Lifetime transfers: gifts with reservation (GWRs): the reservation: examples of exclusion of the donor
The following examples will help you to ascertain whether the donor has been excluded.
Phil gives his house to his son, Nigel. Nigel allows the donor to remain in this house, rent free, until his death.
This is a gift with reservation (GWR). As a matter of fact Phil was not excluded from enjoyment of the gifted property. The fact that he was not contractually entitled to do so and had no rights in or over the property is irrelevant.
Annie, a farmer, retires and gives her farmhouse, lands and farming assets to her son, but Annie continues to live in the farmhouse rent free until her death.
The donor’s continued residence in the farmhouse constitutes a reservation so far as that particular property is concerned, but the reservation does not extend to the remainder of the gifted lands and farming assets.
Aarif makes a gift of shares to Basheera, it being part of the package that Basheera would appoint Aarif to the Board of Directors, a salaried position entitling him to a company car and other fringe benefits.
This would be regarded as the reservation of a benefit to the donor “by contract or otherwise”.
George and James, who are civil partners, each own 50% of the issued capital of a limited company. The company owns the freehold property in which they live. They transfer their shares into a settlement. They continue to live in the house rent-free until the oldest partner dies.
This is not a GWR. The continued occupation of the property is not referable to the gift.
Adam, a shareholder and director, also owns the company premises which are let to the company at a nominal rent. He gives the property to the company. The value of his unquoted shares is increased by reason of the company’s acquisition.
This is not a GWR.
Angelo is the beneficial owner of the whole issued capital of a private trading company. In 1995 he gives 30% of the shares to an employee but as a specific condition of the gift retains an option to buy back the shares at their market value at the date of gift if the employee leaves the company voluntarily within ten years. Angelo dies eight years later, the option not having been exercised because the donee is still an employee.
This is a GWR. Angelo has reserved the right to buy back the shares and therefore has not been entirely excluded from enjoyment of the gifted property. The shares therefore form part of the death estate and will be valued ignoring the option.
Amy gives a holding of shares to Ben. Later, Amy sells the remainder of her holding to Ben, receiving as consideration property which had originally been derived from Amy.
In a straightforward case this is unlikely to be regarded as a GWR.
Jenny conveys land into the joint names of herself and her daughter, Tilly. From then until her death ten years later Jenny receives not only her share of the rents and profits but also a fee for managing the land.
Notwithstanding the decision in Oakes v Commissioner of Stamp Duties of NS Wales  AC 57, no GWR claim should be raised in these circumstances alone provided the fee paid was entirely reasonable in the light of the actual services rendered.
Albert divides his landed estate into two parts and gives one part to his son Bernard, but retains the right to cross Bernard’s part in order to gain access to the public highway.
When the donor retains rights of way (or water and drainage) over the gifted land essential to his own continued enjoyment of land remaining in his ownership and those rights flow naturally from the division of the estate in the same way as if the gifted property were being sold at arm’s length, the retention of those rights by the donor will not, of itself, be treated as giving rise to a reservation. This is because the rights were never given away and so they were not part of the transfer.