T.C. Memo. 2000-368
UNITED STATES TAX COURT
ESTATE OF FLOY M. CHRISTENSEN, DECEASED, CARL STEWART
CHRISTENSEN, PERSONAL REPRESENTATIVE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10793-99. Filed December 6, 2000.
George W. Akers, for petitioner.
Julie L. Payne, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: Respondent determined a deficiency of
$108,633 in Federal estate tax (estate tax) with respect to the
estate (estate) of Floy M. Christensen (decedent).
The issues for decision are:
(1) Is the aggregate amount of funds represented by certain
checks includible in decedent’s gross estate? We hold that it
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is.
(2) Is certain property with respect to which decedent had
a power of appointment at the time of her death includible in
decedent’s gross estate? We hold that it is.
Background
This case was submitted fully stipulated. The facts that
have been stipulated are so found.
At the time the petition was filed, Carl Stewart Christensen
(Mr. Christensen), decedent’s son and the personal representative
of the estate, resided in Seattle, Washington.
On January 10, 1996, Floy M. Christensen, a resident of
Kirkland, Washington, died testate at the age of 102. On Febru-
ary 25, 1982, Carl A. Christensen, decedent’s spouse to whom she
had been married for approximately 50 years, died testate.
Pursuant to Carl A. Christensen’s will, which he executed on
August 26, 1980, a trust (trust) was created for the benefit of,
inter alia, decedent. Pursuant to the terms of Carl A.
Christensen’s will creating that trust, decedent had the power to
withdraw (power to withdraw) from the trust annually, by written
request to the trustee, a share of the trust’s principal in an
amount not exceeding the greater of $5,000 or 5 percent of the
value of such principal. Carl A. Christensen’s will creating the
trust contained no limitations or directions on the exercise of
decedent’s power to withdraw. When decedent died, she had not
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exercised her power to withdraw for 1996. As of the date of
decedent’s death, the value of the trust equaled $1,535,950.58.
On August 15, 1984, decedent executed a durable power of
attorney (decedent’s power of attorney) by which she appointed
Mr. Christensen and Louise M. Hastie (Ms. Hastie), her daughter,
as her attorneys in fact. (For convenience, we shall sometimes
refer to Mr. Christensen and Ms. Hastie as decedent’s children.)
Decedent’s power of attorney provided in pertinent part:
(1) Powers. The Attorneys in Fact, as fiducia-
ries, shall have all the powers of absolute ownership
and control of all assets and liabilities of the Prin-
cipal, whether located within or without the State of
Washington, the same as are possessed by the Principal,
including, but not limited to, the power (i) to convey,
transfer, encumber or otherwise deal in any way in
connection with real property, securities and bank
accounts owned by the Principal, and (ii) to do all
acts granted trustees by the Washington Trust Act of
1959 and any amendments thereto (which powers are
incorporated herein by this reference).
(2) Effectiveness and Duration. This Power of
Attorney shall become effective immediately and shall
not be affected by the disability of the Principal.
Decedent’s power of attorney did not specifically grant dece-
dent’s children the power to transfer decedent’s property by
gift.
On September 30, 1994, decedent moved into Cascade Vista
Convalescent Center (Cascade Vista) located in Redmond, Washing-
ton, where she remained until she died. Upon her admission to
Cascade Vista, decedent was diagnosed with various ailments,
including progressive dementia. From at least September 30,
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1994, to the date of her death, decedent exhibited severely
impaired cognitive skills, including poor short-term and long-
term memory.
Since the mid-1980's until the date of her death, decedent
maintained a joint bank account at Seafirst Bank (Seafirst joint
account) with Mr. Christensen and Ms. Hastie. At all times, all
of the funds deposited in the Seafirst joint account belonged to
decedent.
