The Importance of Giving Gifts Properly

– Deathbed gifts made by personal check delivered before death but deposited after death are subject to estate tax.
– The IRS successfully argued that the gifts were incomplete at the moment of death because the decedent had the ability to stop payment on the checks.
– The entire amount of the gift checks, totaling $330,000, was included in the estate, increasing the estate tax by more than $130,000.
– The estate’s argument that the gifts were complete under the doctrine of a gift made in contemplation of death was not accepted by the 3rd Circuit U.S. Court of Appeals. – The donor’s subjective belief is critical to the doctrine of gifts made in contemplation of death.
– In the case of DeMuth, the Court rejected the argument that gifts were made in contemplation of death because there was no evidence of the donor’s belief he was about to die.
– To exclude a deathbed gift by check from the taxable estate, it should be made by bank check or by wire, not by personal or certified check.
– Failure to make gifts via bank check (or by wire) in the DeMuth case led to an increase in the estate tax and legal fees incurred in litigating the matter.

https://www.saul.com/insights/blog/lessons-learn-deathbed-gifts-made-wrong-way