As you probably know all too well, you can also make gifts to other people during your lifetime. These are called inter vivos gifts if you want to be lawyerly with it. This one’s easier to think about because you’ve been giving gifts for holidays, birthdays, weddings, and anniversaries regularly. You can also make gifts while living of cash, real estate, land, stocks/bonds, and other non-cash assets to charitable organizations.
One specific type of inter vivos gift doubles down on the Latin–it’s called a gift causa mortis. This type of gift is made by the donor while they’re alive in the event of impending death. Causa mortis in Latin translates to “because of death.” Sometimes this type of gift is referred to as a deathbed gift. The most common kind of gifts causa mortis tend to be small, valuable and/or meaningful gifts like a wedding ring.
To make this more salient, consider the scenario where Abe was in a severe accident and is aware that he is going to pass soon. Abe turns to his son Bob, who rushed him to the ER, and tells him that he wants him to have his watch. He takes it and gives it to his son Bob and then gets rushed into surgery. This is a simple example of a gift causa mortis.
Now, with out amateur Latin lesson complete, let’s dive into the elements of the rules related to gifts causa mortis.
Elements of Gifts Causa Mortis
A valid inter vivos gift involves:
intent by the donor facing imminent to donate;
delivery of the gift; and
acceptance by the donor.
Delivery of the Gift
The gift must be delivered to the recipient. That’s easy if it’s something handheld like jewelry that you’re wearing, but what about anything that the donor doesn’t have on them personally? So long as the “delivery” is sufficiently symbolic, that will suffice if physical delivery at the time of the gifts is impractical.
Another Hypothetical
Let’s say a donor wanted to make a gift causa mortis of an antique piece of furniture to their niece. At the time the donor was residing in a hospice facility and very clearly toward the very end of her terminal illness. It would be impractical for the law to expect the dying donor to physical deliver the furniture to her niece. As long as the donor gave the niece a symbolic representation of the gift, such as writing out the details of the furniture’s location and details in the presence of a witness, it would likely be found valid upon the donor’s passing.
Another example that applies arose out of a case where a donor’s delivery was found to be valid where she signed the back of her car’s certificate of title to gift the automobile to her brother.
Can I Get a Witness?
To avoid post-mortem litigation by other heirs-at-law or the decedent’s estate’s executor, it’s preferable if the delivery of the gift is witnessed by a third party who can attest to the validity of the gift. Additionally, if there is an option for a piece of writing to be made out detailing the gifts and signed in the presence of a third party, that’s even better.
Revocable & Conditional
Gifts causa mortis are revocable, which means that the donor (the gift giver) can revoke the gift at any time (while still alive). This revocation can be completed unilaterally, with only the donor. This is different than an inter-vivos gift, which when completed, is completely irrevocable.
Gifts causa mortis are also conditional on the donor’s death, meaning the gift giver actually has to perish before the donee’s ownership is valid.
Taking it back to our story with Abe and his son Bob: if Abe gave his watch to Bob before surgery with the imminent expectation of dying soon, but ended up living through the surgery, the gift is no longer valid and automatically revoked. Of course, Abe could choose to make an inter-vivos gift to Bob if he decided to do so.
Additionally, if the recipient dies before the donor, then the gift is revoked and the beneficiary’s estate has no claim to the property.
Imminent Death
For a valid gift causa mortis, the donor has to die imminently…what constitutes “imminent death?” This has been debated in different cases. What’s clear is the gift giver doesn’t have to die immediately, like seconds after the gift is given. But, the donor must pass away from the danger or condition that was present at the giving of the gift. Plus, it doesn’t “count” if the donor has a fear that they might die at some vague point in the future.
Intervening Recovery
Additionally, there must be no intervening recovery between the gift and death.
Back to our hypothetical: let’s say Abe goes into surgery and survives from the injuries relating to his accident. At this point the gift of the watch is invalid. Abe may unfortunately go on and pass away from a different condition a few months later, but the previous gift causa mortis of the watch is not suddenly valid just because Abe eventually died.
What’s the Difference Between Gifts Causa Mortis and Testamentary Gifts?
