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HMRC internal manual

Inheritance Tax Manual

Lifetime transfers: investigation issues: donatio mortis causa (DMC)

A DMC is a gift of property made by a donor in contemplation of their death within the near future.

  • The normal rules about incomplete gifts do not apply - the property can be said to be on trust for the transferee until the occasion of the death, when the gift becomes effective and absolute.
  • A DMC is in effect an incomplete gift for Inheritance Tax purposes in that the property gifted remains part of the estate at death.

The requirements for a DMC, as laid out in the case of Sen v Headley (1991) and other case law, are

The property must be capable of passing by donatio

In general, anything capable of transfer by mere delivery may be the subject matter of a DMC. Land, bonds and insurance policies can be possible subject matter, but building society shares cannot (Re Weston 1902)

The gift must be made in contemplation of impending death

The donor must have contemplated their death at the time of the gift. This is a subjective test and must be decided from the facts.

The gift must be conditional on the donor’s death

The gift must be completed only on the death, being revocable in the lifetime. The gift is ineffective if the donor not does not die.

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Delivery is essential

Delivery is effected by delivery of the actual property and must be made to the donee, or someone on their behalf. The donor must part with control and not merely physical possession of the property.

In Sen v Headley it was held that a delivery of title deeds (kept in a steel box, the key to which had been given by Mr Hewett to Mrs Sen during her visits to the hospital during Mr Hewett’s illness) amounted to Mr Hewett parting with control over the house.

In Woodward v Woodward (1992), A’s terminally ill father, B, told A to keep the keys to B’s car, which A used regularly. It was held that there had been effective delivery.

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In Scots law there are three essentials for a DMC

  • The donor must act in contemplation of his death,
  • The subject of the donation must be delivered to the donee, and
  • The donor must manifest his intimation to make in favour of the donee a de praesenti gift consistent with the double resolutive condition stated above.

There is as in the case of donation inter vivos a presumption against donation which has to be overcome. See the Stair Memorial Encyclopaedia Vol 8 para 607.

A DMC basically performs the same function as a legacy. Both are revocable in the granter’s lifetime, both are postponed to the claims of the deceased’s creditors if the funds of the deceased are insufficient to meet his debts in full; neither affects the claims of a surviving spouse or civil partner (IHTM11032) to jus relictae or of the children to legitim (IHTM12221) and the property gifted of course remains an asset of the estate for Inheritance Tax purposes at death.