Oran Hall | Giving property as a gift
QUESTION: How can I give a property as a gift? – Powell PERSONAL FINANCIAL ADVISER: A gift to take effect while the parties are alive is known as an inter vivos gift. The person receiving the gift does not have to be a relative. According...
QUESTION: How can I give a property as a gift?
PERSONAL FINANCIAL ADVISER: A gift to take effect while the parties are alive is known as an inter vivos gift. The person receiving the gift does not have to be a relative.
According to the Stamp Duty and Transfer Tax Division of Tax Administration Jamaica, the costs of a ‘love and affection gift’, such as you are interested in, are as follows: transfer tax of 2.0 per cent of the market value of the property as determined by the valuators at the Stamp Office and stamp duty of $100.
By comparison, if you should decide to have ownership of your interest transferred to somebody after your demise, that is, by a probated will, the stamp duty would be zero per cent, and the transfer tax on death is zero per cent for the first $10 million value of the property and 1.5 per cent of the value exceeding $10 million.
For general information, should the transfer be by sale, the transfer tax would be two per cent of the value and the stamp duty $100 if the property or the portion of it being transferred values less than $500,000 and $5,000 if it values $500,000 0r more.
To have the beneficiary’s name registered on the title, you would need to engage the Land Titles Division of the National Land Agency, also called the Titles Office. For a gift utilising the Transfer of Land form, the fee would be $5,000.
Should the transfer be by a will, the cost would be $6,000: $1,000 for the transmission application accompanied by the probated will and which endorses the executor on the title; and $5,000 to register the beneficiary’s name on the title.
Should the transfer be by sale, the cost at the Titles Office would be 0.5 per cent of the value of the interest being transferred.
Transferring property by gift requires completing and signing the instrument of transfer as the initial step. It would be worth engaging the services of an attorney-at-law. Although the consideration in such a case is nil, the Stamp Office requires the value of the property or the portion of it being transferred to determine the transfer tax to be paid.
My mention of the share of the property being transferred is significant. Property can be owned in more than one way. An individual can be the only owner of a property, but joint ownership is also possible. In the latter case, people can own property as tenants-in-common or as joint tenants.
The tenant-in-common has an undivided share and interest in the property and has an equal right to the possession of the whole of the property but not a right to possess any part exclusively.
A tenant-in-common may deal with his or her share of the property as he or she sees fit, such as giving it as a gift. Tenants-in-common may also hold unequal shares in the property. If no share is stated, the presumption is equal shares, that is, 33.33 per cent each if there are three tenants-in-common.
The right of survivorship is a distinguishing feature of joint tenancy. This means that the property so owned passes automatically to the surviving owner upon the death of the other joint tenants without the need for a will and the probate thereof. Joint tenants are not able to gift or sell their share of the property while the other joint tenants are alive.
It is usually prudent to get guidance from an attorney-at-law – at a cost to you, of course. The legal minds would be particularly crucial in the event of a transfer by will.
It seems to me, though, that the processes at the Titles Office are sufficiently straightforward for a sober individual to complete the transaction at that office without engaging the costly services of an attorney. To save money using this approach would require some time on the part of the person relating to the Titles Office.
In terms of the cost of stamp duty and transfer tax, it would cost less to do a testamentary transfer, that is, transfer by will, than a transfer by inter vivos gift, but this is not to suggest that I am making a recommendation to you.
Inter vivos gifts, wills, trusts, and joint ownership are important estate-planning tools. Each has its own advantages and disadvantages, which should be considered carefully before a decision is made about which to use. They are not mutually exclusive, so more than one can be used in the same person’s estate plan.
n Oran A. Hall, author of ‘Understanding Investments’ and principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and email@example.com