one, family, or relative. In the case of a Will vs. Gift deed, it is made without any obligations or compensations.
In this article, we will discuss that while doing a debate on Will vs. Gift deed, which is the best method to bequeath property to a loved one.
What is a property transfer through a gift deed?
- A gift deed is executed to transfer the ownership of the property to a family or non-family member without any monetary exchange. It takes immediate effect and can be the most sought-after way to gift an asset or something valuable to a loved one.
- Gifts can be of properties that are either movable or immovable. It should be self-acquired, and the person gifting is required to be above 18 years of age and of a stable mind as defined by the law.
- As per the provisions of the Indian Contract Act, any person who is unable to discharge their debts is not allowed to enter into any contract.
The vital points to consider
When an individual decides to gift a property to another individual, there are a few important factors to be noted. These are as follows:
- The gift deed should be made without any compensation in return to make it a legally valid deed.
- The deed of Gift should be registered to transfer the property. This forms a difference in Will vs. Gift deed.
- Both donor and the donee must gift and receive during their lifetime. If one passes away before the execution of the deed, then it becomes void. It is not valid for will and thus makes it notable in Will vs. Gift deed.
- The donee becomes the property owner after they receive the Gift.
- Registration fees and stamp duty is charged on the total market value of the property for transfer of ownership.
- No taxes are levied or paid when the gifts are made to close relatives.
- If the receiver is not a relative or a family member, then they must pay tax if the Gift received is above INR 50,000. The tax comes under the heading ” Income from other sources.”
- The gift deed method of property ownership transfer is final and can’t be terminated until and unless there is a specific clause mentioning it or proof of any coercion is found.
What is a property transfer through a will?
- In the context of a Will vs. Gift deed, the Gift is made during the owner’s lifetime, whereas a will comes into effect only after the owner passes away. No stamp duty is charged on it according to the law.
- Will Registration is also not mandatory by law, but it is advised to do so to make it legally valid and avoid future litigation in terms of succession. Such type of asset inheritance is free from any kind of income tax laws and is a plus point when debating over Will vs. Gift deed.
A will takes effect in two ways:
- By succession through a will– This means that the owner of the property has mentioned the names and their share of property in the will. It comes into effect only after the owner’s demise, which is notable between Will vs. Gift deed. The successors get their share accordingly, as mentioned in the will of the testator.
- Succession without a will– Here, the owner did not leave a will, and the property will be divided into equal parts. Each heir ( class 1 or class 2 heirs) will get their share of the property and other valuables as defined by the law.
The vital points to consider
Some notable points to consider when executing a will are:
- The registration of a will is not compulsory as per the law, but it is highly suggested to make it legally valid and mitigate any future conflicts. The testator can register a will online or offline according to their accessibility.
- There are no tax requirements for this type of property ownership.
- The assets and valuables are transferred only after the death of the owner as follows from the laws of the land.
- The owner who is enforcing a will can alter it or terminate it as they like during their lifetime. The owner can draft a will online or offline as required.
What’s the best way to transfer the property: Will vs. Gift deed?
- As we now understand the basic differences between Will and vs. Gift deed, it depends on the individual. Every individual has a different situation and reason for property transfer, and it’s their own decision when they choose Will vs. Gift deed.
- If the owner wants the receiver to have instant ownership of the property, then they shall do so by executing a Gift deed. The owner may also consider leaving their possession to their beneficiaries after their death; a will is made to bring them into effect.
- Immediate help can be provided in the case of a Gift deed, whereas in the case of a will, the receiver has to wait for succession. The idea of a Will vs. Gift deed is based on how the owner wants to help a beneficiary and when to execute the same.
- An individual should not give up their significant portion of assets. It can cause a loss of control over the situation during old age. The debate of Will vs. Gift deed can only go so far, and it is governed by laws that have their own advantages and disadvantages.
- In case of any doubt, one must take legal consultation. Legal consultation helps a person to figure out the best way to transfer property.
Having a will is sufficient if the owner wants to have control over their asset during their lifetime. It can avoid conflicts in the family. If the owner wants to assist someone and help them with urgency, then the gift deed is a good idea. Both Will vs. Gift deed depend on the nature of the transfer. It can be done smoothly and timely or urgently and instantly.