When Is It A Gift and When Is It Just A Loan?
It happens all of the time. Relationships, whether romantic or friendship, come to an end. In many cases, if the relationship was long, property and money were most likely exchanged. Dividing up the assets after a break up can be a difficult if not confusing task.
Regardless of any sentiments or promises that may have been exchanged at the time of “gifting”, under the law, a “gift” is not always a “bona fide gift” if certain criteria have not been met.
For example, in the state of New Mexico, a valid gift must contain the following: (1) property subject to gift; (2) a donor competent to make the gift; (3) the intent on the part of the donor to give the gift; 4) delivery of the gift; (5) acceptance of the gift; and (6) a present gift fully executed.
Let’s break that down a bit by using the example of the gifting of an automobile. Assume a car was given to a person by a former romantic partner for use in their business. The relationship ends and the benefactor wants the car returned. The person who believes they received the auto as a gift claims the vehicle is an asset of the business. After all, that was the expressed intent when the auto was purchased. Assuming the title to the car was never placed in the name of the business or the business’s owner, it can be argued that by law, the gift was never fully executed.
It is a loan till it is not.
When accepting gifts it is important to keep the following in mind- A gift is a gift only when the gifting is verifiable. Meaning, if the actual intent is to give a gift, no strings attached, there should be paperwork that supports this. Attention to such details become quite important when these “gifts” are relied on to carry out the daily functions of a business.