When a person gifts estate assets to another during his/her lifetime, Iowa probate law considers these gifts valid until an interested party successfully presents evidence showing the Donor’s acts were ineffective.
Inter vivos gift Donors must possess a sound mind and fully understand how their gifting will affect their heirs, according to Iowa Code.
Interested parties who bring Will or Trust dispute action to recover lost property due to inter vivos gifting hold the heavy burden of proving all elements necessary to win their case. These parties also may file their disputes only after the Donor has passed away.
This week, let’s discuss inter vivos gifting acts and how gifts you receive from loved ones can become legally effective upon delivery.
What is inter vivos gifting?
In estate law, inter vivos gifts are assets given to another person during the Donor’s lifetime. The term “inter vivos” means “between living persons.” Both the Donor and Donee must be alive during the gifting. The Donor must also either physically deliver the property or asset to the Donee or convey it through a written instrument before the Donor’s death.
The following examples show different types of inter vivos gifting:
- Elder Janet rewards her caregiver a $6000 gold bracelet for exemplary services rendered.
- Mother Mary gifts her summer beach home to one of her sons.
- A father places the deed to the family home in his girlfriend’s name.
- Grandma Jane gives her grandson $5000 in cash to pay his tuition immediately.
In contrast, testamentary (post-mortem) gifts take effect upon death—such as intestacy inheritances or specific Will bequests.
How do inter vivos gifts become effective?
When deciding FREDERICK V. SHORMAN in 1966, The Supreme Court of Iowa held that “unlike a contract, consideration is not an element of a gift.” The Court further established three conditions for effective (proper) inter vivos gifting: (i) donative intent, (ii) delivery, and (ii) acceptance:
Donative Intent: A showing that the Donor not only intended to dispense estate assets but he/she also expected that the Donee would accept them. In other words, inter vivos gifts are only effective when there is proof of actual conveyance and acceptance among the parties.
Delivery: Proof that the Donor successfully delivered the gift during his/her lifetime. Typically, this means showing the Donor transferred possession to the Donee in such a way that the Donee could use the gift immediately.
Acceptance: Finally, The Donee must have accepted the Donor’s delivery.
Can another person challenge inter vivos gifting in court?
Interested parties may contest your inter vivos gift if they believe that it was ineffectively executed, delivered, or accepted. Challengers accordingly must show the courts that the gift does not satisfy the elements under SHORMAN.
Contesters often allege that the Donor’s gift was ineffective because an existing mental incapacity prevented the Donor from knowing what he/she was doing at the time. An interested party may also assert that your undue influence over the Donor prevented him/her from forming proper intent.
If the challenger wins the dispute against you, the courts will annul your inter vivos gift and force you to either return the property or reimburse the estate.
What is express gifting vs. implied inter vivos gifting?
Examining how inter vivos gifts are made may help you understand effective gifting under the law.
Express Inter Vivos Gifts: Donations conveyed in writing, signed by both parties, and witnessed by two people who are not beneficiaries of the gift. Iowa Code holds that such witnesses “can be any person over 18 years old who has no interest in the property or obligation on which payment is sought (a disinterested third party).”
Implied Inter Vivos Gifts: When no writing exists and/or no witnesses were present during the gifting, the Donor and the Donee may have formed a binding oral agreement under Iowa state law. However, because oral contracts have less legal force than written ones, you should accept implied inter vivos gifts only when absolutely necessary.
What are mental incapacity allegations in lawsuits?
In estate dispute litigation involving inter vivos gifting, the courts often examine the Donor’s mental capacity or lack thereof at the time of the gifting —including the Donor’s memory, understanding of the act, and its consequences.
When evidence shows an impairment existed, it becomes more difficult for Donees to defend both the capacity and intent elements under SHORMAN. Proof of incapacity implies the Donor did not understand what they were giving away or the nature of the gifting.
Which delivery issues can arise in dispute litigation?
According to the law, Donors must deliver their donated gifts to the Donee during their lifetime. If a Donor plans to gift you property or assets and dies before they’re delivered, the gift may be ineffective. Let’s look at an example:
Harry donated a valuable painting to you, but Harry passed away before he could ship the art to you. No legally binding contract existed between you and Harry because neither party gave the other valid consideration. And according to the elements outlined in SHOREMAN, a personal inter vivos gift delivery never took place.
Therefore, the gifting was ineffective in this scenario, and one of Harry’s beneficiaries could sue you if you somehow received the painting after Harry’s death.
How do estate attorneys help with acceptance rule compliance?
Suppose you plan on accepting an inter vivos gift and want to ensure the courts will uphold it after the Donor’s death. In that case, you should consult with an estate attorney before moving forward.
Remember that it is harder to defend implied (oral) inter vivos gift acts than ones that were made and accepted in writing. Estate attorneys can help you document an effective gifting execution and acceptance by:
- Testing and verifying the mental capacities of parties before gift acceptance.
- Drafting donation agreements and facilitating proper execution with disinterested witnesses.
- Memorializing the Donor’s intent with a declaration that he/she made the gift without any undue influence on your part.
- Notarizing all written agreements and declarations and safekeeping them in case later you encounter Will or Trust dispute action.
In Conclusion …
Iowa estate law allows Donors to participate in inter vivos gifting during their lifetime. However, it’s important to remember that beneficiaries can contest the inter vivos gifts you receive after the Donor’s death.
So, if you are planning on accepting inter vivos gifts and want assurance that the courts will uphold them, you should first consult with an estate attorney—where your counsel will memorialize the gifting act from start to finish.