An inter vivos gift is basically a gift that is given by a living donor. Such gifts, such as estate property, for instance, won’t be subjected to probate taxes because they’re not included in the estate of the donor. Note, though, that gifts worth more than $14,000 per annum will be subjected to income tax in the event that they’re gifted to someone else other than the spouse of the donor or a charitable organization.
Why Use Inter Vivos Gifts
Inter vivos gifts are often used in asset protection and estate planning since they can’t be taxed. The donor, however, must be aware that an inter vivos gift is not revocable. Cantley Dietrich knows that if the donor tries to benefit from or exert control over the gift, its tax-exempt status will be void, which in turn will compromise the transfer’s legal status and make it taxable.
Benefits of Using Inter Vivos Gifts
Many individuals opt to use inter vivos gifts since it will enable the donor to see exactly what will happen to the gift while he or she is still alive. Rather than placing gifts in a trust or will, this kind of arrangement enables the donor to supervise the estate distribution process. A lot of individuals are keen on this arrangement since they will have complete control of the distribution of their estate. In addition, when you use inter vivos gifts, you can keep your financial affairs and assets confidential because such gifts come with fewer reporting requirements than those in a trust or will.
How to Make Inter Vivos Gifts
In order for an inter vivos gift to be valid and recognized by the law, the following requirements must be met:
- The Donor’s Capacity – The donor should be at least 18 years old and have legal capacity when gifting a property.
- Total Transfer of Control – The donor should give up any interest and control over the property to be gifted.
- The Donor’s Specific Intent – The intent of the donor to give the gift must be stated in writing. The donor should likewise make an irrevocable and present transfer of the property’s right of ownership or title so that the gift will be effective immediately. In addition, the donor should not intend or plan for the gift to be transferred upon his or her death.
- The Gift’s Delivery – The gift can be delivered figuratively or constructively, particularly when physically delivering the property is impractical or impossible.
- The Gift’s Acceptance – The law automatically assumes that the gift will be accepted because it has value. It is, however, recommended that the recipient of the gift accept the gift in writing for proper documentation.
Essentially, if you want to avoid taxes and want control over your estate’s distribution while you’re still alive, giving inter vivos gifts might be an excellent asset protection and estate planning strategy for you. However, since such gifts are not irrevocable, you need to make certain that you satisfy all the elements above for the gifts to be considered valid. That said, a local estate planning attorney should inform you of your rights and responsibilities and ensure that you take the necessary steps to guarantee the validity of your inter vivos gift.