The legal term inter vivos is a Latin phrase meaning “between the living.” An inter vivos gift is a transfer of property from one person to another during the lifetime of the original property holder (as opposed to a testamentary transfer, which takes effect at death only; for more, see our Probate Glossary). Transfers of property during someone’s life avoid probate and fall under special tax regulations. Therefore most states have specific requirements that inter vivos transfers must meet to be valid.
In Mississippi, the requirements of a valid inter vivos gift are: (1) that the donor be capable of making the gift, (2) that the act is voluntary on the donor’s part, (3) that the donor intends to make the gift, (4) that the gift is complete with nothing left to be done, (5) that the property be delivered by the donor and accepted by the donee, and (6) that the gift be gratuitous and irrevocable.
A recent Mississippi Supreme Court case addressed these requirements—particularly the issue of delivery—in a case involving a mother’s attempt to give her son an inter vivos gift of $50,000 to go towards his purchase of her home. The Court held that the inter vivos gift failed because the equity was not properly relinquished and delivered to the intended recipient.
Mary Lagarde owned a home in Bay St. Louis, Mississippi worth approximately $290,000. She had nine children. In 1994, Mary wrote a holographic will stating that three of her children, Christopher, Kevin and Elizabeth, would receive equal shares of her home upon her death. In July 2004, Mary’s son Alan and his wife Lisa made an offer to buy Mary’s home. Mary accepted the offer in October 2004, and they entered into a contract to purchase the home for $250,000.
On November 9, 2004, Mary executed a letter stating that she wanted to give Alan and Lisa a gift of equity in the home. The letter provided a gift of $50,000 of the home’s equity to Alan and Lisa.
In January 2005, Mary died unexpectedly before the sale of the home had been completed. Christopher, Elizabeth and Kevin were appointed executors of Mary’s estate in July 2006. Alan and Lisa brought suit against the executors of Mary’s estate to force them to sell the house (this is also known as a request for specific performance of the terms of the contract). Christopher and Elizabeth were not happy with the agreed upon purchase price or the gift of equity, as both the low sale price and the gift diminished the possible amount they could receive from the sale of the home.
The lower court granted the request for specific performance finding that a valid contract for the sale of the home had been made between Mary and Alan. And they held that Mary made a valid inter vivos gift of $50,000 in the home’s equity to Alan. The court felt that the equity in the home was symbolically delivered when she handed him the paper stating the intent of the gift.
The Supreme Court of Mississippi disagreed with the lower court and held that a valid inter vivos gift was not made because Mary failed to make a present transfer of equity to her son. The gift of equity letter stated: “The source of the gift is gift equity at the time of closing and funding for same subject property.” The gift was not to take place immediately, but when the transfer of the property closed. The property was never closed upon therefore delivery was never made.
The Court relied in part on its earlier decision Meyer v. Meyer. In Meyer the court stated: “To constitute a valid gift inter vivos, the purpose of the donor to make the gift must be clearly and satisfactorily established, and the gift must be complete by actual, constructive, or symbolical delivery without power of revocation.”
Mary’s gift of equity would have remained in her control until she turned the gift over upon the closing of the house. The retained control violates the delivery requirement of a valid inter vivos gift. Thus, the lower court’s decision was reversed. Alana and Lisa still had the option of buying the home for the stated contract price of $250,000 but they no longer had the gift of equity to apply to the purchase of the home.
More careful structuring here could have avoided these issues and likely saved the parties money in attorney fees and court costs. If Mary really intended for the gift to take effect immediately, her estate planning attorney could have used more careful wording in the gift letter to demonstrate an immediate transfer of the equity. If Mary intended the property to pass at death, it should have been included in her Last Will and Testament and executed with testamentary formalities. This case demonstrates the importance of attention to detail in estate planning.
Lagarde v. Lagarde, 2008-CA-01480-COA (Dec. 15, 2009)
Meyer v. Meyer, 106 Miss. 638, 64 So. 420, 424 (1914)
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