Typically gifts causa mortis are informally made in the moment, are not planned to the same extent or formally written out like testamentary gifts. In the majority of states, gifts causa mortis are immediately transferred to the recipient’s ownership after death, whereas gifts made through a will or testamentary trust transfer ownership after the probate process is complete. Additionally, gifts causa mortis can only be made of personal property, not real property like your house or farmland.
How do Gifts Causa Mortis Fit into Taxes?
Similar to testamentary gifts, gifts causa mortis are taxed under federal estate tax law. The policy behind this is because the gifts aren’t complete until the donor’s passing. (Note well that the federal estate tax also applies to general inter vivos gifts made within three years of death. This means the value of such gifts is included in the estate in order to calculate the estate taxes.) It’s also worth noting that the federal estate tax applies to so few people now after the passage of the Tax Cuts and Jobs Act, so you don’t really to be concerned about this!
Final Words on Gifts Causa Mortis
Gifts Causa Mortis or not, there is no substitute for an airtight, updated estate plan. If you have such a plan in place, there’s no need to try and meet all the elements and intricacies of gifts causa mortis.
None of us know when our time will come, and we may not have the opportunity to give away our prized possessions via causa mortis right before death. But, we can know that estate plans never expire and can give you peace of mind that your property will be pass to the people you intend without legal contest (which can arise from gifts of causa mortis).
No questions are dumb questions when it comes to the complex world of property and estates. Don’t hesitate to contact GFLF or schedule a free consult to get your estate planning needs and goals in order.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/09/Screen-Shot-2018-09-22-at-2.07.40-PM.png5691033Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-09-21 00:30:062020-05-18 11:28:44Back to School: Latin Lesson on Gifts Causa Mortis
This month we’ve gone “back to school” with lessons related to GFLF’s core services. I’m glad the title didn’t scare you away, because, let’s be honest, economics class was always a little intimidating. But, fear not! The economics of charitable gifts of life insurance are easy to understand because it means mutual benefits for both you, as the donor, and your fave charity.
It may sound weird at first, but making a charitable donation of your life insurance policy can make for a valuable, tax-wise gift. Plus, there are multiple ways to successfully make a gift of life insurance fit in with your charitable giving goals.
A donor can:
Make a lifetime gift of a life insurance policy;
Name a charity as the beneficiary of a life insurance policy death benefit; and/or,
Take donations that would have made to the favorite charity, use this money to pay premiums toward a life insurance policy, and ultimately leverage the cash into a much larger gift.
Lifetime Gift of Policy
A donor can transfer ownership of a life insurance policy to charity during lifetime. To accomplish the transfer, the donor must complete a change of ownership form that is typically available from the insurance company.
If the policy is not paid-up, the charity will need to maintain the policy until the insured individual’s death to receive the policy benefit. A charity may request that a donor make additional cash gift to cover the ongoing premium payments.
A donor will be making an immediate charitable contribution equal to the fair market value of the policy at the time of transfer. If the donor is taking a federal charitable income tax deduction of $5,000 or more, the donor must obtain a qualified appraisal by a qualified appraiser.
Life Insurance Death Benefit
A beneficiary designation is used to specify who the beneficiary of the life insurance policy will be. A beneficiary designation is usually revocable during the donor’s lifetime and it becomes irrevocable at death. A gift specified in a beneficiary designation will not come into effect until the insured individual’s death.
A donor can specify that a charity will receive a percentage of the total death benefit (e.g., 5% of the total death benefit) or a specific dollar amount.
Tax Consequences
A life insurance policy that is owned by the donor will usually be included in his or her estate for estate tax purposes. The donor will receive an estate tax charitable deduction for amounts that are transferred to charity at death, saving federal estate taxes. (Admittedly, a tiny percentage of Americans are wealthy enough to even have to worry about estate taxes).
A gift of life insurance may allow a donor to leverage available cash to provide a more significant gift to charity than might otherwise be available. For example, a donor might pay $5,000 a year in premiums to purchase a $300,000 life insurance policy that benefits charity. In this situation, the donor’s charitable gift may be far greater by purchasing an insurance policy than if he or she contributed the $5,000 cash to charity each year.
Classic Example
A gift of a life insurance policy can be a good fit for donors who have existing policies that are no longer needed. The classic scenario would be policies purchased while kids were little, as time goes by, now donor has sufficient other assets to provide for children, or children are now adults and no longer require financial help in the event of the death of a parent.
