We all understand what delivery of a gift means, or so we think. After all, we all receive gifts and these are delivered by the donor, by a mail carrier, or by a delivery service. When the item arrives, it has been delivered. But at law, the concept of the “delivery” of a gift is much more complicated.
When a person makes a gift to another during the donor’s lifetime, this is called an inter vivos gift. At times, the person making the gift wishes to retain possession of the gift, all the while “gifting” the item in question to another person. In such a situation, when is the item delivered? To determine the answer, we are going to look at the inter vivos “delivery” of a significant artwork: Gustav Klimt’s “Schloss Kammer am Attersee II,” which sold at auction in 1997 for $23,590,177.
In the case of Gruen v. Gruen, 68 N.Y.2d 48, 505 N.Y.S.2d 849, 496 N.E.2d 869 (1986), Victor Gruen was a prominent architect of Austrian origin with offices in New York and Los Angeles. He purchased “Schloss Kammer am Attersee II” by noted Austrian artist Gustav Klimt in 1959. Two important events occurred in Victor’s life in 1963: he remarried a woman named Kemija, the defendant in this case, and his son Michael by a previous marriage, the plaintiff, turned 21. Upon his son’s achieving majority, Victor gifted him with the painting, a gift that Victor memorialized in two letters signed by him and which were sent to his son Michael. The painting remained in Victor’s possession for the remainder of his life, except for those times when it was loaned out for exhibition purposes.
For the purposes of an inter vivos gift, three elements must be met. The first element is “delivery.” Delivery can be accomplished by a writing or “instrument” to the donee. It is the delivery of the written instrument from the donor to the donee that fulfills this first requirement. In the case of Victor Gruen, he delivered the letters not only to his son but copies were also sent to his lawyer and his accountant.
This also goes to show the second element for an inter vivos gift: donative intent. The donor must intend to make a transfer of present ownership to the donee. Merely intending to give something to someone in the future is not sufficient. The transfer of ownership with an inter vivos gift is immediate. What can be postponed, however, is the right of enjoyment. The donor can continue to enjoy the tangible asset until s/he dies, so long as s/he intends to transfer a present ownership right to the donee. In effect, the donor grants himself a life estate in the tangible asset.
The third element for the completed transfer of an inter vivos gift is acceptance by the donee. The legal presumption is that, absent a renunciation, a gift is deemed accepted if the gift is beneficial to the donee. Since Michael Gruen never renounced or repudiated the gift of the painting, either verbally or through his actions, the gift was deemed accepted. Even the fact that he did not declare the painting in financial affidavits that he submitted as part of his divorce action in 1973 was insufficient to show that Michael had not accepted the painting.
Why is this legal concept of delivery so important? It’s because inter vivos gifts are often part of an estate planning strategy to reduce the corpus of one’s estate by using gifts during one’s lifetime, or as a tax credit on his/her income taxes using charitable trusts. But unless all three elements of “delivery” are met, the gift will fail and will be subject to taxes and penalties.
If you would like to discuss your own personal situation with me, or how an inter vivos gift can be tailored to your needs, you can get a free 30-minute consultation simply by filling out this contact form. I will get back to you promptly.