Gift Letter PDF Template

What Is a Gift Letter?

A gift letter is a document that formally states that money or a valuable item given to someone is genuinely a gift and not a loan or an advancement that needs to be repaid. These letters are most commonly used in mortgage processes when a family member or close friend provides funds to help an individual purchase a home.

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Key Components of a Gift Letter

Donor's Information: The name, address, and contact information of the person giving the gift.
Recipient's Information: The name and contact information of the person receiving the gift.
Relationship: A statement clarifying the relationship between the donor and the recipient.
Gift Details: Specific information about the gift, including the exact amount of money or a description of the item, and the date of the gift.
Purpose: A statement clarifying the purpose of the gift. For instance, if it's for a home purchase, the property's address might be mentioned.
Statement of No Repayment: A clear declaration that the gift is being given without any expectations of repayment or obligations.
Donor's Financial Institution: Information about the bank or financial institution from which the gift is sourced, including account details if relevant (especially for mortgage processes).
Signature: Both the donor and recipient may need to sign the letter, depending on its purpose.

Key Purposes of a Gift Letter

Mortgage Process: Lenders often require a gift letter when a portion of the funds used for a down payment on a property is a gift. This ensures the money isn't an undisclosed loan that might affect the borrower's financial risk.
Tax Purposes: In some situations, to clarify for tax authorities that funds or property received wasn't income but a gift, which may have different tax implications.
Legal Clarity: To provide a written record that can protect against future disputes or misunderstandings regarding the nature of the transferred funds or property.

A gift letter serves as a formal declaration that a transaction is genuinely a gift, ensuring transparency and clarity for financial and legal processes. When using a gift letter, especially in formal settings like a mortgage application, it's essential to ensure that all details are accurate and that the document meets any specific requirements set by the involved institutions.