Gifts Made in Contemplation of Death/Death Bed Gifts

Sometimes referred to by lawyers as donatio mortis causa, deathbed gifts are gifts which are given by a person who believes they are facing imminent death, and which are only fully operational when they die.

When a person dies, whether they made a Will or not, they are deemed to have made a transfer of value to their personal representatives, who hold their transferred assets on trust during the administration process.

This can sometimes have an adverse effect, for example where gains are made on some assets, meaning that your personal representatives may have a capital gains tax bill to settle, in their capacity as personal representative.

If a gift is made in contemplation of death however, the gift is deemed never to have vested in the deceased personal representatives, and passes directly to the recipient.

How do gifts qualify?

There are four conditions that must be met to qualify as a gift in contemplation of death, as follows:

• The donor of the gift must have made the gift when they believed they were going to die. A subjective test, it does not matter if the donor incorrectly held this belief. The recipient however bears the burden of proving that the donor held this belief when they made the gift. Very often, it is only the recipient that has any evidence to this effect.

Case law has ruled that, if the above is established, it does not matter if the donor died some months later. It does not matter if the donor had grounds to anticipate their imminent death or whether they died as soon as they had feared. The question is whether the donor made the gift with a subjective contemplation of possible death in the near future.

• The gift is made on the condition that the donor dies. If they make the gift but then do not die, the gift is revoked.
• The donor must either deliver the gift or part with it in some way. This can mean parting with control of the asset, such as giving the key to a safe or jewellery box where the gift is held. Case law has considered whether a gift of a property is effective if the donor continued to live there for a number of months after making the gift.
• The gift must be capable of being given away in this way. Gifts of land have been the subject of case law, and have been held to be effective. By operation of law, the personal representatives hold the land on trust, and as the trust is created by operation of law, legal formalities from the personal representatives to transfer the land are not required. If the personal representatives do not transfer the gift to the recipient, the courts can force them to do so. If a gift is made by cheque, case law has held that the cheque must clear before the donor’s death or before the bank has been made aware of the death in order to be valid.

Legal formalities

As to the point above with regard to legal formalities, this may cause a problem for the recipient.

Title to land, for example, cannot simply fall into the name of the receiver. It must still be legally transferred. Case law has said that in these circumstances, the recipient is entitled to call upon the personal representatives to lend the recipient their name, or give their endorsement, in order that the recipient may complete their title.

Case law has also held that if the donor makes the gift but then tries to include the item within their Will, then the gift is revoked.

Gifts of this kind are treated as part of the net estate of the deceased for both inheritance tax purposes, and when dealing with claims against the estate for reasonable financial provision.

The point that we address here, is that a person may make a deathbed gift to someone who they have not made reasonable financial provision for in their will, in an attempt to defeat any claim they may make against the estate.

Frequently Asked Questions

What is a gift made in contemplation of death?

A gift made in contemplation of death (donatio mortis causa) is a gift given by someone who believes they are about to die, which only becomes legally effective if they do pass away.

How is a deathbed gift different from a gift in a Will?

Unlike gifts in a Will, deathbed gifts take effect immediately upon death and bypass the estate administration process, meaning they do not pass through personal representatives.

What conditions must be met for a deathbed gift to be valid?

There are four key requirements. The donor must believe death is imminent, the gift must be conditional on death, the donor must transfer possession or control, and the asset must be capable of being gifted in this way.

Does the donor have to die shortly after making the gift?

Not necessarily. What matters is the donor’s belief in impending death at the time the gift is made, not the actual timing of their death.

Can property or land be given as a deathbed gift?

Yes, but it can be complex. While valid in principle, legal title must still be formally transferred with assistance from personal representatives.

Examples

Example A

The jewellery gift

Margaret, seriously ill and believing she will not recover, tells her niece that she wants her to have a valuable necklace. She hands over the jewellery box and explains it is hers if she dies. Margaret passes away weeks later. In this situation, the deathbed gift is valid because Margaret believed death was imminent, transferred control of the item, and made it conditional on her death.

Example B

The bank cheque problem

Sarah writes a cheque to her son while seriously ill, explaining it is his if she dies. However, the cheque is not cashed until after her death and after the bank is notified. In these circumstances the gift is not valid as the cheque must clear before death  to complete the gift.