Hotly Contested: Inter Vivos Gifts

In legal terms, transferring property to someone is referred to as making an inter vivos gift. This type of lifetime transfer may seem like an expedient way to arrange for assets to already be owned by someone else when we die, thus simplifying the administration of our affairs and bypassing probate too. Attorneys caution, however, that when valuable property changes hands late in life—perhaps during an illness or without legal counsel—it invites scrutiny. Far from a shortcut, inter vivos gifts can spark intense, lengthy, and costly probate litigation. Read on for case examples and advice from estate planning professionals. 

Probate Litigation Is Costly and Time Consuming

If not carefully handled, inter vivos gifts can backfire spectacularly, such that instead of “sparing” a loved one from the customary public probate process, they actually result in probate litigation. Though often confused, probate and probate litigation are not the same. Ordinarily, the probate process ensures that when we die, our debts are paid off and the remaining assets distributed, either in accordance with intentions written in a will, or through state laws of intestacy. Though it can take some time (6 to 18 months), and administrative wear and tear, probate simply provides a cooperative, public roadmap for settling the affairs of the deceased. On the other hand, probate litigation only occurs when there is a dispute that must be resolved through the court before any assets can be distributed. Probate litigation is notoriously time consuming, costly, and damaging to relationships. Common reasons for probate litigation include conflicts stemming from accusations of “undue influence,” claims that a will is a forgery, or disagreements over a chosen executor’s competence in managing the estate. 

Jordan Inver, an Associate at New Jersey based Stark&Stark underscores that especially when done at the last minute, an inter vivos gift can result in a “non-probate asset” (the gifted property) turning into a “probate battleground,” as “intent is questioned and expectations collide.” To exemplify how inter vivos gifts can go awry, Inver points to the Matter of the Estate of David Buccafusca. Noting that this case “centered on the ownership of a residential property in New Jersey and a deed that was executed less than twenty‑four hours before the property owner’s death,” Inver shares:

• • The decedent, David Buccafusca, was suffering from advanced cancer and receiving hospice care at the time he signed the deed transferring his ownership interest in the home to individuals who were living in the property.
    • After Mr. Buccafusca’s death, his only child, acting as administrator of the estate, challenged the transfer. The estate argued that the deed was not a valid inter vivos gift and should be set aside because the decedent lacked the mental and physical capacity to understand the transaction and because the transfer was the product of undue influence during a period of extreme dependency. The estate further asserted that the circumstances surrounding the deed – its timing, the decedent’s condition, and the involvement of the recipients – raised serious questions about whether the transfer reflected the decedent’s true intent.

Pointing out that deeds and written transfer instruments are given significant weight by courts “even when they are executed under emotionally charged or unsettling circumstances,” Inver explains that ultimately, in the Matter of the Estate of David Buccafusca, both the trial court and the New Jersey Appellate Division upheld the inter vivos gift: “The courts emphasized that a formally executed deed is strong evidence of intent and that suspicion alone, even when a transfer occurs shortly before death, is not enough to invalidate a lifetime gift. Without sufficient admissible evidence of coercion, domination, or a lack of capacity, the estate could not overcome the high burden required to undo the transfer.”

Legally Enforceable: Wills and Trusts

To prevent the heartache of loved ones, as well as the waste of time and money involved in probate litigation, proactive estate planning is best. Having courageous conversations with relations and close friends about decisions and intentions is also wise, especially if choices may strike some as surprising or hurtful. Even if not everyone agrees with your ultimate decisions and arrangements, it’s best for everyone involved to hear the news from you, while you are “alive and well.” 

A fulsome estate plan is anchored by a will and or trust, and these are legally enforceable documents: courts do not accept frivolous claims aimed at modifications, and not just anyone can randomly attempt to bring a claim. To challenge an estate plan, as Varak Law explains:

A person must have what is called “standing,” or the legal right to challenge an estate planning document. A person who receives property from the decedent, and was designated in their will as a beneficiary, may file a written opposition to the probate of the will at any time before the hearing of the petition for probate. An “interested person” may also challenge the will, including an heir, child, spouse, creditor, settlor, beneficiary, or any person who has a legal property right in or a claim against the estate of the decedent. Wills and trusts can be challenged by making a claim that the person lacked mental capacity to make the document. If they were sick or so impaired that they did not know what they were signing, or they did not fully understand the contents of the documents, they may be considered incapacitated, and the will or trust may be successfully challenged.

Understanding and Obtaining Probate Bonds

Many probate courts standardly require a probate bond for the protection of the estate, before an individual is granted the authority to manage the assets of the deceased. Essentially, a probate bond acts as a financial guarantee. It ensures that the appointed fiduciary for the estate, such as an executor, administrator, or personal representative, performs their duties according to the law. If a fiduciary is found guilty of misconduct or makes a costly error, the bond protects the heirs, beneficiaries, and creditors from financial loss. 

Probate bonds are sometimes alternatively referred to as estate, executor, personal representative, surrogate, administrator or fiduciary bonds. Colonial Surety Company makes it quick and easy to obtain probate bonds that meet the specific requirements of courts in every state, via a user-friendly online service. Simply quote and obtain the required bond, and then instantly download and e-file it with the court.

Click Here For Probate Bonds (aka Estate, Fiduciary or Executor or Bonds) 

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