What Is a Gift in Contemplation of Death?

When people plan for what will happen to their property and fortune after they pass away, they often make “gifts in contemplation of death” (also known as “deathbed gifts”). This type of gift transfers the ownership of an asset from one person to another, typically right before the giver passes away. Commonly, these gifts are made to family members or other close friends.

Gifts in contemplation of death must meet the requirements of the law. For example, the donor of the gift must understand and intend that the gift is made in contemplation of death and be aware of the consequences of the gift. In addition, the gift must be given freely and without the threat of invasion of privacy, liability, or harm from the recipient.

Gifts in contemplation of death often take the form of money, jewellery, or personal property. For example, a parent might make out a check to their child to be received upon the parent’s death. On the other hand, a parent might also give away a family heirloom to a family member in anticipation of their death.

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The Benefits of a Gift in Contemplation of Death

There are many potential benefits to making a gift in contemplation of death. In addition to recognizing the recipient, a gift in contemplation of death can also avoid probate court costs. Probate is the legal process of settling an estate after a person passes away, which can be expensive and drawn-out with lengthy time periods.

A gift in contemplation of death can also help reduce estate taxes, as the property will be considered a gift instead of part of the deceased’s estate. This means that the value of the gift is not included in the final estate tax calculations.

Related Legal Concepts

Understanding gift in contemplation of death often involves related estate planning concepts like gift causa mortis, which refers to gifts made in expectation of imminent death. These arrangements frequently intersect with gift tax considerations and the unified estate and gift tax system, as the timing and nature of such transfers can significantly impact tax obligations. Death taxes and transfer in contemplation of death rules also play crucial roles in determining the ultimate tax consequences for both the giver and recipient.

The Bottom Line

A gift in contemplation of death allows individuals to transfer assets before passing away while potentially avoiding probate costs and reducing estate tax burdens. However, these gifts must meet specific legal requirements including the donor’s clear intent and understanding of the consequences. For guidance specific to your situation, always consult a qualified, licensed attorney.