- 18-Apr-2025
- Education Law
Both wills and gifts are legal methods used to transfer property from one individual to another. However, the processes, legal formalities, and tax implications involved in property transfers through wills and gifting differ significantly. A will comes into effect only after the death of the property owner, while a gift transfers ownership during the giver’s lifetime. Understanding these differences is essential for effective estate planning and tax management.
A will specifies how a person's property will be distributed after their death. The transfer of property through a will is not effective until the person passes away, and the will is probated (validated by a court).
A gift involves the immediate transfer of ownership from the donor to the recipient during the lifetime of the donor. The transfer is effective as soon as the gift is made, and no court validation is needed.
The ownership of property remains with the testator (the person who writes the will) during their lifetime. After the testator's death, the beneficiaries will take ownership based on the will’s instructions.
In the case of gifting, the ownership immediately passes to the recipient once the gift is made, and the recipient has full control over the property, subject to any conditions mentioned in the gift deed.
A will must be written, signed, and witnessed by at least two individuals. In the case of immovable property, the will does not need to be registered, but it must comply with legal formalities to ensure its validity.
A gift deed is required for transferring immovable property, and it must be registered with the local sub-registrar if it involves real estate. For movable property, a written gift deed is recommended for clarity but is not mandatory for smaller items like jewelry.
A will is revocable at any time during the testator’s life, meaning the testator can change or revoke the will as they see fit before their death.
A gift is irrevocable once the property is transferred. Once the gift deed is signed, registered, and accepted by the recipient, the donor cannot take back the gift.
Under Indian tax law, inheritance or property received through a will is generally not taxed as income. However, capital gains tax may apply if the property is sold by the heir after receiving it through inheritance.
Gifts made during one’s lifetime may be subject to gift tax under Section 56 of the Income Tax Act, especially if the value of the gift exceeds Rs. 50,000. However, gifts from close relatives (parents, siblings, spouses) are exempt from tax. Gifts of immovable property may also be subject to stamp duty at the time of registration.
A will can impose specific conditions or requirements on how the property should be used by the beneficiary (such as restrictions on selling the property or conditions for how it is passed on).
A gift may also have conditions attached (e.g., a life interest for the donor or a condition to use the property in a particular way), but these are generally fewer and less common than conditions placed in a will.
A will can be contested by family members or other interested parties if they believe the will is invalid or if they believe they were unfairly left out. This often requires a probate process in court.
A gift is typically not contested once it is legally executed and accepted by the recipient. However, disputes can arise if there is ambiguity in the gift deed or if someone contests the donor's mental capacity at the time of gifting.
A will is an essential tool for estate planning, allowing an individual to specify the distribution of assets after their death. It can also serve to avoid legal disputes and ensure the proper allocation of assets.
Gifting is a strategic estate planning tool that allows the donor to transfer assets during their lifetime, potentially reducing the value of their estate for estate tax purposes. It also enables the donor to see their gifts in action during their lifetime.
In some jurisdictions, there may be estate duties or inheritance taxes applicable to property transferred via a will. Additionally, a probate process is often necessary to validate the will before the property can be transferred.
Property given as a gift does not go through the probate process, and there are no estate duties if the gift is made during the donor’s lifetime.
A person, Mr. Sharma, writes a will stating that his house will go to his son, Anil, after his death. The house remains with Mr. Sharma until his death, and Anil cannot claim ownership until the will is probated and all legal formalities are completed after Mr. Sharma’s death.
Mr. Sharma decides to gift his house to Anil while he is still alive. Mr. Sharma prepares a gift deed, which is signed and registered. Once the deed is complete, Anil becomes the immediate owner of the house and can take possession of it without waiting for Mr. Sharma’s death.
The transfer of property through a will and gifting during one’s lifetime both serve important purposes, but they differ significantly in terms of timing, legal requirements, and tax treatment. Wills provide a way to distribute property after death, while gifting allows for the transfer of ownership during life. Gifted property is generally subject to fewer formalities and is irrevocable, whereas property transferred via a will requires probate and can be contested. Both methods of transfer have distinct tax implications, so careful consideration of the individual’s needs and tax strategy is essential when choosing between them.
Answer By Law4u Team
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