Estate of Lucille R. Devlin v. Commissioner
| Decision Date | 14 December 1999 |
| Docket Number | Docket No. 8595-98. |
| Citation | 78 T.C.M. 948 |
| Parties | Estate of Lucille R. Devlin, Deceased, C. Ronald Lambert, Executor v. Commissioner. |
| Court | U.S. Tax Court |
Clark J. Grant, for the petitioner. Deanna R. Kibler and Albert B. Kerkhove, for the respondent.
Respondent determined a deficiency in petitioner's Federal estate tax in the amount of $25,735.95. After concessions,1 the sole issue for decision is whether decedent's gross estate includes gifts that were authorized by a State court order issued before decedent's death but were made after decedent's death.
The instant case was submitted fully stipulated pursuant to Rule 122.2 The facts stipulated by the parties are incorporated herein by reference and are found as facts in the instant case.
C. Ronald Lambert is the executor of the Estate of Lucille R. Devlin and the son of Lucille Devlin (decedent). At the time the petition was filed, C. Ronald Lambert resided in Columbus, Nebraska. When she died, decedent was a resident of Columbus, Nebraska.
Decedent had another son, Randall T. Lambert, who married Patricia Lambert and had three children: Cynthia Lambert, Sandra Lambert, and Randall T. Lambert, Jr. C. Ronald Lambert married Charlotte K. Lambert and had three children: Mark Lambert, Kimberly Lambert, and Tiffanie Lambert.
On January 8, 1986, the county court of Platte County, Nebraska (county court), appointed Randall T. Lambert and C. Ronald Lambert, as guardians-conservators for decedent pursuant to Neb. Rev. Stat. sec. 30-2630(2) (Reissue 1995). Randall T. Lambert died on April 19, 1986. On August 28, 1986, the county court appointed C. Ronald Lambert as sole guardian-conservator for decedent. During 1991, 1992, 1993, and 1994, C. Ronald Lambert, as decedent's guardian-conservator, made applications to the county court for authority to make certain gifts to decedent's son, daughters-in-law, and grandchildren. The applications were granted, and the authorized gifts were made.
During 1995, C. Ronald Lambert, as decedent's guardian-conservator, applied to the county court for authority to make certain gifts. On April 26, 1995, the county court issued an order (order) authorizing, but not requiring, C. Ronald Lambert to make gifts in cash in the following amounts to decedent's daughter-in-law and grandchildren:
Randa T. Lambert, Jr. ................ $10,000
Sandra Lambert ....................... 10,000
Cynthia Lambert ...................... 10,000
Mark Lambert ......................... 6,666
Kim Lambert .......................... 6,666
Tiffanie Lambert ..................... 6,666
Patricia Lambert Gulley .............. 10,000
The order also authorized, but did not require, C. Ronald Lambert to make a gift of real estate having a value of $20,000 to himself and his wife Charlotte K. Lambert as tenants in common. Before decedent's death, C. Ronald Lambert, pursuant to the order, conveyed the real estate to himself and Charlotte Lambert as tenants in common.
On October 1, 1995, decedent died. At the time of decedent's death, her estate possessed insufficient liquid assets to make the cash gifts authorized by the order. On October 16, 1995, decedent's estate made the cash distributions authorized by the order. Decedent's estate's tax return claimed that the gifts made pursuant to the order, but after decedent's death, were not includable in decedent's gross estate. In the notice of deficiency issued by respondent in the instant case, respondent determined that those gifts were includable in decedent's gross estate for estate tax purposes.
Section 2001 imposes a tax on the taxable estate of every decedent who is a citizen or resident of the United States. The taxable estate is defined as the gross estate less deductions allowed. See sec. 2051. Section 2033 provides that a decedent's gross estate includes "the value of all property to the extent of the interest therein of decedent at the time of his death."
