Monday, October 26, 2020

Gifts Mean No Take Backs – Usually

LAW MATTERS

 

 

We just finished what most agree is the primary gifting season of the year. But, gifts are made all year round and can become the subject of dispute. Some believe they own a gift, and later find out the “giver” did not think a gift was made. In other cases, siblings might challenge a purported gift to a brother or sister after the death of the parent. There can be much argument concerning gifts.

There are two types of gifts, lifetime (completed during life) and causa mortis (made in contemplation of imminent death).

There are three elements to a lifetime gift: intent to make a gift, delivery of the gift and acceptance by the recipient.

Intent to make a gift means the person must intend a gift and gives up all claim and ownership. Intent is one-sided and is not determined by belief or perception of the recipient. The critical aspect is that a gift is intended to pass ownership immediately. That is far different from someone stating he or she a will make a gift in the future. Expression of intent to give a gift at some later date, places no rights in the purported recipient, as there is no delivery nor loss of dominion and control by the owner.

 

 

The rules are relaxed somewhat for a gift causa mortis. That is a gift someone makes when ill or otherwise death is imminent and the gift is to take effect only when the person dies. Because such gifts are conditioned on the donor’s death, if the donor survives, the gift is not effective and even if delivered the donor can usually get it back. Gifts causa mortis are often the subject of litigation because they can change distribution provided in someone’s will or a living trust, opening the door for dispute over intent, effect and the conflict over formalities required in a will or trust and the informality of gift causa mortis. Perhaps for that reason, real estate cannot be the subject of a gift causa mortis.

Delivery is the second element of a gift and as one might expect, delivery can take many forms. Delivery is required even on a gift causa mortis. Delivery means the donor has provided the recipient with possession and has given up dominion and control. The type of delivery required is generally determined by the type of property and location of the gifted item.

Delivery of a piece of jewelry is simple to understand. It means passing the item from one person to another. Other assets can be more problematic. A motor vehicle can be delivered to an individual, but transfer of ownership may require execution of a title document. Some cases have held delivery of keys to a car sufficient. Delivery of the title document without the car should be sufficient but delivery of the car without the title may not establish donative intent. Letters, notes and informal writings have almost always been insufficient to meet the delivery requirement.

Delivery of financial accounts is also different. One does not have to withdraw the funds in an account to make delivery. Delivery can be accomplished by changing title on the account. Adding a name may seem sufficient, but Florida has numerous cases under which creditors or siblings argue that when a child has been added to an account, it is little more than for convenience and access during life and not a completed gift. Exact wording of the account documents, access and use by the parties during life and even expression of intent by the donor become evidence.

Gifts can be made that are not effective until some point in the future. Most of those gifts are probably contracts of sorts, such as when a grandparent offers to give a grandchild $10,000 if the grandchild graduates from high school with honors. In other cases, the future gift becomes an obligation when the purported recipient has spent money in reliance on the gift or as otherwise changed position to his or her detriment. Otherwise, a promise to make a gift in the future is generally not binding. A donor can also create a contract under which a gift will be made, such as a payable on death stock or bank account. But, that gift is not effective until the donor dies and can be changed or revoked at any time.

The third element to complete a gift is acceptance by the donee. Acceptance involves the recipient exercising dominion and control over the gift. In some cases, acceptance is presumed. Gifts to an infant are a good example, since the infant cannot exercise dominion and control. Gifts between husband and wife may also be presumed.

The element of acceptance can be important as an intended recipient may not want the gift. That might be particularly true of land, where an owner seeks to give the property to an unexpecting donee. The donee might not even know of a recorded deed until years later. If the donee has not exercised dominion and control, the gift is not complete and the donee may disclaim liability for an ownership of the property. That does not mean that a secret deed is ineffective. If a deed is recorded transferring title or adding another owner, the added owner will most certainly have to execute a deed to undo the transfer or, court action will be needed to determine if the gift was effective.

What about an engagement ring? Florida courts have determined an engagement ring is a gift made in contemplation of marriage. If the marriage does not take place, the donor is entitled to the ring. If the marriage does take place, the ring is the property of the recipient, even if the couple later divorces.

A completed gift vests title in the recipient. There can be much argument when it is not clear that all three gift elements are met. The arguments are fueled by potential financial benefit to a person challenging the gift. Persons wishing to make gifts, effective now or in the future, I will advise to tread carefully.

William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.

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