Inter vivos is Latin for "between living persons" so that an inter vivos gift is one given during the lifetime of the donor. An inter vivos gift is one given when the donor is still alive. Inter vivos gifts (including estate property) are not subject to probate taxes since they are not part of the donor's estate at death. However, gifts that exceed $14,000 per year are subject to income taxes if they are made to someone other than a spouse or qualified charity. The actual value of the gifted property is calculated at the time of the transfer.
Why Are Inter Vivos Gifts Used?
Inter vivos gifts are an attractive estate planning tool because they avoid probate taxes. However, a potential donor should be aware that such gifts are not revocable. An attempt to exert control over gifted property or derive a benefit from it may result in disallowing the tax-exempt nature of the gift, thus endangering the legal status of the transfer and making it susceptible to tax.
What Are Some Advantages of Inter Vivos Gifts?
In estate planning, many people choose to give inter vivos gifts to their beneficiaries because it allows the donor to be able to watch the gift in their lifetime. Instead of giving the gifts through a will or a trust, this type of arrangement allows the grantor or donor of the gift to oversee the process of distributing their estate while they are alive. Many people like the idea of this arrangement because it gives them total control of the entire process and distribution.
Other advantages of using inter vivos gifts include:
- Removing assets from your estate and avoiding probate fees
- Having flexibility on how your property will be distributed
- Ability to control your property and assets during your lifetime
- Ability to keep your property and affairs confidential since you have few reporting requirements
How Can an Inter Vivos Gift Be Made?
For a valid inter vivos transfer all of the follow must happen:
- Capacity of Donor: The donor must have legal capacity and must be 18 years of age when making the gift.
- Intent: The donor must intend to give the gift immediately. The donor's intent to make a gift should be stated in writing and must make a present and irrevocable transfer of title or right of ownership, so that there is a present transfer of some interest and the gift is effective immediately. A donor cannot intend for the gift to transfer after his death.
- Delivery: There must be delivery. Delivery can be made either constructively or symbolically, especially when it would be impractical to require physical delivery of property. The end effect is the gift is delivered from the donor to the recipient.
- Control: The donor must sever his own interest in the property, thus relinquishing control.
- Acceptance: There must be acceptance of the gift by the recipient. If the gift has value, the law presumes the recipient will accept it. However, it is still wise for the person receiving the gift to express their acceptance in writing to dispel any confusion.
Should I Consult an Estate Planning Lawyer?
An inter vivos gift is not revocable and is not taxable, therefore consultation with an estate planning attorney is recommended to insure adequate evidence of each of the elements noted above. An experienced attorney can walk you through all the steps needed for a valid inter vivos gifting, and ensure your rights and obligations are fully explained.