Overview
Gifts Inter Vivos, a phrase that might sound like a new indie band, but unless you’re paying them in estates rather than applause, you’re off the beat. This term actually dives into the thrilling world of taxation and estate planning, describing gifts made during an individual’s lifetime, as opposed to those bequeathed through a will.
Definition
Gifts inter vivos refer to any transfer of property made voluntarily and without compensation during the giver’s lifetime. These gifts span everything from grandma sliding you a $20 bill to parents gifting property to their children. The allure of these gifts isn’t just in their generosity but also in their potential to reduce inheritance tax burden, which brings us to their next thrilling feature!
Tax Implications
For those who find taxes as enjoyable as a surprise dental exam, gifts inter vivos offer interesting loopholes and pitfalls. Such gifts typically fall under the potentially exempt transfers category. The basic rule is simple: if the donor does not dance off this mortal coil within seven years of making the gift, it escapes the inheritance tax net – otherwise, the taxman cometh.
Special Exemptions
- Small Gifts Exemption: If your gift per person per year is less than £250, it’s tax-free!
- Annual Exemption: You can give away £3,000 each year without it counting towards your estate for inheritance tax purposes.
- Wedding Gifts: Feeling generous on someone’s big day? Gifts on the occasion of a marriage also get special treatment depending on your relationship to the bride or groom.
Gifts to discretionary trusts, however, are like playing financial double dutch. These are chargeable immediately but at half the death rate—a bargain sale on tax duty, if you will.
Related Terms
- Inheritance Tax: The tax on the estate of the deceased. Remember, it’s not evasion if it’s an exemption!
- Potentially Exempt Transfer: A transfer that potentially dodges inheritance tax, depending on the survival period of the donor post-gift.
- Discretionary Trusts: The ‘choose your own adventure’ of financial trusts, where beneficiaries are decided flexibly by the trustee.
- Chargeable Transfers: Transfers that definitely poke the bear named the Tax Authority.
Recommended Reading
To further unwrap the mysteries of gifts inter vivos, consider leafing through these titles:
- “Tax-Efficient Giving Made Easy” by Penny Wise – A step-by-step guide to making gifts that make both your heart and wallet happy.
- “Estate Planning for the Generous” by Will Power – Helps large-hearted individuals navigate the maze of laws and exemptions effectively.
Gifts inter vivos are not just about transferring wealth but also about doing it smartly to ensure your generosity doesn’t inadvertently become generosity towards the taxman. So, plan wisely, give generously, and maybe keep the taxman off your party invite list!