During November 1995, approximately two months prior to
decedent’s death, Mr. Christensen or Ms. Hastie signed the
following checks totaling $105,000 (November 1995 checks) drawn
on the Seafirst joint account that were payable to the individu-
als indicated:
Date Relationship of
of Check Check No. Amount Payee Payee to Decedent
11/5/95 1818 $10,000 Dee Hastie Wife of grandson
11/5/95 1819 5,000 Steve Hewitt Husband of great
granddaughter
11/5/95 1820 5,000 Heather Hewitt Great granddaughter
11/5/95 1821 5,000 Felicia Johnson Great great grand-
daughter
11/5/95 1822 5,000 Ann Johnson Great granddaughter
11/5/95 1823 10,000 John Hanawalt Husband of grand-
daughter
11/5/95 1824 5,000 Calum Hanawalt Great grandson
11/5/95 1825 5,000 Oona Hanawalt Great granddaughter
11/6/95 1351 5,000 Ray Bracelin Great grandson
11/7/95 1353 10,000 M.D. Lamont Significant other
of granddaughter
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11/7/95 1354 10,000 Robert Malinof Significant other
of granddaughter
11/8/95 1826 10,000 Mel Hearn Husband of grand-
daughter
11/8/95 1827 5,000 Colin Hearn Great grandson
11/8/95 1828 5,000 Clare Hearn Great granddaughter
11/8/95 1829 5,000 Ariel Nilsen Great granddaughter
11/21/95 1357 5,000 Sander Bracelin Great grandson
In early January 1996, prior to decedent’s death on January
10, 1996, Mr. Christensen or Ms. Hastie signed the following
checks totaling $100,000 (January 1996 checks) drawn on the
Seafirst joint account that were payable to the individuals
indicated:
Date Relationship of
of Check Check No. Amount Payee Payee to Decedent
1/2/96 1360 $10,000 Louise Hastie Daughter
1/2/96 1361 10,000 Colin Hastie Grandson
1/2/96 1830 10,000 C.S. Christensen Son
1/2/96 1831 10,000 Helen Christensen Son’s wife
1/8/96 1833 10,000 Lisa Hastie Granddaughter
1/8/96 1834 10,000 Chris Hearn Granddaughter
1/8/96 1835 10,000 Lael Hanawalt Granddaughter
1/9/96 1363 10,000 Sandra Christensen Granddaughter
1/9/96 1364 10,000 Karen Christensen Granddaughter
1/9/96 1832 10,000 Toby Hastie Grandson
Check Nos. 1834 and 1835 did not clear Seafirst Bank until
January 11, 1996, and check Nos. 1363 and 1364 did not clear
Seafirst Bank until January 12, 1996.
In addition to the November 1995 checks and the January 1996
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checks, other checks were written on the Seafirst joint account,
including checks totaling $56,000, $15,000, and $41,700 that were
signed around Christmas 1984, 1985, and 1989, respectively, by
one of the joint account holders whose identity is not disclosed
by the record. Moreover, during 1990 through February 11, 1995,
one of the joint account holders of the Seafirst joint account
whose identity is not disclosed by the record signed, inter alia,
the following checks drawn on that account:
Date Relationship of
of Check Amount Payee Payee to Decedent
7/27/90 $10,000 Colin1
7/27/90 10,000 ?2
7/27/90 10,000 ?
7/27/90 10,000 ?
11/9/90 10,000 Toby Hastie Grandson
11/9/90 10,000 Chris Hearn Granddaughter
11/9/90 10,000 Lael Hanawalt Granddaughter
11/9/90 10,000 Lisa Hastie Granddaughter
4/11/91 10,000 ?
4/11/91 10,000 ?
4/12/91 10,000 Colin
4/12/91 10,000 ?
11/17/91 10,000 Dee Hastie Wife of grandson
11/17/91 10,000 Chris Hearn Granddaughter
11/17/91 10,000 Lael Hanawalt Granddaughter
11/17/91 10,000 Lisa Hastie Granddaughter
11/21/91 10,000 Sandra Christensen Granddaughter
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12/5/91 10,000 ?
1/8/92 10,000 ?
1/8/92 10,000 Colin
1/9/92 10,000 ?
1/9/92 10,000 ?
12/2/92 10,000 Lael Hanawalt Granddaughter
12/2/92 10,000 ?
12/2/92 10,000 Lisa Hastie Granddaughter
12/2/92 10,000 Chris Hearn Granddaughter
12/6/92 10,000 Sandra Christensen Granddaughter
12/6/92 10,000 ?
1/12/92 10,000 ?
1/12/92 10,000 ?
1/13/93 10,000 ?
1/13/93 10,000 Colin
10/13/93 10,000 ?
