When it comes to estate planning, you can make a few different types of gifts: inter vivos gifts, causa mortis gifts, and testamentary gifts. In this article, we will discuss inter vivos gifts in detail. What is an inter vivos gift? How does it work? What are the advantages and disadvantages of making a gift inter vivos? We will answer all of these questions and more.
What is an inter vivos gift?
A gift inter vivos is a transfer of property from one person to another during the donor’s lifetime. The word “inter vivos” means “between living persons.” Gifts can be made for either gratuitous or consideration purposes.
Gratuitous gifts are made without the expectation of receiving anything in return. These types of gifts are often made to family members or close friends. Consideration gifts are made in exchange for something of value.
For example, you may give your child a gift in exchange for them agreeing to take care of you in your old age. Gifts can be made outright or they can be placed in a trust. An outright gift is a transfer of ownership that is immediate and irrevocable. On the other hand, a gift in trust is a transfer of property held by a trustee for the recipient's benefit.
How inter vivos gift works
When you make a gift inter vivos, the ownership of the property is transferred from you (the donor) to the recipient. The ownership is transferred immediately and irrevocably if you make an outright gift.
This means you cannot change your mind about the gift or take back the property. If you make a gift in trust, the ownership is transferred to a trustee who holds the property for the recipient's benefit. The trustee can be either an individual or an institution, such as a bank.
The terms of the trust will determine when and how the recipient can access the property. For example, the trustee may distribute the assets of the trust to the recipient when they reach a certain age or upon the occurrence of a specific event, such as marriage or graduation from college.
What is a Conditional inter vivos gift?
A conditional inter vivos gift is a gift that is made subject to a condition. The condition can be anything the donor chooses, but it must be possible to determine whether or not the condition has been met.
If the condition is not met, the gift will not take effect, and the property will remain with the donor. Common examples of conditions include the recipient reaching a certain age, getting married, or having children.
What type of gift is given when it comes to causa mortis?
A causa mortis gift is a transfer of property that is made in anticipation of the donor’s death. The word “causa mortis” means “cause of death.”
Causa mortis gifts are revocable, meaning the donor can change their mind about the gift at any time and take back the property. Causa mortis gifts are often made to family members or close friends who the donor knows will be able to use the gift well.
Causa mortis gift vs testamentary gift
A testamentary gift is a property transfer made through the donor’s will. The word “testamentary” means “relating to a will.” The main difference between a causa mortis gift and a testamentary gift is that a causa mortis gift can be revoked at any time, while a testamentary gift cannot. Unlike causa mortis gifts, testamentary gifts are ineffective until after the donor’s death.
Inter vivos gift vs bequest
A bequest is a type of donation where the donor leaves property to a recipient through their will. Bequests are similar to testamentary gifts in that they are irrevocable and do not take effect until after the donor’s death. The main distinction between a bequest and a testamentary gift is that the former can only include personal property, while the latter encompasses both types.
When a gift is complete, is the gift irrevocable?
Yes, once a gift is complete, it is irrevocable. This means the donor cannot change their mind about the gift or take back the property. The answer to this question is yes. The gift is irrevocable once it has been made.
However, some exceptions may apply. For example, if the donor is incompetent at the time of making the gift (because he or she lacks capacity), then the gift may be revoked by his or her legal representative. In addition, some gifts may be subject to a condition precedent. A condition precedent means something must happen before the gift can take effect.
For example, if you want to give your nephew $10 million but only after he graduates from college, then this money will only be available once he does graduate from college and meets this condition precedent.
What is a gift inter vivos quizlet?
A gift inter vivos quizlet is a type of gift that does not require the donee to die before the gift can be made. Most gifts inter vivos are gifts that are made during your lifetime, but there are some other types, such as the transfer of property under an inter vivos trust or the creation of a power of appointment.
The word "inter vivos" means "during life." A gift inter vivos can be made during your lifetime and does not require your death or the death of someone else for you to make it.