Let’s Talk About How to Make This Giving Option Work For You!
Everyone’s financial, tax, estate planning, and charitable giving situation is unique. It’s highly recommended you consult with an estate planner and/or charitable giving expert so you don’t hit any accidental pitfalls! I offer a free one-hour consult, so don’t hesitate to contact me to get your smart tax-wise gift happen.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/10/Screen-Shot-2018-10-20-at-4.51.05-PM.png527895Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-09-20 16:13:362020-05-18 11:28:45Back to School: Economics of Charitable Gifts of Life Insurance
Constitution Day also stands to recognize everyone who has become an American citizen. According to USCIS, more than 260 naturalization ceremonies were held across the nation as part of this year’s Constitution Week. In fact, before 2004, the day was called Citizenship Day.
For me, the Constitution represents one of the most important legal foundations, on which the world’s oldest constitutional republic is built. That said, we must never forget the privilege it grants us and the duty we all have as citizens to protect it through civic engagement and knowledge. What does Constitution Day mean to you?
“The strength of the Constitution lies entirely in the determination of each citizen to defend it. Only if every single citizen feels duty bound to do his share in this defense are the constitutional rights secure.”
― Albert Einstein
While it’s not the U.S. Constitution, your estate plan is similar in the way that it’s a guiding document that guides people in the future as to your goals and intentions for your property, body, charitable giving, and what you want to happen with the people and pets you care for. So, you can think of yourself as a “founding father” of the legacy you want to leave. Ready to put your “John Hancock” on an estate plan? Get started with my free Estate Plan Questionnaire or contact me.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/09/Screen-Shot-2018-09-18-at-12.27.11-AM.png647952Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-09-17 10:26:072020-05-18 11:28:45Back To School: American History and Constitution Day!
Back to School: Latin Lesson on Gifts Causa Mortis
Wills, Trusts & EstatesElements of Gifts Causa Mortis
A valid inter vivos gift involves:
Delivery of the Gift
The gift must be delivered to the recipient. That’s easy if it’s something handheld like jewelry that you’re wearing, but what about anything that the donor doesn’t have on them personally? So long as the “delivery” is sufficiently symbolic, that will suffice if physical delivery at the time of the gifts is impractical.
Another Hypothetical
Let’s say a donor wanted to make a gift causa mortis of an antique piece of furniture to their niece. At the time the donor was residing in a hospice facility and very clearly toward the very end of her terminal illness. It would be impractical for the law to expect the dying donor to physical deliver the furniture to her niece. As long as the donor gave the niece a symbolic representation of the gift, such as writing out the details of the furniture’s location and details in the presence of a witness, it would likely be found valid upon the donor’s passing.
Another example that applies arose out of a case where a donor’s delivery was found to be valid where she signed the back of her car’s certificate of title to gift the automobile to her brother.
Can I Get a Witness?
To avoid post-mortem litigation by other heirs-at-law or the decedent’s estate’s executor, it’s preferable if the delivery of the gift is witnessed by a third party who can attest to the validity of the gift. Additionally, if there is an option for a piece of writing to be made out detailing the gifts and signed in the presence of a third party, that’s even better.
Revocable & Conditional
Imminent Death
Intervening Recovery
What’s the Difference Between Gifts Causa Mortis and Testamentary Gifts?
How do Gifts Causa Mortis Fit into Taxes?
Final Words on Gifts Causa Mortis
Gifts Causa Mortis or not, there is no substitute for an airtight, updated estate plan. If you have such a plan in place, there’s no need to try and meet all the elements and intricacies of gifts causa mortis.
None of us know when our time will come, and we may not have the opportunity to give away our prized possessions via causa mortis right before death. But, we can know that estate plans never expire and can give you peace of mind that your property will be pass to the people you intend without legal contest (which can arise from gifts of causa mortis).
No questions are dumb questions when it comes to the complex world of property and estates. Don’t hesitate to contact GFLF or schedule a free consult to get your estate planning needs and goals in order.
Back to School: Economics of Charitable Gifts of Life Insurance
Charitable GivingThis month we’ve gone “back to school” with lessons related to GFLF’s core services. I’m glad the title didn’t scare you away, because, let’s be honest, economics class was always a little intimidating. But, fear not! The economics of charitable gifts of life insurance are easy to understand because it means mutual benefits for both you, as the donor, and your fave charity.