10/13/93 10,000 Sandra Christensen Granddaughter
10/13/93 7,000 Ray Bracelin Great grandson
10/13/93 7,000 Sander Bracelin Great grandson
10/13/93 10,000 Toby Hastie Grandson
10/13/93 7,000 Heather Hewitt Great granddaughter
10/13/93 7,000 Ann Johnson Great granddaughter
10/13/93 7,000 Felicia Johnson Great great grand-
daughter
10/13/93 10,000 Lael Hanawalt Granddaughter
10/13/93 7,000 Ariel Nilsen Great granddaughter
10/13/93 7,000 Oona Hanawalt Great granddaughter
10/13/93 7,000 Calum Hanawalt Great grandson
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10/13/93 10,000 Chris Hearn Granddaughter
10/13/93 7,000 Clare Hearn Great granddaughter
10/13/93 10,000 Lisa Hastie Granddaughter
1/3/94 10,000 ?
1/3/94 10,000 ?
1/3/94 10,000 ?
1/3/94 10,000 ?
1/21/94 10,000 ?
1/21/94 10,000 ?
1/24/94 10,000 Chris Hearn Granddaughter
1/24/94 10,000 Lael Hanawalt Granddaughter
1/24/94 10,000 Dee Hastie Wife of grandson
1/24/94 10,000 Lisa Hastie Granddaughter
1/2/95 10,000 ?
1/2/95 10,000 ?
1/3/95 10,000 ?
1/3/95 10,000 Colin
2/10/95 10,000 Lael Hanawalt Granddaughter
2/10/95 10,000 Chris Hearn Granddaughter
2/10/95 10,000 ?
2/10/95 10,000 Lisa Hastie Granddaughter
2/11/95 10,000 ?
2/11/95 10,000 ?
1
Where the payee is shown in the chart as Colin, we have not been able
to determine from the record before us whether the payee was Colin Hastie or
Colin Hearn.
2
Where there are question marks under the column headed “Payee”, we have
not been able to determine from the record before us the names of the payees
of the checks shown in the chart.
Mr. Christensen, as the personal representative of the
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estate, filed Form 706, United States Estate (and Generation-
Skipping Transfer) Tax Return (estate tax return), which showed
estate tax due of $14,573. The estate tax return reported that
decedent’s total gross estate equaled $721,834. Included in
decedent’s total gross estate reported in the estate tax return
was the value of the Seafirst joint account as of the date of
decedent’s death, which the personal representative reported in
Schedule E, Jointly Owned Property, of that return (Schedule E)
as $64,676.1 The value of the Seafirst joint account reported in
Schedule E and included in decedent’s total gross estate did not
include the aggregate amount of funds represented by the November
1995 checks and the January 1996 checks (i.e., $205,000). The
estate tax return did not include as part of decedent’s total
gross estate any amount with respect to decedent’s power to
withdraw.
Respondent issued a notice of deficiency (notice) with
respect to the estate tax return. In the notice, respondent
determined that the aggregate amount of funds represented by the
November 1995 checks and the January 1996 checks should have been
reported in Schedule E. Consequently, respondent increased
decedent’s total gross estate and taxable estate by that amount
(i.e., $205,000). Respondent also determined in the notice that
1
The value of the Seafirst joint account reported in Sched-
ule E included $140 of interest that had accrued on that account
through the date of decedent’s death.
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decedent’s power to withdraw, which had not lapsed as of the date
of decedent’s death, was a general power of appointment that
should have been reported in Schedule H, Powers of Appointment,
of the estate tax return (Schedule H). Consequently, respondent
increased decedent’s total gross estate and taxable estate by
$76,797, which is 5 percent times the value ($1,535,950.58) of
the trust as of the date of decedent’s death.
Discussion
The estate bears the burden of proving that the determina-
tions in the notice are erroneous. See Rule 142(a);2 Welch v.
Helvering, 290 U.S. 111, 115 (1933). That this case was submit-
ted fully stipulated does not change that burden or the effect of
a failure of proof. See Rule 122(b); Borchers v. Commissioner,
95 T.C. 82, 91 (1990), affd. 943 F.2d 22 (8th Cir. 1991).
November 1995 Checks and January 1996 Checks
The parties’ dispute with respect to the November 1995
checks and the January 1996 checks is whether the transfers of
funds represented by those checks constitute nontaxable gifts
made by decedent. If they do not, the parties agree that the
amounts of funds withdrawn by those checks from the Seafirst
joint account are includible in decedent’s gross estate.
