Giving While Living and How It's Causing Inheritance Disputes
Download Our Free Guide to Learn About the Complexities of Giving Away Substantial Assets Before Death
Inter vivos gifts are gifts given to beneficiaries during their lifetime, before they are even accounted for in a will or trust document. Lifetime giving is a viable estate planning tool that often offers several potential benefits, but it may also add unique complexities to the administration of an estate, sometimes resulting in disputes between beneficiaries and other interested parties.
Our resource provides valuable background on the potential complexities that lifetime giving may introduce and on how you can adequately prepare yourself and your family’s estate for them. Along with the legal guidance of the skilled probate litigation attorneys at RMO LLP, this resource prepares individuals to better understand, avoid, and resolve contentious estate disputes related to lifetime gifts.
What You'll Learn From This Guide
This guide serves as a valuable resource with practical considerations for managing your estate when it comes to sending gifts and transferring assets during your lifetime. You’ll learn the following from our resource:
- What it means to “give while living” as it relates to assets in your estate
- The benefits and drawbacks of gift giving during your lifetime
- How lifetime asset transfers introduce complexity into estate administration
- When giving from your estate results in inheritance disputes
- What steps you should take when an inheritance dispute occurs in this context
How To Use This Guide
Use this guide as a primer to understand how gifting works as an estate planning tool, how it factors into one’s overall estate planning, and how disputes can arise. If you are facing an inheritance dispute, this guide can provide important context for potential contests, their implications and key steps to take to navigate them.
This resource provides practical considerations for managing your estate while gifting and protecting your interests in the process. With this guide, beneficiaries, heirs, and other interested parties will feel equipped to develop advanced safeguards for lifetime giving, navigate circumstances that lead to disputes, and respond accordingly. For further legal guidance in your matter, contact the experienced probate litigation lawyers at RMO LLP for legal advocacy to supplement this guide.
Frequently Asked Questions
What is the difference between an inter vivos gift and an inheritance?
An inter vivos gift is a portion of the estate voluntarily given to a beneficiary during the transferor’s lifetime, whereas an inheritance is the transfer of assets to a beneficiary or legal heir after the decedent’s death, typically through a will, trust, or state intestacy laws.
Inter vivos gifts may be subject to certain taxes, we recommend consulting with a tax professional to determine any federal, state, or local taxes that may apply.
How do I prove a lifetime gift was actually an advancement on my sibling's inheritance?
To prove that a lifetime gift was an advancement on an inheritance, you typically need written evidence of the donor’s intention to provide a gift as an advancement. States like California and Texas require written evidence, either in a will or other document, that the transferor intended a lifetime gift to be treated as an inheritance advancement or a debt owed to the lender to substantiate a reduction of your sibling’s asset distribution.
If you have concerns that the circumstances surrounding a lifetime gift were not aligned with the transferor’s true intent, an inheritance dispute attorney can assist with gathering evidence of the transferor’s intention for the gift and building a case to substantiate it.
Can a Power of Attorney legally make gifts to themselves in California or Texas?
A power of attorney (POA) typically cannot legally make gifts to oneself unless they are specifically granted authority to do so in the POA document. A POA agent has a fiduciary duty to act in the best interests of the grantor, and they are not to use the grantor’s assets for their own personal gain. In rare instances, a power of attorney agent may be able to make gifts to themselves if allowed by the grantor, assuming the grantor is mentally fit to make a gift.
Even if the POA grants gifting power generally, the agent would still breach their duty of loyalty by transferring money to themself without a valid reason to do so. An agent taking money for themselves without authority to do so, according to the document that granted them POA powers, is considered an act of self-dealing, power of attorney abuse, and a breach of fiduciary duty. Such a breach of their duty could result in their removal from the role and additional legal consequences.
What is the statute of limitations for challenging a lifetime gift after the donor dies?
The statute of limitations for challenging a lifetime gift after the donor dies typically depends on the grounds for the challenge and varies by state law. For example, if the grounds for the challenge were fraud, the statute of limitations would be three years in California, according to the California Code of Civil Procedure Section 338. In Texas, the statute of limitations is four years for fraud or breach of fiduciary duty, according to the Civil Practice and Remedies Code Section 16.004.
Meanwhile, if the grounds for the contest are undue influence or coercion related to financial elder abuse, the statute of limitations is three to four years in California and ranges from two to seven years in Texas, depending on whether it is a misdemeanor or felony. If a contest is related to a gift transferred through a trust, interested parties have 120 days to contest this transfer according to the California Probate Code. If there’s concealment, they may be able to extend based on the date of discovery of the concealment.
How do courts determine if someone had the mental capacity to give away real estate?
Courts utilize several criteria to determine if someone had the mental capacity to give away real estate or property under valid circumstances during their lifetime. Criteria to assess one’s capacity to make an inter vivos gift include:
- Whether the testator had the capacity to understand the nature of the transaction
- Whether the testator understands their financial circumstances
- Whether the giver understands how their gift relates to their ability to address their own future financial needs
Typically, courts assume the capacity of the transferor, placing the burden on the party challenging the transaction to prove otherwise. Still, both sides should be prepared to gather and present evidence of the transferor’s mental capacity or incapacity to prove their case.
Can we reverse a lifetime gift if the recipient used undue influence?
If the recipient of a lifetime gift used undue influence to obtain a gift from a vulnerable party’s assets, the estate may be able to seek a recovery of that gift through avenues such as a constructive trust or a surcharge order by the court. Interested parties can contest the lifetime gift if they are able to present evidence of the circumstances that constituted undue influence, including:
- Vulnerability of the transferor
- A perceived position of authority of the influencer
- Clear tactics used to influence the transferor, such as intimidation or control
- An inequitable distribution that benefits the recipient to the detriment of the transferor
Does a no-contest clause prevent me from challenging a suspicious pre-death transfer?
A no-contest clause does not always prevent you from challenging a suspicious pre-death transfer. In most states, including California and Texas, probate judges will be willing to waive a no-contest clause as long as you are contesting in good faith and have substantial grounds to object to the transfer. Grounds for contesting that may supersede a no-contest clause include undue influence, fraud or forgery, lack of capacity, and improper execution of an estate planning document.
It’s advisable to consult a probate litigation attorney who can help you assess the validity of your grounds for pursuing a challenge, gather the appropriate evidence to substantiate it, and effectively build your case to present in litigation.
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