Gruen Sr. owned a painting
worth $2.5M. He wrote his son a letter saying he could have the painting
when he died. Gruen Sr. died 17 years later.
Gruen Jr. never had physical
possession of the painting, and there was nothing in Gruen Sr.'s will
that gave the painting to Gruen Jr.
In the letter, Gruen Sr.
said that the painting was a birthday present, but that he wanted to keep
it until he died. Then he wrote a second letter telling Gruen Jr. that
his lawyers advised him to destroy the first letter and simply write that
the painting was Gruen Jr.'s immediately (so as to avoid inheritance
taxes).
When someone tells you that
they are giving you something when they die, it is said that they are
retaining life estate.
When you set up a life
estate, you are actually selling (or
giving) part of the property interest to someone else. The part that
they get is known as the remainder. A person can sell or give away the remainder to someone else.
Gruen Jr.'s stepmother was in
physical possession of the painting and refused to hand it over. Gruen
Jr. sued for replevin.
Replevin is an old common law term meaning that someone
has your property and you want it back.
The Trial Court found for the
stepmother. Gruen Jr. appealed.
The Trial Court found that
Gruen Jr. had done nothing to establish the elements of an inter vivos
gift.
An inter vivos gift is one where there is immediate irrevocable
transfer of ownership. It is different from a will, which only awards
ownership after death.
You can't make an inter
vivos gift and still retain life
estate. Property transfer must be
immediate. Otherwise the transfer is invalid unless it's part of a
will.
The Appellate Court reversed
and awarded the painting to Gruen Jr. The stepmother appealed.
The New York Supreme Court
affirmed.
The New York Supreme Court
found that in order to make a valid inter vivos gift, there must be:
Intent on the part of the
donor to make a present transfer.
Delivery of the gift to the
donee (actual or constructive)
Acceptance of the gift by
the donee.
Since all three things
happened, the painting was a valid inter vivos gift, owned by Gruen Jr. immediately, and not
something that Gruen Sr. had willed to Gruen Jr. after death.
Gruen Jr. didn't
technically accept the gift, but the Court felt that it could be
presumed that if someone offers you a multi-million dollar painting you
will accept.
Had Gruen Sr. written to his
son and said, "I give you the painting when I die," that would
not be a valid gift. That would be part of a will.
