What is a Gift Affidavit?
A Gift Affidavit is a formal way of recording something given to another person as a gift. The affidavit is a sworn legal statement affirming a valuable item was voluntarily transferred from one person to another as a present.
For example, the gift given could be a car, boat, land, house, or money.
Typically, a gift affidavit is required when the gift has significant value or requires a title or deed transfer to complete the change in ownership.
The purpose of a gift affidavit is to state the gift giver’s intention clearly, document that this process was not a loan or sale, and declare that no other value was exchanged for the item.
Depending on the item given, the gift designation may also be relevant at a state or federal level for taxation, registration, and other purposes.
Standard terms used in a gift affidavit include:
- Gift Giver: the person who owns the item or cash and then gives it to another person.
- Donor: another name for the gift giver.
- Gift: a description of the gift.
- Value: the specific amount of cash given or the estimated or appraised value of the gift.
- Recipient: the person receiving the gift.
- Notary Public: the person before whom the affidavit is sworn and signed.
A gift affidavit is not usually necessary when giving a person birthday, holiday, wedding, or baby gifts or in other typical gift-giving situations.
As a reference, this document may also be referred to as:
- Affidavit of Gift
- Gift Affidavit Form
When a Gift Affidavit is Needed
A gift affidavit is needed when a donor voluntarily gives a valuable item to someone else. It is often used when gifting a car or significant cash to another person, usually a family member. It documents that a donor acted voluntarily when giving the item and was not forced in any way to do so.
Gift affidavits also prove that the gift was not a loan, and therefore the giver cannot demand its return, any payments, or other compensation.
Many states require a gift affidavit when a car is being transferred from one person to another for no payment or significantly less than the car’s value. A downloadable form can be found on the state’s Department of Revenue web page in these situations.
A bank may also require a gift affidavit to document how a buyer is financing the down payment of a home. The lender must know if this money will need to be repaid and is part of the buyer’s debt load or if it is a gift that requires no repayment.
Depending on the lender, there are limits on who can give the buyer cash for the down payment, and appropriate rules must be followed.
A gift affidavit may also be used in a divorce to prove what is not jointly owned property.
A cash gift can never be used as a down payment to purchase an investment property, and only conventional lenders will allow it to be used as a down payment on a vacation property.
The Consequences of Not Having One
The consequences of not having a gift affidavit will depend on the type of gift given. For example, the person receiving a car as a gift will be required to pay taxes as if it were purchased unless there is a valid gift affidavit.
Gifts of cash or assets of up to $14,000 per person per year are exempt from federal taxes. Without a gift affidavit, you may be required to prove that the cash or assets were a gift, or you will pay taxes on these items. Additionally, the gift could be potentially classified as a loan or sale.
Gifting large amounts of cash for educational and other purposes triggers complicated tax laws, so it is a good idea to seek legal, financial, and/or estate planning expert advice before doing so.
The Most Common Situations For Using This Document
The two most common situations for using a gift affidavit are:
- When transferring the title of a car to a family member as a gift, or
- Giving a member of the family money to use for the down payment of a home.
In both situations, if it is proven the assets were given as a loan instead of a gift, and the gift affidavit was used solely to avoid taxes, both the donor and recipient could be charged with fraud and may face prosecution.
You don’t need a gift affidavit when making a cash or other donation to a charitable organization. You will want a document from the charity acknowledging the gift, but an affidavit is not required or typically used in this situation.
What Should be Included
A gift affidavit is a simple document. At a minimum, it should include:
- Donor information and address: the donor identification details, including their address, including the state and county.
- Statement of gift: a statement stating that the item is voluntarily given.
- Recipient information: the recipient identification information. It may include the person’s legal relationship with the donor, but it is not required.
- Gift Description: a description of the gift, worth, and when it is given. The report should include the VIN if the facility is a motor vehicle.
- Notary details: the person in charge of administering the affirmations and oaths of the donor.
