The phrase “Inter Vivos” is Latin for “between living persons.” An inter vivos gift is one that is given during the lifetime of the donor. The gift is given when the donor is still alive. Such gifts, including estate property, are not generally subject to probate taxes. This is due to the fact that they are not part of the donor’s estate at the time of their death.
However, it is important to note that gifts exceeding $15,000 per year may be subject to income taxes, if they are made to a party other than a spouse or qualified charity. The actual value of the gifted property is calculated at the time of transfer.
Inter vivos gifts are often included in estate planning because they avoid probate taxes. However, potential donors should know that such gifts are not revocable. What this means is that any attempt to exert control over gifted property, or derive any benefit from it, may result in the gift no longer being tax exempt. As such, the legal status of the transfer is endangered and susceptible to being taxed.
Gift taxes are a federal tax on gifts paid by the person making the gift, also known as the donor. It exists to prevent people from avoiding federal estate taxes by giving away all of their money before they die. Gifts that amount to more than $15,000 to one person in one year are considered to be taxable gifts, and may generate a potential gift tax.
It is important to note that gift taxes are not due until a person has given away over $11.4 million in their lifetime. This lifetime gift exemption means that most people will not need to pay any gift tax.
What Are Some Advantages Associated with Inter Vivos Gifts?
Many people utilize inter vivos gifts in their estate planning due to the fact that it allows the donor to distribute part of their estate during their lifetime. As opposed to giving a gift through a will or a trust, the donor is allowed to oversee the process of distributing their estate while they are alive.
This is an attractive option for people who wish to maintain total control over the distribution of their estate and wish to be part of the process, rather than leaving it all to be carried out once they die.
Some other advantages to using inter vivos gifts include:
- Removing assets from your estate to lessen or remove tax liability;
- Avoiding probate fees;
- Flexibility in regards to how your property is to be distributed;
- The ability to control your property and assets during your lifetime; and
- The ability to keep your property and affairs confidential, due to the fact that there are few reporting requirements.
How Are Inter Vivos Gifts Made?
In order for a valid inter vivos gift to be made, all of the following criteria must be met:
- Capacity of Donor: In order for the gift to be valid, the donor must be of at least eighteen years of age when making the gift, and possess testamentary capacity. This means that the donor must be aware of what they are doing and who they are giving the gift to;
- Intent: The donor must intend to give the gift immediately, and the intent should be put in writing. Additionally, the intent to make a gift must make a present and irrevocable transfer of title or right of ownership. This ensures that there is a present transfer of some interest, and the gift is effective immediately. Donors cannot intend for the gift to transfer at their death;
- Delivery: Simply put, the gift must be delivered to the recipient. Delivery may be made either constructively or symbolically, such as when it would be impractical to require physical delivery of property. The end result must be that the gift is delivered from the donor to the recipient;
- Control: The donor is required to sever their own interest in the property that is being gifted. Doing so relinquished their control of the property; and
- Acceptance: The gift must be accepted by the recipient. If the gift is of value, the law presumes that the recipient will receive the gift. However, it is still advised that the recipient expresses their acceptance in writing, so as to avoid any confusion.
Do I Need an Attorney for Gifts Made During My Life?
Consulting with a skilled and knowledgeable estate attorney can ensure that gifts made during your lifetime are correctly done. An experienced estate planning attorney can help you better understand estate and gift taxes, and help you draft any necessary documents for the transfer of property or assets. An attorney can also ensure that all the necessary steps are taken to ensure that the inter vivos gift is not revocable and is not taxable.
Additionally, the attorney can help you put together a sound estate plan in order to avoid potential conflicts regarding the distribution of your estate. An attorney will ensure that your rights and wishes for the distribution of your estate are protected and carried out. Finally, should there be any issue after your death, an attorney may help ensure that any conflicts are resolved.