Gruen
Sr. owned a painting.He
wrote his son a letter saying he could have the painting upon the elder
Gruen's death.Gruen Sr. died
17 years later.
Gruen
Jr. never had physical possession of the painting.
Gruen
Sr. had written a letter to Gruen Jr. saying 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.
If
you've given away the remainder,
then you can't sell the property to someone else, since you don't own
100% of the painting.You
can sell the life estate,
which gives someone use of the property until you die.
If
you have given away the remainder,
you are essentially holding the remainder's interest in trust.If you negligently allow the property to be
destroyed, you are liable for a tort claim from the owner of the remainder.
The
painting was by Gustav Klimt, and worth $2.5M.
Gruen
Jr.'s stepmother was in physical possession of the painting.Gruen Jr. sued for replevin.
There
was nothing in Gruen Sr.'s will that gave the painting to Gruen Jr.
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 decision to award the painting to
Gruen Jr.
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 New York Supreme 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.