2
All Rule references are to the Tax Court Rules of Practice
and Procedure. Unless otherwise indicated, all section refer-
ences are to the Internal Revenue Code in effect on the date of
decedent’s death.
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According to the estate, the transfers of funds represented
by the November 1995 checks and the January 1996 checks consti-
tute gifts made by decedent because those checks were “authorized
and proper disbursements” under the laws of the State of Washing-
ton. In support of its position that the checks in question were
authorized and proper disbursements under the laws of the State
of Washington, the estate asserts:
Washington State law, RCW 30.22.050, provides for
various types of bank accounts, one of which is a joint
account. RCW 30.22.090(2) provides that funds in a
joint account belong to the person depositing the
funds. Finally, RCW 30.22.040(11) and (14) and RCW
30.22.140 provide that any individual who has the
current right to payment of funds pursuant to the
account agreement may issue checks on the account which
the financial institution is authorized to honor. * * *
Respondent counters the estate’s position as follows:
Respondent agrees with Petitioner that Floy
Christensen’s children were authorized by statute to
write checks on the joint account. Petitioner accu-
rately states that Wash. Rev. Code § 30.22.050 provides
for the creation of joint bank accounts and Wash. Rev.
Code § 30.22.090 provides that funds in a joint account
belong to the person depositing the funds. Petitioner
also argues under Wash. Rev. Code § 30.22.140 that any
individual who has the current right to payment of
funds pursuant to the account agreement may issue
checks on the account which the financial institution
is authorized to honor. Petitioner misconstrues this
statute.
Wash. Rev. Code § 30.22.140 is a provision for the
protection of financial institutions when they pay a
depositor named on a joint account who may not be the
actual owner of the funds paid. Clearly, a depositor
named on a joint account may withdraw all of the funds
in an account. This ability does not, however, trans-
late into ownership of the funds that are held in the
joint account. Rather, Wash. Rev. Code § 30.22.090
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sets forth the joint account holders’ respective owner-
ship rights to the funds deposited in the account.
Consistent with this statute, and as stipulated in this
case, Floy Christensen was at all times the owner of
all of the funds in the joint account.
Wash. Rev. Code § 30.22.130 preserves Floy
Christensen’s ownership rights to the funds in the
joint account, notwithstanding that a financial insti-
tution properly made payment of the funds to her chil-
dren as joint account holders. * * *
We find the estate’s reliance on certain statutory provi-
sions of the laws of the State of Washington to support its
position that the transfers of funds represented by the November
1995 checks and the January 1996 checks constitute gifts made by
decedent to be misplaced. None of those provisions, which are
part of the Financial Institution Individual Account Deposit Act
(Act), see Wash. Rev. Code Ann. ch. 30.22 (West 1986),3 grants
authority to a person named on a joint bank account who does not
own the funds in such an account to make a gift of all or a
portion of those funds on behalf of the actual owner of those
funds.
As the estate accurately indicates, Wash. Rev. Code Ann.
sec. 30.22.050 (West 1986) provides for the creation of joint
bank accounts, and Wash. Rev. Code Ann. sec. 30.22.090(2) (West
1986) provides that funds on deposit in a joint account belong to
3
All references to the Revised Code of Washington Annotated
are to that Code in effect on the date of decedent’s death and on
the various dates on which the November 1995 checks and the
January 1996 checks were written and subsequently paid by
Seafirst Bank.
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the depositors in proportion to the net funds owned by each
depositor (unless the contract of deposit provides otherwise or
there is clear and convincing evidence of a contrary intent at
the time the account was created). In the instant case, the
parties stipulated that at all times decedent owned all of the
funds deposited in the Seafirst joint account. The estate also
accurately indicates that Wash. Rev. Code Ann. sec. 30.22.140
(West 1986) (RCWA 30.22.140) permits a financial institution to
make payments of funds on deposit in an account having two or
more depositors to or for any one or more of the depositors named
on the account without regard to the actual ownership of the
funds by or between the depositors.
