The transfer of assets before death is an often overlooked aspect of estate planning, which is more commonly regarded as being about ensuring that your Will is in good order.

Transferring assets before death is often referred to as 'lifetime giving'. In this first of a three-part series on lifetime giving, today's article will discuss the giving away of personal items such as jewellery, which together with items such as paintings and furniture, are known as 'personal chattels'.

Later articles will discuss the lifetime giving of company shares and real estate. Lifetime giving of personal chattels might be motivated by goodwill towards the recipient, stamp duty considerations, or a combination of both. Whatever the motivation it is very important that any gift made is genuine and properly effected.

Chattels can be effectively gifted by two principal methods ? the first is by delivery and the second is by deed of gift.

A typical example of effecting a gift by delivery might occur between a mother and daughter.

The mother might wish to give the daughter a diamond ring. If the mother then continues to wear the ring the gift will not be effective.

This is because delivery is an essential ingredient of such a gift. The giver's intention that the gift should not be returned to the giver is also an essential ingredient.

To ensure that the gift is effective the ring should be physically handed to the daughter or taken out of the mother's house and placed in the daughter's house. If the intended gift is ineffective, the item will remain in the estate of the person who failed to effectively gift it, and will pass according to the Will (or if there is no Will under the general law governing the estate of those who die without a Will).

The person who receives the item under the Will may be someone different to the intended recipient. In addition, stamp duty is payable on the value of a person's Bermuda estate at death.

The failed gift of an item of jewellery located in Bermuda is likely to increase the stamp duty payable on the death of the person who attempted (but failed) to make the gift.

The second, and more unusual, method by which a personal chattel can be transferred is by deed of gift. A deed is a formal and binding legal document that must be made in a particular form. It is a very clear way of transferring an item to another person and difficult to challenge.

Such a deed of gift would give rise to stamp duty, but may result in a saving due to the differential stamp duty rates on outright lifetime gifts, lifetime gifts to trusts and transfers on death.

It is very important to think carefully when considering making an outright gift. Some of the issues to consider include:

Creditors of the recipient may claim the value of the asset in satisfaction of debts;

The asset could be claimed as a matrimonial asset by the spouse of the recipient in divorce proceedings;

Freedom to dispose of the asset is lost to the giver. Furthermore, the original owner loses the right to have the asset returned without the recipient's consent, or to gift it to another person;

lIf made by deed, stamp duty will be paid on the initial transfer and yet further duty on the value of the asset may be payable if the recipient dies first.

The present owner of the asset might like others to benefit but not wish the intended recipient to have complete control of the asset. For example, the mother may wish to give the diamond ring with a view to the daughter having the use of it and then subsequently passing it down to a grandchild at an appropriate time.

An outright gift to the daughter would not achieve this as there would be nothing to prevent the daughter selling the ring or giving it to someone that her mother does not approve of.

A trust is an effective way of making a gift without control of the asset passing to the beneficiary. The trustees become the legal owners of the jewellery and, if the trust is discretionary, decisions as to whom to benefit and when, are made by the trustees rather than by the beneficiaries.

If there were sufficient valuable assets to warrant the costs of establishing a trust this is one way the mother might achieve her wishes.

If the trust is discretionary and includes the daughter and grandchildren as beneficiaries, the trustees can allow the daughter and then a grandchild the use of the jewellery without the daughter or the grandchild having any legally enforceable right to it.

The mother's wishes can be set down in a letter to accompany the trust. The trustees would not be legally obliged to follow the wishes set down in the letter but it would be usual for them to carry out any wishes that are consistent with a trustee's duty to act in the best interests of the trust beneficiaries.

Transferring assets to a trust has stamp duty implications and anyone considering this step should take legal advice on whether it is an appropriate and cost effective way to achieve one's wishes.