Can an Inheritance Be Given Before a Person Dies?

By John Cromwell

An inheritance is the transfer of property after a person passes away. Property can be transferred at any point before or immediately after the person's death. How that property is transferred depends on the wishes and priorities of the donor. One key issue is whether the donor wants to retain the use and control of the property for the duration of her life or is willing to relinquish it. Another issue is taxes. Many property transfers will be taxed as gifts or as part of an estate. Minimizing tax liability may be an important consideration when determining if and how to transfer property prior to death.

An inheritance is the transfer of property after a person passes away. Property can be transferred at any point before or immediately after the person's death. How that property is transferred depends on the wishes and priorities of the donor. One key issue is whether the donor wants to retain the use and control of the property for the duration of her life or is willing to relinquish it. Another issue is taxes. Many property transfers will be taxed as gifts or as part of an estate. Minimizing tax liability may be an important consideration when determining if and how to transfer property prior to death.

Last Will and Testament

A person’s last will and testament is a document that directs how she wants her property distributed when she passes away. A will does not transfer property before death, but it does allow the person to define what property will be given to whom. Thus, a will can act as a promise of an inheritance from one person to another. That promise is revocable. A person can modify her will by amending it through a codicil, or the will can be revoked in its entirety.

Protect your loved ones. Start My Estate Plan

Gifts Defined

A gift is a property transfer without the expectation of payment. For a gift to legally occur, the donor must be aware that he is transferring the property and intend to do so without receiving compensation. The gift must be delivered, either in terms of actual physical transfer or through some form of symbolic conveyance. An example of symbolic delivery would be handing over the keys to a home. Finally, the recipient must accept the property for the gift to be completed. As a consequence of this transfer, the donor loses all ownership rights over the property.

Trusts

A trust is a device that allows a donor to transfer property to a distinct legal entity. This entity is managed by a chosen individual, called the “trustee,” who oversees the trust’s property in a manner specified by the donor. The trust’s property and income are used to support identified beneficiaries. By having different people act as beneficiary and trustee, the beneficiaries get the advantages of the trust’s property without burdening them with the obligations of maintaining those assets. A revocable living trust can be structured so that the property’s original owner is both beneficiary and trustee, allowing the donor to retain both property control and its benefits. The donor can also change the trust’s underlying terms in a revocable trust, allowing him to choose different beneficiaries, add or subtract property, and select new trustees.

Tax Issues

Transfers of property and assets may trigger one of two different taxes. The federal gift tax levies all transfers made by one individual to another for less than full value. The estate tax is levied on the total value of a decedent’s property as of his death, and is a tax on the right of the estate to distribute its property. As of 2012, only estates valued in excess of $5.12 million are taxed. A gift given by a donor in anticipation of his death and revocable trusts are included in the person’s estate and are not taxed as gifts.

Protect your loved ones. Start My Estate Plan
Does a Verbal Gift Supersede a Will?

References

Related articles

Can a Revocable Trust Be Changed With a Will?

A revocable trust, or living trust, is an estate planning device that allows you to manage your property while you are alive and after your death. It is effective immediately after you execute it, and you can amend the trust during your lifetime. However, it becomes irrevocable at death. Although a will can add additional assets to the trust, it cannot dispose of the assets already in the trust or alter any trust provisions.

How to Establish a Life Estate

Life estates are popular devices for estate planning. A life estate grants a person the use of the property for the duration of her life and upon her death the property is promptly transferred to another beneficiary. This property interest can be created by a deed or will. The creation of this estate has tax implications for the creator of the estate, and possibly to the life tenant. The laws that define property rights, such as life estates, are the exclusive jurisdiction of the state where the property is located.

How Can the Executor of an Estate of a Life Tenant Allocate the Appreciation to the Beneficiaries?

Life estates are often used in estate planning to help expedite the transfer of property between a decedent and his beneficiaries. Due to life estates' unique nature in regard to probate, people can be confused as to what role the executor plays in distributing the underlying property. The purpose of a life estate is to ensure that property is transferred without having to rely on probate. Therefore, the role of the executor is generally limited to ensuring the underlying property is quickly transferred to the next owner after the life tenant passes away. Any appreciation of the property during the tenant's life is transferred to the person receiving the property after the tenant's death.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

How Can a Sole Proprietorship Be Passed On?

A sole proprietorship is a business with one owner-employee who holds assets and is directly responsible for all ...

Family Trusts & Gifts

A family trust is an estate planning device used to transfer assets to family members without those assets having to go ...

Can a Deceased Person's Estate Give Property Under a Trust?

Normally, trusts are used to keep property out of an estate. Having property included in probate delays its ...

Does a Will Supersede a Gifted Deed?

Beneficiaries under a will may be disappointed if they discover upon the death of the maker of the will that he had ...

Browse by category
Ready to Begin? GET STARTED