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Gratuitous Transfers
SUNY Buffalo Law School
Joyce, Kenneth F.

 
GRATUITOUS TRANSFERS
 
Fall 2007
Professor Joyce
 
I.        Introduction
1.                  Default rules. We will focus on NY State law, and in the event that there is no state law, we look at common law. Estates and Trusts Law is not as statutorily driven as Tax Law.
 
2.                  Probate Property: passes under the decedent’s will or intestacy
 
3.                  Non-Probate Property: passes under an instrument other than a will (joint tenancy of real and personal property; life insurance; contracts with payable upon death provisions; interests in trusts)
 
II.     Intestate Succession under the EPTL
A.     Intestate Succession
EPTL § 4-1.1à intestate succession. Deals with property not disposed of by will when a person dies. This means property not governable by will (will = probate estate).
Identify the property that is governable by the instrument. This is the probate estate. When someone dies, a will must be probated. It goes through a proceeding. “The probate estate” – ask: is this property governable by will?
Decide intestate succession according to EPTL 4-1.1.
B.     Harry’s Will (page 1 of Supplement)
1.                  Paintingà Hilda doesn’t have to worry about the painting. Who will get the painting? Think about: intention; delivery; and acceptance. The most difficult is intention. If you have a present transfer of an irrevocable interest, whether possessory or future, this removes the property transferred from probate estate it would otherwise be in.
·        Gruen v. Gruen (p. 46 of CB): son received two letters regarding a painting from his father. The second letter told him to destroy the first letter. The first letter said happy birthday, the painting is yours, but I want to keep it in my apartment. The second letter said the painting is yours (but nothing about keeping it in the apartment). The man’s lawyer and accountant told him to send the second letter so he wouldn’t have to pay a tax on the gift. If he gives away property and retains a life estate, then his estate will pay a tax on it. Mr. Gruen was told that if the IRS hears about the first letter, they will say he has a retained life estate and the son will have to pay tax on the painting. So he sent the second letter. This was bad advice. The IRS will find out and say that the father and son had an agreement, and they will impute a life estate and it will still be taxed anyway. Destroying the letter won’t make a difference. Telling your client to do this could warrant disbarment! This case is about whether there was an effective gift of the painting during the life of Mr. Gruen so that the painting is not in any estate. It is classified as “other.” If it is “other,” then it is not covered by the will.
·        Donative Intentà there must be intent to make a present transfer. See page 48. Mr. Gruen did not intend that the son was to receive the painting now, he just intended that the son receive the painting upon his death. Is the question whether the father wanted to make a present transfer, or a present interest?
·        Present vs. Future Interestà present interest example (you can use my driveway now). Future interest example (you can use the painting later). So, the question from Gruen is not about transferring a present interest. It is about transferring a life estate. The question is about whether he wanted to transfer a future interest! He had a present intention to transfer a future interest. What makes this different from what the defendant is saying: that this is not a present transfer of any interest in the painting, but it is an invalid attempt to transfer it at death. The second letter in Gruen is really an irrevocable transfer. Basically, the concept from Gruen is: you can make an irrevocable transfer of a future interest,

·        If this was a joint tenancy, then what? It would STILL go to the joint tenant, not to George Washington! You can alienate your own half, creating a tenancy in common. There is half revocability in a joint tenancy. But that half is still not governable by will. 
·        Joint tenancyà this is an inter vivos property device that has right of survivorship. Can transfer your own half while alive, but can’t use your will to distribute your half.
·        Tenancy in Commonà if Harry transferred his half of the joint tenancy to George while he was alive, thereby creating a tenancy in common, then what would happen? The right of partition could be used by George to get Hilda to sell so he can take his share.
4.                  Bank Account (held solely by Harry)à property in his own name. There are no strings attached. So this is probate property! It will go to George Washington. BUT: George Washington only gets $10,000!
·        SEE ALSO § 5-3.1(a)à exemption for benefit of family. It exempts certain property (by giving it to the family) to keep it from the decedent’s creditors. This section also takes away decedent’s ability to govern it by will. 5-3.1(a)(5) HILDA WILL TAKE $15,000! Under this section, Hilda has protection. 
Joint Bank Account w/Harry’s Daughterà there is a balance of $10,000 in the account. Right before he died, Harry took out a large sum of money (it was at $18,000, and he took out $8,000). Who gets the money? This is sort of like the house example. This is a joint tenancy.