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Law Offices of Ronald W. Rutz
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December 12, 2005: Gifting

Q: Over the years I have enjoyed your Christmas columns about gifting. Please do another one this year.

A: Thank you for your kind words. Here is a consolidation and an updating of a number of columns.

At about age four, I remember very vividly sitting on SantaŐs lap. But even then I had an inquisitive legal mind. For example, one of my thoughts revolved around what happens if Santa doesnŐt come through with all of the things on my Christmas list? Could a kid sue Santa to get the stuff? DidnŐt we have some type of contract?

Nowadays, I am told Santa listens but does not promise. In my day and to my young ears, it sure did sound like he promised. But even if Santa did make a commitment, such a promise is considered a future gift without consideration. Thus I could not have enforced such a bargain. But if I relied on the "promise" to my detriment, then I might have had a cause of action. However, bragging to classmates at school and then eating crow later when the gifts did not materialize probably would not sway a judge or jury and probably did not give rise to the level of detrimental reliance.

The cookies and milk left for Santa probably would not be considered adequate consideration and thus move the arrangement from a gift to a binding contract with consideration on both sides.

Also at the time when I was four years old, I would have had another problem. Santa probably would have been considered mom and dadŐs agent. So any cause of action would have been against my parents, not Santa, but at that time such a legal pursuit probably would have been barred by the legal chestnut that "a child cannot sue a parent on contractual matters."

Here are the general rules concerning gifting. In order to have made a completed gift, there has to be intent to give, plus a transfer of possession of the gift in such a way that legally the giver does not have the right to take it back. Also, to make a binding transfer any conditions that were attached to the gift must have been met. LetŐs review some Holiday fact patterns to see how the rules might be applied.

If you find your hidden gift before Christmas, opening the present probably would not make it your property. The intent to give it to you may be clear, but until possession was given or the gift made available in the normal way, the giver always retains the power not to follow through or maybe change gifts at the last minute. (Thus, the old legal chestnut that "possession is nine-tenths of the law" would not carry the day, at least not here.) In other words self help would not be an option.

Even if the present was under the tree and you didnŐt have to scour the house (or when I was young the barn) to find it, the same rationale would more than likely apply. Opening your present early probably would fail to transfer ownership if the intent was to transfer control on Christmas Eve or Christmas morning, depending upon your family tradition. (Remember, Santa is watching to see if you are naughty or nice.)

But once you open your present at the appropriate time, then the gift is yours. The giver cannot change his or her mind, even though physically he or she could yank it back (again, another old chestnut of "might makes right" as practiced in many families would not legally carry the day). So Dad, you do not have the right to play with the train set without permission. IT BELONGS TO YOUR CHILD! And if you break it, you are responsible.

On a serious note and for holiday considerations, there are a number of gifting rules of thumb despite the old saying not to look a gift horse in the mouth. Gifting property that could appreciate rapidly in the future might be a good idea (to reduce the possible estate tax exposure resulting from the increase). But gifting appreciated property may not always be wise (the receiver is stuck with the gifterŐs capital gains tax basis).

A minor may own property but does not normally have the legal right to enter into binding contracts so another rule of thumb is to never give something of value such as stock, real estate, etc., (something needing a legally binding signature) to a minor. Such gifts need to be made to trusts or in such a way that a custodian or guardian has the legal right to deal with the property. Otherwise, a conservatorship through the courts would be needed.

Well, Ho, Ho, Ho. Thank you for reading the column and Happy Holidays!

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