Gifts, IHT and Donatio Mortis Causa

With the ongoing rise in property prices more and more people are concerned that their estate will become liable to inheritance tax, meaning that their heirs will not inherit the full value of their estate. With the inheritance tax rate at 40% the sums involved are not insignificant so more and more people are looking into ways they can minimise their IHT liability and ensure that their heirs benefit along the way.One method is to give away money or belongings as gifts, so although it does not affect IHT, it is interesting to consider the broader area of gifts and the law regarding donatio mortis causa which can be relevant when someone dies without having made a will naming their heirs and beneficiaries.

The law says there is a donatio mortis causa if:

  • the intended gift is made in contemplation of impending death;
  • it is a gift that will become absolute on the giver’s death, but can be revoked at any time before then (and becomes ineffective if the intended recipient dies first);
  • The subject matter of the gift, or the ‘essential indicia’ of ownership of it, has been handed over in a way that amounts to parting with not just physical possession but with ‘dominion’ over the gift.

A recent case in the High Court:  Vallee v Birchwood [2013] EWHC 1449 (Ch) brought this aspect of the law to attention.

When an adopted daughter, who lived abroad, visited her father in the UK she was told that as he did not expect to live much longer he wanted her to have his house when he died. He gave her the title deeds, a key to the house, his war medals and a photo album.

Around four months later when he died intestate his daughter claimed he had made a donatio mortis causa which would have meant the property went straight to her, rather than into her father’s estate.

The High Court found in her favour because:

  • A person can make a gift in contemplation of impending death without expecting it to happen soon, therefore the father’s death was ‘impending’, even though it took place four months after the alleged donatio mortis causa. It was the giver’s motivation that was relevant.
  • Even though the father continued to live in the property the title deeds to the property amounted to ‘essential indicia’ of ownership, and handing them over amounted to a parting with the dominion over the land.
  • It did not matter if the words of gift and the delivery of the subject matter do not take place at the same time, or if the recipient of the gift already holds them for another reason when the purported donatio mortis causa is made.

Of course if the father had made a will and named his daughter as the beneficiary of the house and other items, she would have received her inheritance without having to go to court.

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Daniel Curran
Written by Daniel Curran
Daniel is a leading figure in the UK Heir Hunting industry. He is from Isleworth in West London and has lived in London for most of his life. He has been in the probate genealogy profession since 1990. He formed Finders in 1997 after 7 years at another firm.