You would think that giving a gift would be easy. You would be wrong.
People have fumbled with the law of gifts for years. They have tried, unsuccessfully, gifting in the future, characterizing business transactions as gifting to avoid taxes, and taking back completed gifts.
Why is making a gift so darn difficult? Because to be successful, a gift must meet three requirements: intent to make a gift; delivery of the gift; and acceptance of the gift.
Then you add the details. Each element has to be proven by clear and convincing evidence. A gift promised in the future is no gift at all. “Delivery” requires taking a definite action (like signing the Deed to a gifted house).
Even delivering a wrapped package isn’t a completed gift. The recipient can still refuse the intended gift (oh, really, thanks for the schizophrenic feral cat, but no thanks).
The law of Gifts is so intricate that it invokes the usage of Latin. Gifts can be made “inter vivos” (during the donor’s lifetime) or “causa mortis”. A gift is made “causa mortis” when it is made in contemplation of death from a present illness or anticipated peril (I am going on my first sky dive, take my diamond necklace). The circumstances must be such as to show that the donor intended the gift to take effect when made, but if the donor should recover or survive, the property would be restored to him (the sky dive was fun, I want my diamond necklace back). A gift causa mortis is the ultimate claw-back, and often this leaves the recipient in an awkward position (you know what is really fun? Skydiving TWICE).
Even the IRS gets into the gift-giving act. A donor can make an annual gift of $14,000 (this amount occasionally increases) to each recipient, and never has to report it to the IRS. A gift over that amount needs to be reported, but isn’t taxable unless the TOTAL amount of life-time gifting exceeds $5.43 million dollars (this increases to $5.45 million in 2016).
Be ye donor or recipient, gifting should not be taken lightly.
Hammerle Finley Law Firm. Give us a call. We can help.