Moreover, Wash. Rev. Code Ann. sec. 30.22.120 (West 1986)
(RCWA 30.22.120) permits a financial institution, in making
payments of funds deposited in an account, to rely conclusively
and entirely upon the form of the account and the terms of the
contract of deposit at the time the payments are made. RCWA
30.22.120 does not require a financial institution to inquire as
to (1) either the source or the ownership of any funds received
for deposit to an account or (2) the proposed application of any
payments made from an account. Unless a financial institution
has actual knowledge of the existence of a dispute between
depositors, beneficiaries, or other persons claiming an interest
in funds deposited in an account, pursuant to RCWA 30.22.120, a
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payment that is made in accordance with various sections of the
Act by a financial institution from an account at the request of
any depositor to the account and/or the agent of any depositor to
the account is to constitute a complete release and discharge of
the financial institution from all claims for the amount so paid
regardless of whether or not the payment is consistent with the
actual ownership of the funds deposited in an account by a
depositor and/or the actual ownership of the funds as between
depositors and/or their heirs, successors, personal representa-
tives, and assigns. RCWA 30.22.120 thus permits a financial
institution to assume that each of the persons listed on a joint
account has authority over all of the funds on deposit in such an
account unless the financial institution specifically knows of a
dispute regarding the funds.
Neither RCWA 30.22.120 nor RCWA 30.22.140 on which the
estate relies authorizes a joint account holder who is not the
actual owner of the funds in a joint account to withdraw funds
from the account. If funds on deposit in a joint account are
paid to or for a joint account holder who does not own the funds
and who is not authorized by the owner of the funds to withdraw
such funds for that purpose, the proper remedy is for the actual
owner to sue the joint account holder. See Kalk v. Security Pac.
Bank Wash. N.A., 866 P.2d 1276, 1278 (Wash. Ct. App. 1994), revd.
on other grounds 894 P.2d 559 (Wash. 1995). Such a right is
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preserved by Wash. Rev. Code Ann. sec. 30.22.130 (West 1986)
(RCWA 30.22.130). See id.
RCWA 30.22.130 provides:
30.22.130. Rights as between individuals preserved
The protection accorded to financial institutions
under * * * [the Act] shall have no bearing on the
actual rights of ownership to deposited funds by a
depositor, and/or between depositors * * * and their
heirs, successors, personal representatives, and as-
signs.
The protections accorded to financial institutions by RCWA
30.22.120, RCWA 30.22.140, and other sections of the Act when
they make payments of funds on deposit to a person named on a
bank account were not intended to and, as RCWA 30.22.130 ex-
pressly provides, do not threaten or eviscerate the ownership
rights of depositors. See Kalk v. Security Pac. Bank Wash. N.A.,
894 P.2d 559, 561 (Wash. 1995). As noted by the Supreme Court of
Washington, the legislative history of the Act indicates that
RCWA 30.22.130, which preserves the ownership rights of individ-
ual depositors, is the converse of RCWA 30.22.120, which protects
financial institutions. See Kalk v. Security Pac. Bank Wash.
N.A., supra at 561 n.4.
Although the estate acknowledges that RCWA 30.22.130 pre-
serves certain rights of ownership to deposited funds, it con-
tends that RCWA 30.22.130 did not preserve the ownership rights
of decedent to the amounts of funds withdrawn from the Seafirst
joint account by the November 1995 checks and the January 1996
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checks. That is because, according to the estate, none of the
payees of any of those checks was a depositor referred to in RCWA
30.22.130 within the meaning of Wash. Rev. Code Ann. sec.
30.22.040(11) (West 1986) (RCWA 30.22.040(11)). In support of
that position, the estate asserts:
Depositors are defined in RCW 30.22.040(11) to include
Floy Christensen, both as the owner of the funds on
deposit and as a person authorized to sign on the joint
account, as well as her two children as people autho-
rized to sign on the joint account. The recipients of
the Gift Checks, as payees of the Gift Checks, are not
within the definition of depositor for the issues
presented in this case.
We reject the estate’s position. That position misconstrues
RCWA 30.22.130 and disregards the definition of the term “deposi-
tor” in RCWA 30.22.040(11) that is to apply for purposes of RCWA
30.22.130. RCWA 30.22.040(11) sets forth the following two
distinct definitions of the term “depositor”:
30.22.040. Definitions
(11) “Depositor”, when utilized in determining the
rights of individuals to funds in an account, means an
individual who owns the funds. When utilized in deter-
mining the rights of a financial institution to make or
withhold payment, and/or to take any other action with
regard to funds held under a contract of deposit,
“depositor” means the individual or individuals who
have the current right to payment of funds held under
the contract of deposit without regard to the actual
rights of ownership thereof by these individuals. * * *
In order to determine which of the foregoing two definitions
of the term “depositor” applies for purposes of RCWA 30.22.130,
it is necessary to determine whether the term “depositor” is used
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in RCWA 30.22.130 in order to determine the rights of individuals
to funds in an account or in order to determine the rights of a
financial institution to make or withhold payment and/or to take
any other action with regard to funds held under a contract of
deposit. We conclude that the term “depositor” is utilized in
RCWA 30.22.130 in order to determine the rights of individuals to
funds in an account and is not utilized in that section in order
to determine the rights of a financial institution to make or
withhold payment and/or to take any other action with regard to
funds held under a contract of deposit. We further conclude that
the definition of the term “depositor” that appears in RCWA
30.22.130 is an individual who owns the funds in an account. See
RCWA 30.22.040(11).
