What Is Gift Inter Vivos?
Let me explain what a gift inter vivos is—it's a Latin term meaning a gift between the living, and it refers to a transfer or gift you make during your lifetime as the grantor. These inter vivos gifts, which can include property tied to your estate, aren't hit with probate taxes because they're not part of your estate when you die. Essentially, an inter vivos transfer happens while you're still alive.
If your gifts go over $17,000 per year—that was $16,000 in 2022—they're subject to gift taxes unless they're to your spouse or a qualified charity. We calculate the value of the gifted property right at the time of transfer. You, as the recipient, don't have to report it to the IRS or pay income tax on it, but the giver does need to handle gift taxes if it tops that $17,000 mark.
That said, there's a lifetime exclusion for you as the giver before taxes really apply, and it adjusts for inflation each year. In 2023, you can give up to $12.92 million over your lifetime without paying gift taxes, up from $12.06 million in 2022.
Key Takeaways
- In Latin, gift inter vivos means gift between the living.
- Gifts inter vivos are transferred while the grantor is alive.
- These gifts can be added to a person's lifetime exclusion limit.
Understanding Gift Inter Vivos
You should know that a gift inter vivos is a solid estate planning move for a few reasons. When you give a gift, it cuts down your taxable estate by lowering your overall net worth. Plus, if you're giving to a charity, you can deduct that from your taxable income for the year.
A lot of people choose inter vivos gifts because they want to handle the gift themselves while they're alive, unlike stuff left in a will or trust.
Reporting for these gifts is pretty straightforward and minimal, so if you're using them to shrink your estate's value, it keeps your property and affairs somewhat private.
Fast Fact
Most gifts that go beyond the annual limit can just be added to your lifetime exclusion of $12.92 million.
Making an Inter Vivos Gift
As the donor, you need to be of legal capacity and at least 18 years old to make the gift. Confirm your intent in writing, and ensure there's a present, irrevocable transfer of title or ownership. You can't plan for the gift to happen after you die—delivery has to be immediate, whether physical or symbolic, especially for property that's hard to hand over physically.
Once the gift is made, you give up all rights to the property and can't take it back without the recipient's okay. If you try to control it or benefit from it afterward, that could kill the tax-exempt status and open it up to taxes, questioning the whole transfer.
The recipient has to accept the gift too. If it's something valuable, the law assumes acceptance, but it's smart for them to put it in writing to avoid mix-ups and seal the deal.
Example of an Inter Vivos Gift
Take Julia, who wants her grandson Mike to have her family home. Mike's just married with a baby coming, and Julia's ready to move to her Florida place to dodge cold winters.
Julia's retired and healthy, and she figures Mike could use the house or sell it for cash to support his family now. Instead of making him wait until she passes, she gives him the home as an inter vivos gift, so he owns it fully and can do what he wants.
Since Julia won't own it when she dies, it skips probate and estate taxes. The gift is over the tax limit, so it could face gift taxes, but if she reports it to the IRS and adds it to her lifetime exclusion, she probably won't owe anything.
What Are Inter Vivos Gifts?
Inter vivos gifts are simply gifts given between living people, and the term comes up a lot for tax purposes regarding gift values.
What Is a Gift Causa Mortis?
A gift causa mortis is one given 'because of death'—think of it as when someone facing death, like in illness, hands over a valuable gift.
What Are the 3 Elements That Have to Be Present for a Gift to Be Properly Conveyed?
For a gift to be properly conveyed, you need three elements: donative intent, delivery or intended delivery, and acceptance.
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