Neuschafer v. McHale
709 P.2d 734, 76 Or.App. 360 (1985)
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Rule of Law:
For a valid inter vivos gift to exist, the donor must have the present intent to make a gift that goes into immediate and absolute effect. A transfer of property intended to take effect only upon the donor's death is a void testamentary disposition, not a valid gift.
Facts:
- Eulalia Neuschafer and her daughter, Eulalia James, owned shares of AT&T stock and related dividend reinvestment accounts.
- Neuschafer had a long history of giving numerous gifts to her grandson, James McHale.
- In 1963, Neuschafer and James added McHale's name as a joint tenant with right of survivorship to their respective stock certificates and accounts.
- Although new certificates were issued in the joint names, Neuschafer and James retained physical possession of them.
- Neuschafer and James continued to receive all dividends, vote the shares, and report the dividend income on their personal tax returns.
- In 1981, a dispute arose when McHale claimed and received the cash dividends from some of the stock while Neuschafer was ill.
- Shortly thereafter, McHale requested that Neuschafer transfer ownership of the stock to him completely, which she refused to do.
Procedural Posture:
- Eulalia Neuschafer and Eulalia James (plaintiffs) filed a declaratory judgment action in an Oregon trial court against James McHale (defendant).
- The trial court entered a judgment for McHale, declaring he acquired a future interest in the stock and accounts, with full title to vest upon Neuschafer's death.
- Neuschafer and James (appellants) appealed the trial court's judgment to the Court of Appeals of Oregon.
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Issue:
Does adding a person's name as a joint tenant to stock certificates constitute a valid inter vivos gift when the donor's sole expressed intent was to avoid probate and for the transfer of ownership to occur only upon the donor's death?
Opinions:
Majority - Young, J.
No. Adding a person's name as a joint tenant to stock certificates does not constitute a valid inter vivos gift when the donor lacks the present intent to transfer an immediate interest. A valid inter vivos gift requires three elements: (1) an intent by the donor that the gift go into immediate and absolute effect, (2) delivery of the gift, and (3) acceptance by the donee. Here, the court found the first element, present donative intent, was missing. The court relied on the plaintiffs' direct testimony that their only reason for creating the joint tenancies was to 'avoid probate' and for McHale to receive the property only upon their deaths. This indicates an intent to make a testamentary disposition, not a present gift. A gift intended to take effect in the future upon the death of the donor is void if it does not comply with the statutory requirements for a will.
Analysis:
This decision clarifies that the form of title, such as creating a joint tenancy, is not conclusive proof of donative intent for an inter vivos gift. Courts will look beyond the face of the document to the donor's subjective intent at the time of the purported gift. The case reinforces the critical distinction between a valid gift, which irrevocably transfers a present interest (even if enjoyment is postponed), and an invalid testamentary transfer, which attempts to pass property upon death without the formalities of a will. This holding emphasizes that a donor's own testimony about their intent is highly probative, especially when the donor is alive to testify about their state of mind during the transaction.
