Gifts that are given purely out of affection can create unintended consequences. This includes gift taxes and the relinquishing of control over the gift once it is accepted. Without understanding gifts and joint ownership, you could be making a decision that you will come to regret.
Unmarried Couples and Gifts. Love can make people act irrationally. Somebody might be convinced that they have met the love of their life, and this can prompt them to make decisions they regret in hindsight. “Look before you leap” is good advice when considering marriage. Prior to marriage, “Think before you gift” is equally applicable.
Gift has a specific legal meaning rooted in contract law. It is something that is transferred from one person to another for a nonbusiness reason and without compensation. A few conditions must be met to make a gift valid:
- The person giving the item intends it as a gift.
- The giver actually delivers the gift to the receiver (and does not simply promise to do so at some point in the future).
- The receiver accepts the gift from the giver.
If a gift meets these requirements, contract law recognizes it as a valid gift. As a result, the gift is enforceable and, in most cases, it cannot be taken back. That is, once a gift is successfully made, the giver loses control over the gifted money or property.
Gifting an object of relatively little value probably will not be a big deal in the event of a breakup. It is unlikely that somebody will ask for a birthday or Christmas present back so they can return it for a refund. But if the gift is something large—like joint ownership in a property— major issues can arise.
Imagine that you add your partner to the title of your house so that legally, half of the house is theirs. After a split, they are unwilling to return their share to you. To get it back, you would have to buy it from them. But what if they do not want to sell it to you? Alternatively, they could buy your share, or they could sell their share to another party. They could also petition the court to perform a forced sale of the property and distribute the proceeds among the two of you, or ask the court to partition the property. In any case, these are probably not scenarios you would have agreed to if you had thought through your gift of joint tenancy ahead of time. A house is a dramatic example of the perils of gifting, but the same legal considerations apply to any gift.
Love and the Law: It Is Okay to Ask Questions. Even though cohabitation without marriage is more popular than ever, unmarried couples still do not have all the legal protections that married couples enjoy. You might be certain that you have met “the one,” and you may be right. But before you hand over the keys—literally and figuratively—to another person, or sign on the dotted line with them, there is no shame in talking to a lawyer about how to protect yourself. If you have any questions about how to gift property to your significant other, please contact us.