Many people cannot imagine their families going to battle in court over the terms of their will after their passing. But it is an unfortunate reality that grief and probate can bring out the worst in people. Litigation over an estate is all too common. One significant source of this can be deathbed gifting or the practice of giving large gifts of assets and property to intended heirs in an individual’s final days. While many people think this might be a good idea because it helps the asset stay out of the probate process and out of the courts, that can be a mistaken belief.
Why Avoid Deathbed Gifting?
One substantial reason to avoid deathbed gifting is that it can result in heated litigation. Last-minute and end-of-life gifts can raise a lot of questions. Taking the time to think through the worst-case scenario can help avoid a costly mistake later down the road.
For one, these assets are often already accounted for in an aging individual’s last will and testament. While gifts typically supersede the terms of a will, the circumstances surrounding a large gift can be murky. The person who received the gift may have a difficult time proving the existence of the gift or the intention of the gift giver. And if the original beneficiaries of the asset are not the ultimate gift recipient, tension can arise.
Additionally, this can create a question of whether the gift giver was unduly influenced by the recipient. Deathbed gifting can often be done while the individual is suffering from Alzheimer’s or dementia, illness that requires heavy medication, extreme pain, or other judgment-impairing ailments. This could call the giver’s competence into question. In the instance of a gift to a caretaker—whether family or hired—questions of coercion or fraud can emerge.
If the executor or administrator of the estate comes aware of these potential scenarios, it is their duty to investigate and potentially recover the assets. This will lead to more court interference and potential litigation—exactly what the gift giver was, in all likelihood, trying to avoid.
There are also complex tax implications that can arise. Tax basis step-ups are common when an asset is within an estate, and these can save your heirs from hefty capital gains taxes, if applicable. The misconception that gifts avoid substantial inheritance taxes is misplaced, especially given the relatively high estate tax exclusion in place federally. And fortunately, Colorado is a state in the majority, with no additional estate tax and no inheritance tax. The tax laws are ever-changing and highly complex, and the outcome of any gifting is best assessed by an estate planning attorney.
Boulder, Colorado Estate Planning Attorneys Dedicated to Solving Clients’ Issues
For help with taxes and avoiding litigation, contact an experienced Boulder estate planning attorney. Braverman Law Group is here to help clients craft customized estate plans uniquely tailored to every family and individual’s needs. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.