What’s Gift Inter Vivos?
An inter vivo gift is a transfer or gift done during the grantor’s lifetime. Intervivos donations, including estate property, are not subject to probate taxes as they are not part of the donor’s estate after death. Interview transfers occur during the grantor’s lifetime.
Gift taxes apply to gifts over $17,000 annually ($16,000 in 2022) to individuals other than spouses or qualifying charities. Transferring the provided property determines its value. The sender must pay gift taxes if the gift exceeds $17,000, while the recipient does not.
Before gift taxes, the giver has a lifetime exclusion, updated annually for inflation. Your lifetime gift tax-free maximum increased to $12.92 million in 2023 from $12.06 million in 2022.
Understanding Inter Vivos Gift
Gifts inter vivos are effective estate planning strategies for numerous reasons. A gift lowers your net worth, lowering your taxable estate. You can also deduct charity donations from your taxable income.
Many people give inter vivos gifts because they wish to manage them during their lifetime, unlike will or trust donations. If contributions lower an estate’s worth, the giver’s property and affairs can remain private due to minimum reporting obligations. Givers can add most gifts beyond the gift limit to their $12.92 million lifetime exclusion.
Gifting Inter Vivos
The donor must be 18 and of legal age to donate. Confirm the donation purpose in writing and ensure a present, irreversible transfer of title or ownership. The donor cannot intend for the gift to pass after death. Ensure prompt delivery, literally or metaphorically, especially for gifts involving property or impracticable delivery.
Upon giving, the giver loses all rights to the property and cannot retrieve it without the recipient’s permission. Any attempt to control or benefit from the donated property may invalidate its tax-exempt status, rendering the transfer subject to tax.
The receiver must accept the gift. If the present is valuable, the law implies acceptance. However, the gift recipient usually confirms acceptance in writing to minimize misunderstandings and finish the deal.
Inter Vivos Gift Example
Julia wants her family home for Mike, her grandson. Mike is married and has a kid, and Julia wants to move to her second Florida house to escape the bitter winters.
Julia has retired and is well, and she understands Mike might need the land or the sale proceeds to support his expanding family right away. She gifts Mike the home interior, giving him complete ownership and the freedom to do as she pleases.
Julia will die without probate or estate tax because she no longer owns the residence. However, the donation exceeds gift tax restrictions; therefore, gift taxes may apply. If Julia reported the gift to the IRS and included it in her lifetime gift exclusion, taxes may not be due.
What Are Inter Vivos Gifts?
Gifts provided between living persons are called inter vivos. The word refers to tax-favored gifts.
A Gift Causa Mortis?
Causa mortis is a gift “because of death.”3A gift causa mortis occurs when someone approaching death gives a valuable present to someone else.
What are the three elements needed to convey a gift properly?
Donative purpose, delivery, and acceptance are required for gift conveyance.
Conclusion
- Latin gift between vivos, meaning gift between alive.
- While living, grantors transmit gifts inter vivos.
- Gifts can increase a person’s lifetime exclusion.
