Validity of a gift - typed and signed, enough to prove ownership?

Disjoint

Hi all, on the passing of my mother in law (MIL) my father in law (FIL) gave a small sum of cash to my wife and her sister from his late wife's estate. His accountant had him type and sign the following "I FIL, on the "date" make a gift out of love and with no reservations to my daughter xxxx and daughter yyyy of £0.00" this is typed and then he manually signed it.

He also on the same paper typed the same thing about a few paintings that belonged to his late wife. "I xxx, on the "date" make a gift out of love and with no reservations to my daughter xxx and daughter yyy of all the paintings that were left by my late wife in equal share to each daughter." and signed it.

At the time the idea was that he would live 7+ years and then there would be no taxes payable on such a gift, so this was done purely for tax reasons. Today my FIL has (fortunately) found companionship and is quite happy with a new girlfriend. My wife is just slightly concerned that the paintings in the house might potentially be taken away from her and her sister if her father passes away, and the new girlfriend is made to inherit everything instead.

The concern is that her father might potentially change the will in a few years or get remarried and the paintings would be at risk (those are paintings from her great grand father so the value is more than monetary).

My wife does not want to upset her father, but as something similar happened to her grand father (remarried and inheritance moved to a brand new partner), she wants to be careful. The paintings are still at her father's place, and she does not want to upset her father by taking the paintings away today from the walls of her parents' home. On the other hand, she is wondering if that simple typed paper with her dad's signature is enough to prove that those paintings are hers and that in the event that everything goes to his new partner, she would be able to claim that the paintings are hers and her sister's.

It does seem slightly OTT in my eyes for her to worry about such things, but then as her family already experienced this, she is quite concerned and wants to make sure she is covered and never have to worry about the paintings leaving her family.

Keep_pedalling

I am not sure if the gift of the paintings would actually take them out of his estate for IHT purposes as he has kept possession of them, so I would class that as a gift with reservation so the 7 year rule does not kick in until he stops having the benefit of them hanging on his walls for his pleasure. It does however provide evidence of ownership so they can’t be left in his will. 

As for the rest it is totally down to him how he leaves the assets he currently owns.

cymruchris

He could change his will any time right up until the moment he passes away which would allow him to leave anything that's his to anyone he likes, however the paintings you refer to have apparently been given as gifts - yet they are still on his wall.

Do the signed statements specify the artworks by name/frame/content? Or do they say I give these few paintings on my wall as a gift? If the latter, it'll be hard to prove which paintings they are referring to, and not only that, if you've got a signed piece of paper that says 'these few paintings are a gift' - it might very well be assumed that the gifts have already been given, and are no longer in his possession.

If she wants to ensure they stay in the family - then she might need a conversation with him to say how happy she is that he's found a new partner, and also happy that he can do whatever he wants with his estate in relation to the new partner, but would appreciate that if possible, a mention be made in a letter of supporting evidence with any new will, if one was made,  said that painting A of a white horse in an oak frame, painting B of a green car in a light teak frame and painting C of a tree in a black ash frame have already been given as gifts to my daughter XYZ on the Xth of October 2021, with the agreement that until my passing they remain on my walls. 

It's not a conversation I'd want to have myself - as it looks to me like someone is already trying to carve up my estate and I'm not even dead yet. 

Disjoint

Keep_pedalling said:

I am not sure if the gift of the paintings would actually take them out of his estate for IHT purposes as he has kept possession of them, so I would class that as a gift with reservation so the 7 year rule does not kick in until he stops having the benefit of them hanging on his walls for his pleasure. It does however provide evidence of ownership so they can’t be left in his will. 

As for the rest it is totally down to him how he leaves the assets he currently owns.

Brilliant - thank you very much for this. My wife was mainly concerned with ownership and appreciates your answer. "out of love, and with no reservation" you are right, they are still in his house so there is clearly reservation here. My wife is shouting over from the other side of the room telling me to thank you kind stranger, she'll gladly pay taxes if it means that in a worst case scenario she would keep the paintings  

Disjoint

cymruchris said:

He could change his will any time right up until the moment he passes away which would allow him to leave anything that's his to anyone he likes, however the paintings you refer to have apparently been given as gifts - yet they are still on his wall.

Do the signed statements specify the artworks by name/frame/content? Or do they say I give these few paintings on my wall as a gift? If the latter, it'll be hard to prove which paintings they are referring to, and not only that, if you've got a signed piece of paper that says 'these few paintings are a gift' - it might very well be assumed that the gifts have already been given, and are no longer in his possession.

If she wants to ensure they stay in the family - then she might need a conversation with him to say how happy she is that he's found a new partner, and also happy that he can do whatever he wants with his estate in relation to the new partner, but would appreciate that if possible, a mention be made in a letter of supporting evidence with any new will, if one was made,  said that painting A of a white horse in an oak frame, painting B of a green car in a light teak frame and painting C of a tree in a black ash frame have already been given as gifts to my daughter XYZ on the Xth of October 2021, with the agreement that until my passing they remain on my walls. 

It's not a conversation I'd want to have myself - as it looks to me like someone is already trying to carve up my estate and I'm not even dead yet. 

I did tell my wife not to worry, and I'd get everything answered via MSE! As you said in your last sentence - we want to AVOID that at all cost. My FIL is very happy in his new relationship, and we don't want to come in as a money grubbing heirs. My wife does not care so much about his cash, shares, or the family home. Which he understands most of this can likely be gone and if he does remarry will very likely happen.

The paintings however were rescued from the previous inheritance fiasco that happened in her family, and she is very worried that she could lose them. I might write about all the paintings and make individual description and tell him I need to do this to avoid any confusion for IHT when I see him next. Not something I am excited to do, but shouldn't be too hard given he has already technically gifted them all and they belong to his daughters

Manxman_in_exile

cymruchris said:

...
It's not a conversation I'd want to have myself - as it looks to me like someone is already trying to carve up my estate and I'm not even dead yet. 

