Instruments of Donative Intent
Overview
The phrase “donative intent” refers to an individual’s conscious desire to make a gift, which must be distinguished from gifts given by mistake or under pressure. The ability of an individual to make gifts often proves to be a powerful and flexible tool in part of a well-constructed estate plan.
Other Designated Individuals
In the event that an individual becomes incapacitated, the power to gift is often designated towards a specific individual through tools like a power of attorney or trust. The designated individual is then able to make gifts on behalf of the incapacitated individual to the incapacitated individual’s loved ones, family members, or charities. In Massachusetts, it is an established aspect of law that powers not explicitly given to an agent are not to be inferred. Due to this refusal to imply powers, an individual who wishes to transfer donative instruments to a designated individual must clearly specify whom and for what purpose gifts can be made or risk not having the power to gift honored by courts of law.
Should A Gift Be Made During One’s Life Or After Death
Individuals should decide whether to make a gift while the individual is still alive or after the individual’s death. Individuals who use a will to gift to a loved one will not be alive to see the individual inherit the gift. There are other reasons why individuals might decide to gift while still alive such as, for instance, to take certain property out of his or her own estate utilizing the lifetime gift tax exemption.
Tax and Other Consequences
Individuals with large estates often find that giving gifts is a successful way to remove money or other type of property from their estates in order to reduce future estate tax liability. There is also no requirement that income tax be paid by individuals who receive money or property as a gift from another; however, income tax may be due from, for instance, income received from investing such money or rental income from a property received as a gift. Individuals should know that gifting can have negative consequences if the individual is considering applying for Medicaid.
Types Of Gifts
One option is that an individual can make a gift outright to a family member, loved one or a charity of one’s choice. Individuals who are planning on making a gift to a minor, such as, for example, a child or grandchild, should consider making a gift under the Uniform Gift to Minors Act or the Uniform Transfer to Minors Act. Individuals might also consider depositing money into a 529 plan, which is exclusively designated for education purposes. If an individual would like the gift to be made after the individual’s death, a will or trust is often a wise choice. Trusts are more flexible and allow individuals to greatly control the terms of how money or property are gifted.
Resources for Donative Intent
Massachusetts Law about Trusts
http://www.mass.gov/courts/case-legal-res/law-lib/laws-by-subj/about/trusts.html
Massachusetts Court System
http://www.mass.gov/courts/
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