GIFT OF CHECK NOT COMPLETE UNTIL FUNDS CLEARED?

Estate of Oakley, Date filed: 2022-02-09, Court: Surrogate's Court, Ulster, Judge: Surrogate Sara McGinty, Case Number: 2018-346/B:

"...The objectants contend that $95,000 transferred from decedent to executor in the last few days of his life were not gifts, but were engineered by the executor for his exclusive benefit.

The requirements for a valid inter vivos gift are (1) an intent on the part of the donor to make a gift; (2) acceptance by the donee, and (3) delivery of the gift (Matter of Szabo, 10 NY2d 94 at 98 [1961]). A donee who claims an inter vivos gift of an asset that would otherwise be part of an estate faces a heavy burden: “[t]he proof must be of great probative force and must clearly establish every element of a valid gift” (Matter of Kennedy, 36 A D 2d 549 [1971]).

The $95,000 gift was accomplished by means of 2 checks drawn on decedent’s accounts.1 When a payment or gift is made by check, an agency relationship is created: the payee of the check is authorized, as the payor’s agent, to deposit the check to complete the transfer of funds. The moneys are not “delivered” and payment is not deemed complete until the payee’s bank credits it to their account. Death of the principal terminates the agency. A gift by check is thus complete only if the check has been deposited and credited to the payee/donee’s account during the lifetime of the payor/donor (Matter of Mead, 90 Misc 263 [Sur Ct NY Cty 1915]; aff’d 173 Ad 982 [1916]; aff’d 221 NY 645[1917]); see, also Estate of Horowitz, 2006 NY MIsc LEXIS 6597 [Sur Ct West Cty 2006]). Where such a check is not so delivered prior to the payor/donor’s death, “the gift is incomplete and no valid transfer of the fund is effectuated” (Braunstein v. Russo, 2014 NY Misc LEXIS 1048, *3 [2d Dept 2014]; quoting Matter of Grauds, 43 NYS2d 803, 817 [Sur Ct NY County 1943]).

The bank records offered into evidence reflect that a $45,000 check drawn on decedent’s account was deposited into the executor’s personal KeyBank account on May 30, 2017.2 KeyBank did not credit it to his account until May 31, 2017, five days after his father’s death. This gift was therefore not complete at the decedent’s death and the proceeds must be returned to the estate.

The executor testified that the $50,000 transfer was also accomplished by check. The KeyBank records indicate that the check was deposited at the branch on May 26, 2017, the day his father died. The transfer was not credited to the executor’s account on that date. The Court has not been provided with a record of when the $50,000 was actually credited to the executor’s account, but it must have occurred after May 26th. This payment, too, reflects an incomplete gift and must be reversed by the executor’s payment to the estate in this amount.

Even if the checks had been “delivered” by being deposited and credited to the executor’s personal account before the decedent’s death, the executor has not met the burden of proving that his father was possessed of donative intent when the putative checks were signed (Mirvish v. Mott, 18 NY3d 510, 518 [2012]). When, as here, the donee claims “title to property through a gift inter vivos as against the estate of a decedent,” the clear and convincing standard of proof must be supported by evidence of “great probative force” (Estate of Kennedy, 36 AD2d 549, 550 [3d Dept 1971]). At trial, the executor had the opportunity to meet the elevated burden of proof as to donative intent, but offered nothing other than say it was his father’s desire to make gifts to him for the renovation of the old farm house and to compensate him for his care-giving. No details were offered as to the manner, place or time in which his father expressed the desire to make these gifts. Nor did the executor describe any renovation work he performed or detail the extent and nature of his caregiving responsibilities. The executor’s sister, MaryEllen Van Gordon, who he claimed assisted in the transfer of funds to him, was not called upon to testify.

The transfers themselves were apparently accomplished with only minimal involvement from the decedent: prepared in the final 5 days of decedent’s life, the executor drafted personal checks to himself for $45,000 and $50,000, both from decedent’s bank accounts. His father signed the checks.

In the absence of proof as to decedent’s role in the transfer — and his donative intent — the Court can only conclude that they were completed “not at decedent’s direction, but on [the executor's] own initiative” (Estate of Magacs, 227 AD2d 760, 762 [3d Dept 1996]).

The Court therefore finds that the $95,000 transferred to the executor from his father’s accounts were incomplete gifts at best. The proceeds of these transactions are estate assets and must be returned by the executor to the estate, with interest at the rate of 3 percent per annum from the decedent’s date of death.

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