The OP's father wouldn't have anybody to blame other than himself though - would he?  He started prematurely carving up the estate when he decided to gift the painting collection to his daughters in order to avoid tax.  Problem is, he doesn't seem to have done it effectively.

Having experienced a situation where the children of a first (deceased) wife were disinherited by their father after a second marriage, it's a conversation I'd want to have if the paintings were sufficiently valuable - monetarily or sentimentally.  It would certainly be less embarrassing than an argument with his widow.

cymruchris

Manxman_in_exile said:

cymruchris said:

...
It's not a conversation I'd want to have myself - as it looks to me like someone is already trying to carve up my estate and I'm not even dead yet. 

The OP's father wouldn't have anybody to blame other than himself though - would he?  He started prematurely carving up the estate when he decided to gift the painting collection to his daughters in order to avoid tax.  Problem is, he doesn't seem to have done it effectively.

Having experienced a situation where the children of a first (deceased) wife were disinherited by their father after a second marriage, it's a conversation I'd want to have if the paintings were sufficiently valuable - monetarily or sentimentally.  It would certainly be less embarrassing than an argument with his widow.

Very true - the seed was sown when the written instructions were made well before knowing there'd be a potential change of circumstances, and agree I'd rather put it to bed now rather than having an argument later.

Malthusian

Unfortunately this is the kind of situation that could easily turn into an MSE thread years down the line that runs "Hi, my father in law gave us some paintings years and years ago but kept them on his wall, he has now died, we asked his new wife if we could have the paintings, she is denying all knowledge and won't let us in the house, we think she sold them or put them in a skip, what can we do?"

Possession is 9/10ths of the law when it comes to items of sentimental value kept in someone else's house. 

Of course we've no reason to think that the new stepmother-in-law won't do the right thing and simply hand over the paintings when the time comes. But whether she is a reasonable person or isn't, the OP's wife can do little either way other than forget about the paintings and treat it as a nice bonus if she gets them on her father's death.

Clarifying exactly what she owns is not a bad idea but it wouldn't help much if the paintings disappeared. Unless they are much more valuable than the OP is letting on, it's unlikely they would be worth a court case.

The OP's wife would not normally pay IHT directly on the gifts to her (even though they will be added back into the estate for IHT purposes if they are a gift with reservation). IHT would be paid by the estate, which means the residuary beneficiaries will pay the tax on the gifts in due proportion to their shares, even if they didn't benefit from those gifts.

Malthusian

For what it's worth I don't think this kind of "gift" does anyone any favours, as well-intentioned as it was. Becoming emotionally invested in an object without having any control over it is a recipe for misery.

Looked at another way, the father has given their daughters the right to do something - waltz into the property and take their paintings - but with an emotional obligation to not actually do it. What have they actually been given? (Compared to not owning the paintings but being left them in the Will.)

If I was Dad and wanted my daughters to have my paintings I would either give them away, to hang on their walls, or, if I wasn't ready to let go of them, keep them and update my Will. Not this halfway house that accomplishes nothing. (Certainly not Inheritance Tax benefits.)

Gold_Shogun

@ Disjoint

A very important point for the legal validity of a "Deed Of Gift" is that the signing of the document by the DONOR (= the Giver) is witnessed independently by Two people (= NOT the DONEE/Recipient) .... IF an unwitnessed Gift-Document is challenged, there is a very good chance of it being nullified or overturned in the event of a later dispute.

I've drawn & executed a fair few of these for various items for people over the years, and  IF you need/want to get the Gift remade to properly protect & cover yourselves & your FIL, I could perhaps (IF you wish) either PM you a "Sample Base-Draft" (if the forum allows PDF uploads/transfers) OR alternatively post it into a post here in text form which you could modify to suit your needs.

IDEALLY, (but ONLY IF the paintings/items are to remain Post-Gift at your FILs residence), you should have TWO documents ..... The FIRST being the Formal "Deed Of Gift" from FIL -to- You. ..... and then a SECOND "Voluntary Loan Agreement" from You -to- FIL which effectively Loans the same items back to your FIL until his death at which time any Executors would have a Legal Duty to return those items back to you (which avoids any later "Gift With Reservation" claims).

Disjoint

Gold_Shogun said:

@ Disjoint

A very important point for the legal validity of a "Deed Of Gift" is that the signing of the document by the DONOR (= the Giver) is witnessed independently by Two people (= NOT the DONEE/Recipient) .... IF an unwitnessed Gift-Document is challenged, there is a very good chance of it being nullified or overturned in the event of a later dispute.

I've drawn & executed a fair few of these for various items for people over the years, and  IF you need/want to get the Gift remade to properly protect & cover yourselves & your FIL, I could perhaps (IF you wish) either PM you a "Sample Base-Draft" (if the forum allows PDF uploads/transfers) OR alternatively post it into a post here in text form which you could modify to suit your needs.

IDEALLY, (but ONLY IF the paintings/items are to remain Post-Gift at your FILs residence), you should have TWO documents ..... The FIRST being the Formal "Deed Of Gift" from FIL -to- You. ..... and then a SECOND "Voluntary Loan Agreement" from You -to- FIL which effectively Loans the same items back to your FIL until his death at which time any Executors would have a Legal Duty to return those items back to you (which avoids any later "Gift With Reservation" claims).

@Malthusian thank you!!!
And @Gold_Shogun, this is fantastic advice. I will PM you now. I didn't realize how little use that piece of paper had!

I really really appreciate all the advice I got from everyone on this thread.