At all times, the only individual who owned the funds in the
Seafirst joint account was decedent. RCWA 30.22.130 preserved
her ownership rights to the funds deposited in that account.
Unless decedent authorized Mr. Christensen and Ms. Hastie to make
gifts on behalf of decedent of certain funds in the Seafirst
joint account by issuing the November 1995 checks and the January
1996 checks to the payees indicated on those checks, when
Seafirst Bank paid those checks, decedent, as the owner of the
funds so paid, had the right to sue the joint account holders,
Mr. Christensen and Ms. Hastie, in order to recover those funds.
See RCWA 30.22.130; see also Kalk v. Security Pac. Bank Wash.
N.A., 866 P.2d at 1279.
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In further support of its position that RCWA 30.22.130 does
not apply to the November 1995 checks and the January 1996
checks, the estate contends that
the term deposited funds as used in RCW 30.22.130 is
defined in RCW 30.22.040(13) to be the funds on deposit
with the financial institution less any withdrawals.
Thus, Respondent’s reliance upon RCW 30.22.130 is
inappropriate since it only preserves rights as between
Floy Christensen and her children as to the ownership
of the deposited funds, which by definition are those
funds remaining in the account and would, therefore,
exclude funds which had been withdrawn from the joint
account by the Gift Checks.
We reject the estate’s contention that the term “deposited
funds” in RCWA 30.22.130 does not include funds withdrawn from
the Seafirst joint account by the November 1995 checks and the
January 1996 checks. The term “deposited funds” that appears in
RCWA 30.22.130 is not defined, as the estate asserts, in Wash.
Rev. Code Ann. sec. 30.22.040(13) (West 1986) (RCWA
30.22.040(13)). Instead, RCWA 30.22.040(13) defines the terms
“‘Depositor’s funds’ or ‘funds of a depositor’”.
Although not defined in the Act, we conclude that the term
“deposited funds” that appears in RCWA 30.22.130 is not suscepti-
ble to more than one reasonable interpretation. See State of
Wash. v. Azpitarte, 995 P.2d 31, 33 (Wash. 2000). The only
reasonable interpretation of the term “deposited funds” in RCWA
30.22.130 is funds on deposit with (i.e., placed in) a financial
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institution.4
We conclude that the protections accorded to Seafirst Bank
under the Act with respect to the withdrawals represented by the
November 1995 checks and the January 1996 checks that were signed
by either Mr. Christensen or Ms. Hastie as a joint account holder
of the Seafirst joint account had no bearing on the actual rights
4
Assuming arguendo that we were to have concluded that the
meaning of the term “deposited funds” in Wash. Rev. Code Ann.
sec. 30.22.130 (West 1986) (RCWA 30.22.130) is the same as the
meaning of the terms “‘Depositor’s funds’ or ‘funds of a deposi-
tor’” in Wash. Rev. Code Ann. sec. 30.22.040(13) (West 1986)
(RCWA 30.22.040(13)), we nonetheless reject the position of the
estate that RCWA 30.22.130 “preserves rights as between Floy
Christensen and her children as to the ownership of the deposited
funds, which by definition are those funds remaining in the
[Seafirst joint] account and would * * * exclude funds which had
been withdrawn from the joint account by the Gift Checks”. RCWA
30.22.040(13) defines the terms “‘Depositor’s funds’ or ‘funds of
a depositor’” as follows:
30.22.040. Definitions
(13) “Depositor’s funds” or “funds of a depositor”
means the amount of all deposits belonging to or made
for the benefit of a depositor, less all withdrawals of
the funds by the depositor or by others for the deposi-
tor’s benefit, plus the depositor’s prorated share of
any interest or dividends included in the current
balance of the account and any proceeds of deposit life
insurance added to the account by reason of the death
of a depositor.
