Understanding Inter Vivos: A Lifelong Gift Strategy

Inter vivos refers to any gift or a transfer of asset that is executed during the lifetime of the giver, distinct from bequests or inheritances that take effect after the giver’s death. This Latin phrase literally means “between the living” and it plays a significant role in strategic financial and estate planning.

How Inter Vivos Works

Inter vivos transfers can offer various financial and tax advantages, providing immediate benefit to both the donor and the recipient. Typically, these transactions do not involve cumbersome probate processes associated with testamentary gifts.

Inspiring Example

Example: Abel decides to distribute his wealth gradually to his family while he is still alive. He gifts $10,000 each to his three children. The children enjoy the financial benefit and use the funds to fulfill immediate needs or investments. In the future, if Abel designates them as beneficiaries in his will, they may also inherit more assets upon his passing.

Benefits of Inter Vivos Gifts

• Tax Efficiency: Strategically planned inter vivos gifts can help reduce the taxable estate value.
• Immediate Assistance: Offers immediate financial assistance to loved ones or charitable entities.
• Control and Flexibility: Allows the donor to see the impact of their generosity during their lifetime.

Considerations

• Gift Tax: Ensure that your gifts are within the annual exclusion limit to avoid gift tax liability.
• Intent and Documentation: Clearly document your gift intention to avoid disputes later.

Frequently Asked Questions

What is an inter vivos trust?

An inter vivos trust is a trust established during the trustor’s lifetime, as opposed to a testamentary trust which is created upon the trustor’s death. It can offer benefits like avoiding probate, providing for minor children, and potential tax advantages.

How does inter vivos gifting impact estate tax planning?

Inter vivos gifting can significantly reduce the size of the taxable estate, potentially lowering estate taxes after death. However, larger gifts might still require you to file a gift tax return.

Is there a limit to inter vivos gifts?

There is generally an annual exclusion limit set by tax authorities for inter vivos gifts, beyond which the excess amount may be subject to gift tax. In the U.S., as of recent, this limit is $15,000 per recipient per year.

By understanding and leveraging inter vivos strategies, you can ensure that you positively impact your loved ones’ lives during your lifetime while also optimizing your estate planning. Ensure you consult with financial and legal advisors to tailor the best giving strategy to suit your needs and goals.

Related Terms: Living Trust, Estate, Gift Tax, Probate, Inheritance.