Should I Make Gifts Now As Part Of My Estate Planning?

 Inter Vivos Gift

An inter vivos (or lifetime) gift is one that is made while you are still alive and well. It is a great way to reduce your taxable estate. But care must be taken to avoid problems with gift taxes, Medicaid, and related tax issues. If you no longer own the property when you die, it can't be taxed (though it may be subject to tax if it is made during 1-3 years before your death). These gifts also avoid probate and allow your beneficiaries to enjoy the property much sooner.

But, on the flip side when you make gifts you no longer control or have use of the property. And, the person receiving the gift also receives your tax basis. Finally, if the gift exceeds a value of $13,000 or the amount of the current exclusion amount allowed by the government, it might trigger, tax to the person making the gift.

What exactly is an Inter Vivos Gift? 

There are 3 simple requirements to have a valid Inter Vivos Gift:

You need:

1. Present Donative Intent - The donor (that is YOU) must have the present intent to make a gratuitous transfer (a gift).

2. Delivery - The property must be delivered to the donee (who you are giving the gift to).

3. Acceptance - The donee must accept the property (must accept the gift).

When all 3 occur the gift is completed.

Now that you have a little background on what an Inter Vivos Gift is and how it can be so important in a successful estate plan, here is a recent (May 2011) Pennsylvania case on Inter Vivos Gifts and why it is so important to understand what they are, what they do, and how to utilize them.

Recent Estate Planning News:

The Decedent (the person who has passed away) opened 3 bank accounts with his sister as joint tenants with right of survivorship between 1997 and 2003. In 2005 he created his last will and gave all his real and personal property to his three grandchildren and he named his daughter and not his sister as his durable power of attorney. In 2005 his sister withdrew over $45,000 from these accounts. Pennsylvania Orphans' Court has ordered that these funds must pass under the decedents will. The sister appealed explaining the accounts were to go to her but the Appellate court ruled that joint accounts should pass under the will.

In short, using joint accounts as an estate planning tool can be confusing and expensive. Get good advice on this gift.

 

David M. Frees, III
Attorney, Speaker and Author
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