§ 17  Lifetime Gifts  [119-122]

 

A.     Personal Property

 

Traditionally, to make an effective gift of personal property, the donor must deliver the property to the donee with the intention to make a gift.  Manual delivery is a particularly important element because it is such strong evidence of intention.  Some tangible items (like a piano) are too big for easy delivery, so constructive delivery may suffice.  Donors can transfer intangible property (like stocks or bank accounts) by manually delivering the stock certificate or bank book evidencing the property.

 

There is now developing a rule allowing the donor to use an intervivos donative document instead manual delivery, even if the tangible item could have been delivered.  Restatement (Third) of Prop. § 6.2, comment c.

 

1.      Gifts Causa Mortis

 

Gifts of personal property made in fear of death then imminent (gifts causa mortis) require delivery and an intention to make a present gift, but unlike most other gifts, they are both revocable and conditional (on the donor dying).  If the donor changes her mind, she can get the property back. Moreover, if the donor survives, the gift is automatically revoked.

 

B.     Real Property

 

Gifts of real property must meet the Statute of Frauds writing requirements and must also be “delivered.”  A common problem is that lay people often do not appreciate the law’s distinction between a lifetime gift and one intended to take effect only at death (and thus requiring Statute of Wills compliance).   See Ferrell v. Stinson, 11 N.W.2d 701 (Iowa 1943).

 

§ 18  Joint Interests  [122-125]

 

The right of the survivor to own the whole is the distinguishing feature of these interests.  When one owner dies, her interest simply disappears, leaving the survivor(s) owning the whole.  Most estate planning problems involving joint interests center around whether and when grantors intended a completed gift.

 

         A.  Real Property

 

Joint tenancy can be an effective probate avoidance device.  However, a deed creating a joint tenancy, unlike a will identifying a beneficiary, is not revocable.  See Gross v. Gross, 781 P.2d 284 (Mont. 1989).

 

         B.  Personal Property [Especially Bank Accounts]

 

In an estate context, perhaps the most common controversy about a jointly held account is whether it was opened only for the “convenience” of one depositor.  If so, there was no completed gift and the property remains in the estate of the depositor.  See Franklin v. Anna National Bank of Anna, 488 N.E.2d 1117 (Ill. App. 1986).  

 

If banks and others were to offer accounts clearly designated as convenience accounts, much litigation could be avoided.  For example, the UPC provides a “check off what you want” form, which includes a “multiple-party account without right of survivorship.” See UPC § 6-204. 

 

A form of ownership peculiar to savings accounts is the so-called “Totten Trust,” sometimes also known simply as a “savings account trust.”  In form, the depositor opens an account in his own name, “as trustee” for someone else.  In fact, there is really no trust relationship established.  Rather, the depositor can withdraw the funds at any time for his own use and the “beneficiary” gets what is left when the depositor/trustee dies.  See In re Totten, 71 N.E. 748 (N.Y. 1904).

 

§ 19  Life Insurance and Other Contracts  [125-127]

 

Despite its functional similarity to wills, life insurance has escaped the “testamentary transfer” label.  The enforceability of life insurance policies is governed by contract law, not the law of wills.

 

§ 20  Retirement Funds  [127-129]

 

The rules surrounding pension plans are extraordinarily complex, and detailed descriptions are beyond the scope of this text.  As a practical matter, most pension plans are governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and the Internal Revenue Code (IRC).

 

Employer plans fall into two broad categories.  “Defined benefit” plans establish each employee’s benefit according to a formula.   “Defined contribution” plans either require or allow employer contributions at various levels.  Accounts are kept for each employee, and whatever has been accumulated before retirement becomes available to that person.

 

§ 21  Using a Will to Change a Will Substitute  [129-130]

 

Sometimes testators will attempt to use their wills to transfer property not subject to probate court jurisdiction.  Often those attempts seek to change who benefits from various will substitutes.  Generally the efforts fail, but the law is not consistent.  Compare In re Schaech’s Will, 31 N.W.2d 614 (Wis. 1948) (will could not change title to will substitutes), with Burkett v. Mott, 733 P.2d. 673 (Ariz. Ct. App. 1986) (will could change a life insurance beneficiary designation).

 

UPC § 6-213(b) prohibits changing by will rights of survivorship or payable-on-death designations in bank accounts, but takes no position regarding other will substitutes.  UTC § 602(c)(2)(A) allows a will to revoke a lifetime trust.