The conveyance of something of value from one person, place, or situation to another.
The law recognizes that persons are generally entitled to transfer their assets to whomever they wish and for whatever reason. The most common means of transfer are wills, trusts, and gifts. Increasingly, however, persons are transferring property and money in order to qualify for government-funded nursing care or to avoid paying creditors or the INTERNAL REVENUE SERVICE. State and federal laws prohibit transfers that defraud creditors, however. If a creditor can show that a transfer was made in bad faith and for the purpose of avoiding a lawful debt, the transfer will be voided.
A will is a common way of transferring assets. The testator, the person writing and signing the will, states in writing how the assets of his estate shall be divided and transferred upon his death. The estate of the testator is subject to inheritance taxes, but the remainder is transferred to the heirs and beneficiaries in the will. If a person dies intestate, without writing a will, state statutes direct how the assets shall be divided and transferred among family members.
For persons who have substantial assets, the transfer may be accomplished by using a trust. There are many types of trusts, some of which are part of a will and go into effect upon the death of the testator. Instead of being transferred directly to persons, the assets are transferred to a trustee, who distributes funds based on the terms in the trust documents. The use of a trust generally reduces inheritance taxes. A person may also transfer assets to a trust while living to reduce her INCOME TAX burden. Income earned by the trust will be taxed to the trust, which usually is in a lower tax bracket than the person transferring the assets. The trust must benefit others, however, not just the person transferring the assets.
Living persons may also make gifts to others. An inter vivos gift, which takes effect during the lifetime of the donor and the donee, is irrevocable when made. Federal tax law permits a person to give up to $10,000 yearly to each recipient without having to pay any gift tax or file a gift tax return. All gifts...