Question

Before her death, Melanie McCarthy had written and sent or otherwise delivered nine $3,000 checks intended as gifts to various relatives. None of the checks had been cashed prior to Melanie's death. Melanie's son, Daniel, who was one of the administrators of her estate, claimed that the Internal Revenue Service should not levy taxes on the $27,000 still in Melanie's account to cover these checks, because the checks were completed gifts. Is he right? Why or why not?

Answer 1

Answer: no; he is not right.

This is not the effective way of execution and delivery of gift. The gift of $27,000 in aggregate is not delivered before her death, since neither of these checks are encashed. If the person was alive, there might be a “stop payment” order by the issuer of check to the bank; although the probability of such was very low but it was still there. Therefore, this cannot be said that the receivers of $27,000 checks actually got that much of money as gift during the life-time of the issuer of checks.

Moreover, a bank account of a death person can’t be operated unless certain formalities are fulfilled. Therefore, these checks are not completed gifts.