Gift Inter Vivos

Key takeaways

• A gift inter vivos (Latin: “between the living”) is a transfer of property made during the donor’s lifetime.
• Inter vivos gifts reduce the donor’s taxable estate and generally avoid probate.
• Annual and lifetime gift-tax exclusions limit when gift taxes apply (for example, the 2023 annual exclusion was $17,000 per recipient and the lifetime exclusion was $12.92 million).

What it is

A gift inter vivos is an outright, irrevocable transfer of ownership made while the donor is alive. Unlike testamentary transfers (gifts in a will), inter vivos gifts pass immediately to the recipient and are not part of the donor’s estate at death, so they typically avoid probate.

The recipient does not pay income tax on the gift. The donor may be required to file a gift-tax return or pay gift tax if transfers exceed the applicable annual exclusion (per recipient) and available lifetime exclusion. Gifts to a spouse or qualified charities are generally treated differently for tax purposes.

Why people use inter vivos gifts

• Reduce the size of a taxable estate to limit estate taxes.
• See and supervise the transfer during the donor’s lifetime.
• Provide immediate financial support to family members.
• Maintain a degree of privacy (no probate proceedings for transferred property).

How a valid inter vivos gift is made

A valid inter vivos gift generally requires:
1. Donative intent — the donor must intend to give the property now, not at death.
2. Delivery — the gift must be delivered to the recipient, either physically or symbolically if physical delivery is impractical.
3. Acceptance — the recipient must accept the gift (acceptance is usually presumed for valuable gifts).

Additional practical requirements and effects:
* The donor must have legal capacity (typically at least 18 years old and mentally competent).
The transfer should be irrevocable: after the gift is complete, the donor must relinquish ownership and control unless the recipient agrees to return it. Attempts by the donor to retain control or receive benefits from the gifted property can jeopardize the gift’s legal and tax status.
If a gift exceeds the annual exclusion amount, the donor generally must report it (e.g., on IRS Form 709 in the U.S.) and may need to apply it against their lifetime exclusion.

Example

Julia gives her family home to her grandson Mike while she is alive because she plans to move and wants Mike to have the house now to support his growing family. Once the transfer is completed, Mike owns the home outright; it will not pass through probate at Julia’s death. Because the gift exceeds the annual exclusion, Julia may need to report it and apply it to her lifetime exclusion to avoid gift tax.

Gift causa mortis (contrast)

A gift causa mortis is a gift made in anticipation of imminent death (given because the donor expects to die soon). It differs from an inter vivos gift because it may be revoked if the donor recovers and typically takes effect only if the donor subsequently dies.

Practical checklist for donors

• Confirm intent and capacity to make the gift.
• Document the transfer in writing when possible and record delivery/acceptance.
• Get a professional appraisal for valuable property.
• Consider tax consequences: track annual and lifetime exclusion amounts and file any required gift-tax returns.
• Consult an estate or tax professional to ensure transfers meet legal and tax objectives.

Inter vivos gifts can be an effective estate-planning tool when made carefully and documented properly.