Discussion:Gift just before death

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Discussion Forum Index --> Tax Questions --> Gift just before death


Mcthom (talk|edits) said:

14 May 2007
My client's daughter wrote checks for gifts to siblings, spouses, and grandchildren the day before my client died. None of the checks cleared my client's bank account before she died. I know that the amount of the gifts are added back into the estate and reported as part of her cash balance at death. My question is, do I report these gifts on Form 709 even though they are being reported as part of the taxable estate?

Kevinh5 (talk|edits) said:

14 May 2007
they weren't completed gifts, no 709, yes 706

Kevinh5 (talk|edits) said:

14 May 2007
The executor may have a right to request these back from the recipients. The ultimate beneficiaries may object to this, especially if the taxpayer didn't write the checks, but her daughter did, as you wrote.

Riley2 (talk|edits) said:

14 May 2007
The fact that none of the checks cleared before death is not relevant. If there was enough money in the account at the time of the gift to cover the outstanding checks, under the "relationship back" doctrine, the gifts would be treated as completed gifts as long as the decedent had the capacity under state law to make a gift.

Kevinh5 (talk|edits) said:

14 May 2007
Riley, please see Estate of Mary Rosano, 99-6299, US Court of Appeals (2nd Circuit)

Mary Rosano held that the Relationship Back doctrine does not apply

more on Relationship Back doctrine & why it doesn't apply here

A certified or cashier's check given just before death would have been a completed gift, because the donor couldn't change his mind and cancel the check like he could with a regular check. Thus, he would have given up dominion and control at the time he hands over the cashier's check.

Riley2 (talk|edits) said:

15 May 2007
The applicability of the relationship back doctrine turns on whether the gift is completed under state law. I apologize for applying California law to my original response.

The Rosano decision turned on New York state law which provided, at the time of the decision, that a gift by check is not complete until the check is cashed by the donor’s bank. Under California state law, for example, the gift must be “perfected” prior to death in order to be a completed gift. Presenting the check to the donor’s bank is only one of several ways in which the gift may be “perfected” under California law.

I guess the obvious question here is whether the gifts were considered completed under state law.

Mcthom (talk|edits) said:

21 May 2007
This transaction occurred in Texas. It is my understanding that the checks must have cleared the decedent's bank account before her death in order to be completed gifts. The estate attorney thinks that the gifts should still be reported on 709 but added back into the estate on 706. I don't think that is right. I think that the gifts are added back to the cash balance on Form 706 and not reported at all on Form 709.

Riley2 (talk|edits) said:

21 May 2007
If the attorney is telling you that, under Texas law, the decedent had not parted with “dominion and control” over the funds, then the gift was not complete under Rev. Ruling 96-56. The proper treatment would be to add the funds back to the checking account balance on Form 706.

I cannot tell you how Texas law defines “dominion and control.” For example, in some states, the donor relinquishes dominion and control if the checks are accompanied by a gift letter. In other states, the donor relinquishes dominion and control if the checks are acquired by a holder in due course. In many states, the donor relinquishes dominion and control only when the check clears the bank (except in the case of certified checks).

The attorney’s recommendation to file a 709 with an adjustment on Form 706 would be correct if the gifts were includible under Sec. 2035 or 2040 (obviously not the case here).

Dennis (talk|edits) said:

22 May 2007
There is a $12K per person difference and if that is what the attorney is looking for here I would show him the relevant citations and if it is his legal opinion these were completed gifts under Texas law note it in your files and follow instructions. If you feel your opinion is better than his, walk.

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