What Is a Gift Causa Mortis?
Let me explain what a gift causa mortis is: it's a gift of personal property that someone makes when they expect to die soon. You should know that this differs from an inheritance outlined in a will.
Key Takeaways
- A gift causa mortis occurs when someone gives a gift believing they will die soon.
- Unlike transfers through a will or inter vivos gifts, this is revocable by the donor until death and may have different tax implications.
- The term comes from Latin, meaning 'contemplating death.'
Understanding Gift Causa Mortis
You need to understand that a gift causa mortis only activates after the donor's death. It's a conditional gift, given only if the donor anticipates dying. Often called a deathbed gift, it's the typical example of something handed over at the end of life.
You can give a gift causa mortis in anticipation of death or inter vivos during life. A gift causa mortis gets taxed under federal estate tax law just like a bequest in a will. Remember, a will is the document that transfers an estate to beneficiaries after the testator's death.
Gift Causa Mortis Versus Gift Inter Vivos
There are key differences between an inter vivos gift and a gift causa mortis. First, gifts causa mortis are revocable, while inter vivos gifts are not. Once you give an inter vivos gift, the donor loses all rights and can't reclaim it. But with causa mortis, the donor can revoke it anytime while alive, for any reason.
Even though the gift is delivered and accepted, the beneficiary's right to keep it is only secure after the donor dies, making it irrevocable then. Another point: if the donor doesn't die, the gift revokes automatically.
Unlike inter vivos gifts between living people, causa mortis gifts are revocable and conditional, with different tax rules. The donor can revoke it unilaterally while alive, or it revokes if they survive the anticipated peril. It's also conditional on the beneficiary surviving the donor; if the beneficiary dies first, the gift revokes, and their estate gets nothing.
Finally, these gifts are taxed as if bequeathed in a will under federal estate tax law because they're incomplete until death. However, an inter vivos gift made within three years of death also falls under estate tax.
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