I often encounter clients who automatically believe that creating a will is the best option for passing on their assets to their loved ones. However, I am not just a lawyer, but also a strategist with the ultimate goal of identifying the most suitable and tailored solution to meet the client’s specific needs and objectives. Therefore, while wills have traditionally been seen as the gold standard in estate planning, I want to challenge this common assumption and propose an alternative: inter vivos transfers, commonly referred to as living transfers or transfers by gift.
In this article, I’ll explain what inter vivos transfers are, who they may be more suitable for, and compare the costs, complexities, and benefits of this approach versus a traditional will.
What are Inter Vivos Transfers?
Inter vivos transfers are essentially gifts or transfers of property made during a person’s lifetime. These transfers can include anything from real estate, vehicles, and business interests to financial accounts. By transferring assets while still alive, an individual can avoid probate—the often long, complicated, and expensive process required to validate a will and settle an estate after someone has passed away.
Why Consider Inter Vivos Transfers?
There are several key benefits to inter vivos transfers that make them an attractive option for individuals, especially those with significant assets or specific concerns about how their estate will be managed after their passing:
- Avoiding Probate Costs: Probate can be extremely expensive. In many jurisdictions, legal fees, executor fees, court costs, and appraisal fees can add up to a substantial percentage of the estate’s value. By using inter vivos transfers, you avoid these expenses altogether. For those with large estates, the cost savings alone can make this approach more attractive.
- Time Efficiency: Probate is notoriously time-consuming and can drag on for months, if not years. Inter vivos transfers, on the other hand, take a lot less time and allow the recipient to benefit from the assets immediately without waiting for the court’s approval.
- Privacy: Probate is a public process. Once a will goes through probate, the details of the estate, including the nature and value of the assets, become public records. If privacy is important to you, an inter vivos transfer ensures that your affairs remain confidential. This can be especially relevant for those who do not want their financial matters publicly disclosed.
- Control Over Distribution: By transferring assets during your lifetime, you maintain control over how and when your property is distributed. Especially since more than one person can legally have possession and control over the same property simultaneously. This can be advantageous for those who wish to ensure that their assets are managed properly or want to ensure that family disputes are minimized after their passing.
Who Might Benefit Most from Inter Vivos Transfers?
Inter vivos transfers can be particularly beneficial for:
- High-Net-Worth Individuals: If you own substantial property or assets, avoiding probate’s high fees and time costs may be a primary concern. Inter vivos transfers allow you to distribute your wealth without probate court involvement.
- Real Estate Owners: Since real estate tends to be one of the most valuable parts of an estate, transferring property through inter vivos gifting can help avoid probate complications, especially if you own multiple properties or international real estate.
- People Looking to Minimize Family Conflict: If you’re concerned about family disputes arising over the distribution of your assets, making inter vivos transfers allows you to decide how your assets are distributed and, ideally, clarify your intentions during your lifetime, especially where children are concerned.
- Business Owners: Inter vivos transfers are useful for business owners who want to hand over control of their business to a successor. By gradually transferring shares or ownership interest, you can ensure a smooth transition and continued success of the business without waiting for probate.
How Do Wills and Inter Vivos Transfers Compare?
Wills:
- Cost: Wills are relatively inexpensive to create, but the probate process can be costly.
- Flexibility: Wills offer more flexibility for making changes over time. You can easily revise a will if your circumstances change.
- Timing: A will only takes effect after death, so the assets cannot be distributed until then.
- Privacy: Wills become part of the public record once they go through probate.
Inter Vivos Transfers:
- Cost: Inter vivos transfers can involve legal costs upfront, but there is no need to pay probate fees later.
- Timing: These transfers happen during your lifetime, giving you more immediate control over how your assets are distributed.
- Flexibility: Once an inter vivos transfer is made, it’s typically irrevocable. This means you cannot change your mind about who receives the asset unless you have structured it with conditions.
- Privacy: The transfer is private and does not require public disclosure.
So, Which Option Is Right for You?
The decision between a will and inter vivos transfers depends on various factors, including the size of your estate, your priorities (e.g., privacy, cost, timing), and the specific assets you hold. For individuals with large estates, real estate holdings, or concerns about family disputes, inter vivos transfers can be a powerful tool for estate planning.
For those with simpler estates or those who wish to maintain more control over their assets until death, a will may be the better option. Ultimately, each case is unique, and it’s essential to evaluate your circumstances carefully and seek personalized legal advice.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
