Types Of Gifts
The two principal categories of gifts are inter vivos gifts and causa mortis gifts.
Inter vivos gifts Inter vivos is Latin for "between the living" or "from one living person to another." A gift inter vivos is one that is perfected and takes effect during the lifetime of the donor and donee and that is irrevocable when made. It is a voluntary transfer of property, at no cost to the donee, during the normal course of the donor's life.
A gift inter vivos differs from a sale, a loan, or barter since something is given in exchange for the benefit in each of such transfers. Whether the value given is a money price, a percentage interest or an equivalent item of property, or a promise to repay, the element of exchange makes such transfers something other than a gift.
There are a number of special types of inter vivos gifts. Forgiveness of a debt is a gift of the amount of money owed, and delivery can be accomplished by destroying the promissory note signed by the debtor and handing it over to him or her. A share of stock in a corporation may ordinarily be given to someone else by having ownership transferred to the person on the books of the corporation or by having a new stock certificate issued in the person's name. A life insurance policy can generally be given to someone by delivering the policy, but it is more expedient to express in writing that all interest in the policy is assigned, or transferred, to the donee and to notify the insurance company to that effect. Certain states require these formalities since insurance is strictly regulated by state law. Gifts of land can only be made by written transfer.
A donor can limit an inter vivos gift in certain ways. For example, he or she might give someone a life estate in his or her property. When the donee dies, the property reverts to the donor. A donor cannot place other restrictions on a gift if the restrictions would operate to make the gift invalid. If, for example, the donor reserves the power to revoke a gift, there is no gift at all.
Causa Mortis Gifts A gift causa mortis (Latin for "in contemplation of approaching death") is one that is made in anticipation of imminent death. This type of gift takes effect upon the death of the donor from the expected disease or illness. In the event that the donor recovers from the peril, the gift is automatically revoked. Gifts causa mortis only apply to personal property.
A donor who is approaching death might make a gift by putting his or her intention in writing. This procedure is likely to be followed, when, for example, the donee is in another state, and personal delivery is thereby impractical. The delivery requirement is frequently relaxed when a causa mortis gift is involved, since a donor is less likely to be able to make an actual delivery as his or her death approaches. A symbolic delivery is frequently sufficient to show that a gift was made, provided at least some effort to make a delivery is exercised. The OVERT ACT aids a court in its determination as to whether a delivery has been made.
The difference between a gift causa mortis and a testamentary gift made by will is that a will transfers ownership subsequent to the death of the donor, but a gift causa mortis takes effect immediately. In most states, the donee becomes legal owner of the gift as soon as it is given, subject only to the condition that the gift must be returned if the donor does not actually die.
The requirements of a causa mortis gift are essentially the same as a gift inter vivos. In addition, such a gift must be made with a view toward the donor's death, the donor must die of the ailment, and there must be a delivery of the gift.
Gifts causa mortis are usually made in a very informal manner and are frequently made because dying people want to be certain that their dearest possessions go to someone they choose.
A donor who is approaching death might make a gift by putting his or her intention in writing. This procedure is likely to be followed, when, for example, the donee is in another state, and personal delivery is thereby impractical. The courts only permit the donee to keep the gift if the donor clearly intended the gift to take effect at the time it was made. If the gift is made in writing in a will and is intended to become effective only after the donor dies, the gift is a testamentary one. The law in each jurisdiction is very strict about the features that make a will valid. One requirement, for example, is that the will must be signed by witnesses. If the donor writes down that he or she is making a gift, but the writing is neither an immediate gift nor a witnessed will, the donee cannot keep the gift.
The delivery requirement is frequently relaxed when a causa mortis gift is involved, since a donor is less likely to be able to make an actual delivery as his or her death approaches. A symbolic delivery is frequently sufficient to show that a gift was made, provided at least some effort to make a delivery is exercised. The overt act aids a court in its determination as to whether a delivery has been made.
A gift causa mortis is only effective if the donor actually dies. It is not necessary that the donor die immediately, but the person must die of a condition or danger that existed when the gift was made and without an intervening recovery. The donee becomes legal owner of the property in most states from the time the gift is made. The person must, however, later return the gift if the donor does not actually die. If the donor changes his or her mind and revokes the gift, or recovers from the particular illness or physical injury, the gift is invalid. A donor also has the right to require that debts or funeral expenses be paid out of the value of the gift.