In the instant case, we must decide whether the gifts made to decedent's daughter-in-law and grandchildren pursuant to the order, but after decedent's death, are includable in decedent's gross estate. Respondent argues that such gifts were incomplete on the date of decedent's death and, accordingly, should be included in decedent's gross estate. Petitioner argues that on the date that decedent's guardian-conservator conveyed the real property to C. Ronald Lambert and Charlotte Lambert as tenants in common, decedent's guardian-conservator breached a fiduciary duty to the remaining beneficiaries covered by the order. That breach, petitioner contends, resulted in a constructive trust on decedent's property to the extent of the gifts authorized but not yet made. Accordingly, petitioner argues that, when the remaining gifts were completed, they related back to the date of the creation of the constructive trust. Consequently, petitioner argues that such gifts should not be included in decedent's gross estate.3 Petitioner bears the burden of proof. See Rule 142. That the instant case was submitted to the Court fully stipulated does not relieve petitioner of that burden. King's Court Mobile Home Park, Inc. v. Commissioner [Dec. 48,173], 98 T.C. 511, 517 (1992).
Morgan v. Commissioner [40-1 USTC ¶ 9210], 309 U.S. 78, 80 (1940). Nebraska law provides, that in order for a conveyance to be a completed intervivos gift, there must be donative intent, delivery, and acceptance. See Lewis v. Poduska, 481 N.W.2d. 898, 902 (Neb. 1992). Although Nebraska courts have sustained gifts where delivery was incomplete, they have done so only where it is clear that the donor took all of the necessary steps to complete the gift and the possibility that completion of the gift might fail was in the hands of another party. See Rorabaugh v. Garvis, 252 N.W.2d 161 (Neb. 1977) ().
For Federal gift tax purposes, a transfer of property is considered complete only to the extent that "the donor has so parted with dominion and control as to leave in him no power to change its disposition, whether for his own benefit or for the benefit of another". Sec. 25.2511-2(b), Gift Tax Regs. To evaluate whether a gift has been completed, we look to the "objective facts of the transfer and the circumstances under which it [the gift] is made". Sec. 25.2511-1(g)(1), Gift Tax Regs.
In the instant case, there is no indication that any steps were taken toward delivery of the gifts or the cessation of dominion and control over the property that was the subject of the claimed gifts. With the exception of conveying the real estate to C. Ronald Lambert and his wife, decedent's guardian-conservator took no steps to effect delivery of the other gifts authorized by the order. Indeed, immediately prior to the date of decedent's death, she had insufficient liquid assets to pay the authorized cash gifts. Petitioner has not shown that decedent's guardian-conservator took any steps to make the cash gifts authorized, but not required, by the order. Accordingly, we find that, pursuant to Nebraska law, petitioner has not shown that the gifts made after decedent's death were complete on the date of decedent's death.
As to petitioner's argument that gifts authorized by the order were completed when decedent's guardian-conservator conveyed the real estate to C. Ronald Lambert and Charlotte Lambert, we disagree. Neb. Rev. Stat. sec 30-2646 (Reissue 1995) provides "In the exercise of his powers, a conservator is to act as a fiduciary and shall observe the standards of care applicable to trustees as described by section 30-2813".4 Acknowledging that the Nebraska Supreme Court has not addressed the specific situation presented in the instant case, petitioner relies on White v. United States, 881 F. Supp. 688 (D. Mass. 1995). In that case, a grantor created a trust which provided for distributions to the beneficiaries immediately after the first day of each successive year. See id. at 690. The trustees failed to make the required distributions for a number of years prior to the grantor's death (missed distributions). See id. After the grantor's death the trustees made the missed distributions. See id. The U.S. District Court for the District of Massachusetts held that the missed distributions were completed gifts. See id. at 693. The District Court explained:
The language of the trust required the trustees to make the distributions on the first of the year as to each year's distribution. Once this date passed, [the grantor] had transferred her control over the amount of the distribution. Otherwise stated, [the grantor's] power lapsed on the first of the year with respect to the distributions at issue. [The grantor] could not have canceled or amended the amount of a missed distribution which, under the mandatory language of the trust, became binding once the date for distribution passed. * * * [Id.]
The facts of the instant case are distinguishable from the facts of White. The language of the order does not require the gifts to be made. Nebraska law provided that, after a determination of incompetency, the court, either directly or through a conservator, can exercise all powers over the estate and affairs of the incompetent, including the power to make gifts. See Neb. Rev. Stat. sec. 30-2637(3) (Reissue 1995). That statute,...
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