Inter Vivos Gifts – what are they and how will they affect my estate?

An inter vivos gift is a gift or transfer of property made during someone’s lifetime. For example, a person gifting their child the family home during their lifetime would be an inter vivos gift.

The transfer of property must occur during the person’s life and cannot be done once the person has passed away. Often, inter vivos gifts are made where a person wishes to give their property to another person immediately or some time before their death.

Inter vivos gifts are not included in a person’s estate to be distributed upon their death because they are no longer that person’s property. This is another reason a person may grant an inter vivos gift.

However, there are some requirements that must be met for an inter vivos gift to be a valid gift.

The gift or transfer must first occur during the person’s lifetime. The property cannot be held in a trust or be provided under the person’s Will. If the latter is the case, it will be part of the person’s estate and as such will be subject to relevant testamentary laws. 

Further, there cannot be any payment for the gift. The person that receives the gift must not pay for, or give anything in return for, the gift. If they do, the transfer of property cannot be considered a true gift.

The inter vivos gift must also be given freely, the person must not be influenced or forced to give the gift. A Court will likely hold a gift to be invalid if the gift giver was coerced or pressured to gift the property.

The person giving the gift must also have the legal mental capacity to give the gift. This requires that the person understands what giving the gift means, including the nature of the gift and the consequences of giving the gift.

If the inter vivos gift is found to be valid, it may be subject to tax. The IRD will not usually tax gifts, whether the gift itself is money or not, as it will not usually be considered income. However, a gift may be considered income if, for example, the gift was given to a person in return for some work they completed.

If you are planning to give an inter vivos gift, it is important to be aware of the requirements to ensure that the gift is valid. It is also vital to understand the implications of such a gift, as the property will not be considered part of your estate once the gift is made. As per the previous example, giving the family home as an inter vivos gift means that it cannot later be claimed under the person’s estate.

If you are unsure about these requirements or wish to know more about the implications of an inter vivos gift, it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Shaun Cousins and Hunter Flanagan-Connors
Wellington