It may sound weird at first, but making a charitable donation of your life insurance policy can make for a valuable, tax-wise gift. Plus, there are multiple ways to successfully make a gift of life insurance fit in with your charitable giving goals.
A donor can:
Lifetime Gift of Policy
A donor can transfer ownership of a life insurance policy to charity during lifetime. To accomplish the transfer, the donor must complete a change of ownership form that is typically available from the insurance company.
If the policy is not paid-up, the charity will need to maintain the policy until the insured individual’s death to receive the policy benefit. A charity may request that a donor make additional cash gift to cover the ongoing premium payments.
A donor will be making an immediate charitable contribution equal to the fair market value of the policy at the time of transfer. If the donor is taking a federal charitable income tax deduction of $5,000 or more, the donor must obtain a qualified appraisal by a qualified appraiser.
Life Insurance Death Benefit
A beneficiary designation is used to specify who the beneficiary of the life insurance policy will be. A beneficiary designation is usually revocable during the donor’s lifetime and it becomes irrevocable at death. A gift specified in a beneficiary designation will not come into effect until the insured individual’s death.
Form of Gift
A donor can specify that a charity will receive a percentage of the total death benefit (e.g., 5% of the total death benefit) or a specific dollar amount.
Tax Consequences
A life insurance policy that is owned by the donor will usually be included in his or her estate for estate tax purposes. The donor will receive an estate tax charitable deduction for amounts that are transferred to charity at death, saving federal estate taxes. (Admittedly, a tiny percentage of Americans are wealthy enough to even have to worry about estate taxes).
A Great Planning Opportunity!
A gift of life insurance may allow a donor to leverage available cash to provide a more significant gift to charity than might otherwise be available. For example, a donor might pay $5,000 a year in premiums to purchase a $300,000 life insurance policy that benefits charity. In this situation, the donor’s charitable gift may be far greater by purchasing an insurance policy than if he or she contributed the $5,000 cash to charity each year.
Classic Example
A gift of a life insurance policy can be a good fit for donors who have existing policies that are no longer needed. The classic scenario would be policies purchased while kids were little, as time goes by, now donor has sufficient other assets to provide for children, or children are now adults and no longer require financial help in the event of the death of a parent.
Let’s Talk About How to Make This Giving Option Work For You!
Everyone’s financial, tax, estate planning, and charitable giving situation is unique. It’s highly recommended you consult with an estate planner and/or charitable giving expert so you don’t hit any accidental pitfalls! I offer a free one-hour consult, so don’t hesitate to contact me to get your smart tax-wise gift happen.
Back To School: American History and Constitution Day!
Estates & Estate Planning, EventsWe’re headed “back to school” on the blog this month, and I couldn’t pass up today’s fantastic excuse for a short American history lesson!
Fourth of July gets all the attention for red, white, and blue pride, but Constitution Day is a lesser-known, but still important reason to celebrate America’s values of freedom, democracy, and liberty. Constitution Day commemorates the formation and signing of the U.S. Constitution on September 17, 1787. The Constitution was signed in Pennsylvania at the Constitutional Convention by 39 men including Alexander Hamilton, Benjamin Franklin, James Madison, and George Washington.
There’s a wealth of American history I encourage you to explore to understand in full the lead-up of events that led to the execution of the Constitution. TIME wrote a great piece and the National Archives offers up some great information.
Constitution Day also stands to recognize everyone who has become an American citizen. According to USCIS, more than 260 naturalization ceremonies were held across the nation as part of this year’s Constitution Week. In fact, before 2004, the day was called Citizenship Day.
For me, the Constitution represents one of the most important legal foundations, on which the world’s oldest constitutional republic is built. That said, we must never forget the privilege it grants us and the duty we all have as citizens to protect it through civic engagement and knowledge. What does Constitution Day mean to you?
While it’s not the U.S. Constitution, your estate plan is similar in the way that it’s a guiding document that guides people in the future as to your goals and intentions for your property, body, charitable giving, and what you want to happen with the people and pets you care for. So, you can think of yourself as a “founding father” of the legacy you want to leave. Ready to put your “John Hancock” on an estate plan? Get started with my free Estate Plan Questionnaire or contact me.