What is “Inter Vivos” Giving?

When considering your estate planning options, you're often thinking about what happens in the event of your passing: how your spouse and family members will be affected, who your beneficiaries will be, and how your assets will be divided or donated. But there is an estate planning strategy that can be considered while you're still alive, called an "inter vivos" gift.

How to understand gifts made inter vivos

Gifts inter vivos, from the Latin meaning "between the living," are primarily used when property transfer is being considered but can be applied to any assets. When put into a trust, this is known as a living trust (which can be revocable or irrevocable). 

This may be a good option if you want to gift your investment property to a loved one, for example, but don’t want to wait until after your death to do so. However, consider the tax consequences of doing so as any gifts given before death will not be eligible for a stepped-up basis.

The same general gifting rules apply: With the exception of giving to a spouse or a qualified charity, you can’t exceed the yearly exclusion limit or the lifetime gift tax exemption ($18,000 and $13.61 million in 2024, respectively). Giving more than $18,000 to a single donee in any given year won’t necessarily trigger a gift tax but will require the donor to file a gift tax return known as Form 709. This is the government’s way of tracking lifetime gifts of very wealthy families.   

Benefits of inter vivos gifts

Aside from your personal satisfaction and seeing the immediate positive impact that your gift may have on its recipient, gifts made during one’s lifetime may have other benefits. For example, inter vivos gifts can be a strategy used to lower the overall net worth of your estate, thus helping you potentially save on estate taxes. Giving the gift to a charitable organization can also be deducted from yearly taxable income if you have more than $10M in assets.

It's important to note that this is applicable while the Tax Cuts and Jobs Act is in effect. The TCJA is set to expire at the end of 2025, and if the legislation is not extended, estates valued over an estimated $7.5M may be subject to estate tax. Furthermore, gifting assets while the lifetime gift tax exemption is $13.61M may help reduce overall future estate size. If this is an avenue you want to explore for your estate plan, it is best to discuss your options with your financial advisor, tax professional, and legal counsel to make an informed decision with your personal financial situation in mind.

What you need to know about inter vivos gifts

To ensure that you aren't accidentally causing yourself financial or tax surprises, rules must be followed in the event of an inter vivos gift to legally complete the transfer. Documentation is key between donor and recipient.

• To be considered a gift, nothing must be given in return for receiving said gift. 
• The donor must intend to transfer the asset or ownership of property immediately.
• The recipient or beneficiary must agree to or accept the gift.

Once the transfer of property or asset is finalized, the donor relinquishes their rights to that property.

Consider inter vivos gifts and other estate planning options

If inter vivos giving sounds like a strategy you’d like to explore for your estate plan, the team at Chatterton & Associates can help. 

With the assistance of our corporate partner, the Law Office of James F. Roberts & Associates, and our tax professionals, we can discuss whether this estate planning strategy makes sense for your personal financial situation or whether a different estate trust may be a better fit from a wealth, tax, and estate planning perspective. Contact us today to get started.

Sincerely,

The Team at Chatterton & Associates