Decedent's Attempted Debt Forgiveness Failed to Comply with the Doctrine of Gifts Causa Mortis
Four months before his death at age 88, Roger T. Hansen met with an attorney on several occasions for the purpose of making a will, but he died shortly before the appointment at his attorney’s office at which he was to sign the last draft his attorney had prepared. Mr. Hansen was survived by a brother, Lyle, a sister, their children, and the children of siblings who had predeceased him.
Mr. Hansen made mortgage loans to Lyle’s three daughters and was the vendor on a land contract with a grandson of Lyle. At the time of his death, the total outstanding debt on these four notes was approximately $278,000. Lyle, his brother’s personal representative, included these four notes in Mr. Hansen’s probate estate.
The nieces and grandnephew – we’ll call them “the debtors” – petitioned the probate court in Dane County, Wisconsin, to strike the notes from the inventory on the grounds that Uncle Roger intended to forgive the debts at his death.
As proof, they presented a notation Mr. Hansen had made on an early draft of his will, directions in a letter to his attorney, and Mr. Hansen’s approval of the resulting revisions made by his attorney. Another niece, Peggy Meegan, opposed the petition.
This evidence convinced the probate court that, indeed, Mr. Hansen had made gifts causa mortis (that is, in contemplation of death). The debts were stricken from the inventory.
Ms. Meegan appealed the probate court’s order to the Wisconsin Court of Appeals, which, in a unanimous decision, reversed the order and sent the matter back to the probate court for administration of the Hansen estate that included the $278,000 in debts.
Gifts causa mortis are rarely seen. A “gift” that is intended to be effective only at death sounds a lot like a testamentary bequest. Instead, people make testamentary bequests – wills – that are effective at death.
Of course, Mr. Hansen died before he could execute a will that forgave the debtors what they owed to him. Thus, he died intestate at a time when money was owed to him. Unless the promissory note itself stated that it was to be canceled at death, how would the debtors avoid having to repay?
The general rule is that a testamentary disposition (a disposition that takes effect upon the death of the person making the disposition) must comply with the statutory requirements for the executions of wills. An exception is a gift causa mortis.
The requirements of a valid gift causa mortis are: (1) the donor has an intention to make a gift effective at death; (2) the donor makes the gift with a view to the donor’s death from present illness or from an external and apprehended peril; (3) the donor must die of that ailment or peril; and (4) there must be a delivery.
As the Wisconsin appeals court observed, although the “gift” – if there is one – does not take effect until the donor’s death, “the donee has an interest in the gift during the lifetime of the donor.”
This interest is explained as follows: as “an inchoate title which ripens into absolute title at the donor’s death from the illness or peril which [the donor] apprehended in making the gift.”
Thus, a so-called “desk drawer deed” – a deed executed but lying in the donor’s desk drawer to be found and recorded only after the donor’s death – does not pass title to the donee.
The reason is that the prior to the donor’s death, the donee did not have any legal interest in the property at all, because the deed was never delivered to the donee.
The same reasoning applied to the notes in the possession of Roger Hansen at the time of his death. Although from the evidence presented in the case report it seems indisputable that Mr. Hansen intended to forgive the debts, during his lifetime he never did: either by making a testamentary writing that explicitly said so or by delivering an instrument of debt cancellation to the debtors.
In the absence of either a will or a gift causa mortis, therefore, the Estate of Roger T. Hansen includes $278,000 owed to him during his lifetime by his nieces and grand-nephew.
In re Estate of Roger T. Hansen, January 26, 2012.