Are inter vivos gifts taxable?
Because they are not included in the estate of the donor after they pass away, inter vivos gifts, which can include property tied to an estate, are exempt from the taxes that are associated with the probate process.
A transfer made while the grantor is still alive is called an inter vivos transfer. One common type of inter vivos transfer is a gift, where the donor gives property to the donee without receiving anything in return.
The gift may be made outright or placed in trust for the benefit of the donee. Another type of inter vivos transfer is a sale, where the grantor sells a property to the grantee in exchange for consideration (usually money). The main advantage of making an inter vivos transfer is that the property is removed from the donor's estate, which can save on estate taxes. When a person dies, their estate is subject to estate taxes.
The tax amount depends on the estate's value and the state in which the person resided. Federal estate taxes may also be owed if the value is high enough. By making an inter vivos transfer, the donor can reduce the size of their estate and save on these taxes. Another advantage of an inter vivos transfer is that it can be used to avoid probate.
Probate is the legal process used to settle a person's estate after they die. It can be a long and expensive process, so many people try to avoid it if possible. One way to do this is by making an inter vivos transfer of their property before they die. Inter vivos transfers are not always tax-free, however.
Depending on the circumstances, they may be subject to gift taxes or capital gains taxes. For example, if you give property to your child and it is worth more than the annual gift tax exclusion amount ($15,000 in 2020), you will have to pay a gift tax on the excess value.
You may have to pay capital gains taxes on the difference if you sell a property for less than its fair market value. Before making an inter vivos transfer, it is essential to consult a tax advisor to determine if any taxes will be owed. An irrevocable gift cannot be changed or taken back once made.
Inter vivos gift vs causa mortis
By looking at both the advantages and disadvantages of these popular options, you can more easily decide which route is best for you and your family.
Advantages of Inter vivos gift
There are many advantages to making gifts inter vivos. First, it lets you see how your gift will be used while still alive. This can be incredibly gratifying if the gift is being made to a family member or close friend.
Here are some additional advantages of inter vivos gift. You get to see the recipient enjoy the gift while you're still alive: One of the best advantages to giving an inter vivos gift is seeing the recipient enjoy it while you are still alive.
This can be a great feeling, especially if the gift is for someone close to you, like a family member.
The recipient doesn't have to wait until after your death to receive the gift: Another advantage of an inter vivos gift is that the recipient doesn't have to wait until after your death to receive the gift. With a will, the beneficiary would have to wait until after probate before receiving anything.
But with an inter-vivos gift, the recipient can enjoy the benefits of the gift right away. You can change your mind about the gift up until the time of transfer: One final advantage of an inter vivos gift is that you can change your mind about the gift up until the time of transfer.
This means that if you decide you don't want to give the gift after all, or if you change your mind about who you want to give it to, you can simply cancel the transfer.
Disadvantages of Inter vivos gift
By looking at the disadvantages of making an inter vivos gift, you can better understand if this is the right option for you.
The recipient may need to pay taxes on the value of the gift: One potential downside of an inter vivos gift is that the recipient may need to pay taxes on the value of the gift. This will depend on the laws in your state, but in some cases, the recipient may be responsible for paying gift taxes.
You may not be able to take a tax deduction for the value of the gift: Another possible drawback of an inter vivos gift is that you may not be able to take a tax deduction for the value of the gift. This is because gifts are not considered taxable income.
So, if you want to reduce your taxes by making a gift, you may consider another option. Inter vivos gifts can be complex, so it's important to seek professional: If you are considering making an inter vivos gift, it's important to seek professional guidance to ensure that the transfer is done correctly.
These types of gifts can be complex, and strict rules must be followed for the gift to be valid.
Overall, making an inter vivos gift can be a great way to show your loved ones how much you care while also providing some financial security for them. However, it's important to make sure that you understand all of the implications of such a gift before moving forward. We hope that this guide has helped you do just that.
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