Legal Definitions - donatio velata

Donatio velata is a Latin term that translates to a "veiled gift" or "concealed gift." It refers to a transaction that, on the surface, appears to be a standard commercial exchange—like a sale, a loan, or a service agreement—but is, in reality, intended to be a gift. The true intention of transferring assets or value as a gift is hidden or "veiled" behind another type of legal transaction, often to avoid certain legal implications, taxes, or restrictions that might apply to a direct, open gift.

Here are some examples to illustrate this concept:

• Example 1: The Nominal Sale of Property

  A parent decides to transfer ownership of a valuable vacation home to their adult child. Instead of simply gifting the property, which might incur significant gift taxes or require specific legal disclosures, they draw up a sales contract. The contract states that the child "purchases" the home for a symbolic amount, such as one dollar, or a sum far below its actual market value. The parent never truly expects to receive the market value, and the child understands this is not a genuine commercial sale. The "sale" acts as a veil for what is fundamentally a gift of the property.

• Example 2: The Unenforced Loan

  An individual wants to provide a substantial sum of money to a friend who is struggling financially, but they prefer not to declare it as a direct gift for personal or tax reasons. They draft a formal loan agreement with terms for repayment, interest, and a maturity date. However, both parties privately understand that the lender has no intention of ever demanding repayment, and the borrower is not expected to return the money. The loan agreement serves as a disguise for what is, in essence, a gift of the funds.

• Example 3: The Overpriced Service Contract

  A wealthy individual wishes to transfer a significant amount of money to a relative without it being immediately recognized as a gift. They create a contract where the relative is hired to perform a minor, easily accomplished task, such as "consulting services" for a project that requires minimal effort. The payment stipulated in the contract for these services is disproportionately high, far exceeding the market rate for the work performed. The excessive payment is the "veiled gift," hidden within the framework of a legitimate-looking service agreement.