Contrary to the estate’s contention, the definition of the terms
“‘Depositor’s funds’ or ‘funds of a depositor’” does not exclude
all funds that would have been withdrawn from an account in a
financial institution. The definition of those terms excludes
only those withdrawals “by the depositor or by others for the
depositor’s benefit”. RCWA 30.22.040(13). None of the November
1995 checks and the January 1996 checks represented a withdrawal
of decedent’s funds in the Seafirst joint account “by the deposi-
tor [decedent] or by others for the depositor’s [decedent’s]
benefit”. RCWA 30.22.040(13).
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of ownership by decedent to the deposited funds in that joint
account. See RCWA 30.22.130.
Unless decedent granted Mr. Christensen and Ms. Hastie the
authority to make gifts on her behalf of the funds withdrawn from
the Seafirst joint account by the November 1995 checks and the
January 1996 checks, both Mr. Christensen and Ms. Hastie had an
obligation to account to decedent for the funds withdrawn by the
respective checks that they signed, and decedent could have sued
both of them to recover those funds. See RCWA 30.22.130; see
also Kalk v. Security Pac. Bank Wash. N.A., 866 P.2d at 1279. On
the record before us, we find that the estate has failed to show
that decedent authorized either Mr. Christensen or Ms. Hastie to
make gifts on her behalf of the funds in the Seafirst joint
account that were withdrawn by the November 1995 checks and the
January 1996 checks. Indeed, the estate does not even suggest
that any such authority existed outside the purported authority
that it claims was granted to them as joint account holders of
the Seafirst joint account by certain sections of the Act. In
this connection, the estate expressly disavows relying on the
power of attorney that decedent signed on August 15, 1984, in
order to establish that decedent authorized Mr. Christensen and
Ms. Hastie to make gifts on her behalf. We conclude that the
estate acknowledges that that power of attorney did not authorize
Mr. Christensen and Ms. Hastie to make gifts on behalf of dece-
- 21 -
dent.5
In further support of its position that the transfers of
funds represented by the November 1995 checks and the January
1996 checks constitute nontaxable gifts made by decedent, the
estate argues:
Regulation § 25.2511-1(g)(1) makes it abundantly
clear that Floy Christensen did not have to possess
donative intent at the time of the Gift Checks to have
made a gift. Instead, the Regulation applies an objec-
tive facts and circumstances test. The Regulation
eliminates any doubt as to that test in this fact
pattern through an example found in the Regulations,
§ 25.2511-1(h)(4), which example deals with a joint
bank account and gifts made from that account.
According to the estate, the example found in sec. 25.2511-
1(h)(4), Gift Tax Regs., “impliedly recognizes” that, regardless
of donative intent on the part of the transferor, checks properly
drawn on a joint account to others constitute gifts. The estate
points to sec. 25.2511-1(c)(1), Gift Tax Regs., in further
5
We agree with the estate’s acknowledgment regarding dece-
dent’s power of attorney. Section 11.94.050(1) of the Revised
Code of Washington Annotated (West 1998) (RCWA 11.94.050(1))
provides that an attorney in fact does not have the power, unless
specifically otherwise provided in the power of attorney, to make
any gifts of property owned by the principal. Decedent’s power
of attorney authorizing Mr. Christensen and Ms. Hastie to act as
her attorneys in fact does not specifically provide that those
individuals were authorized to make gifts of property owned by
decedent. We conclude that decedent’s power of attorney did not
authorize Mr. Christensen and Ms. Hastie to make gifts on her
behalf. Where, as here, a power of attorney is silent with
respect to any authority to make gifts of the principal’s prop-
erty, the agent may not read such authority into the instrument.
See RCWA 11.94.050(1).
- 22 -
support of that contention.6
Respondent counters the estate’s position as follows:
The bare fact that Floy Christensen’s children
6
The estate also argues that, even if it were necessary to
show decedent’s donative intent as a prerequisite to finding that
the transfers of funds withdrawn by the November 1995 checks and
the January 1996 checks constitute nontaxable gifts,
the only evidence bearing upon Floy Christensen’s
intent is the declaration of Stewart Christensen * * *.
In particular, paragraphs 4, 5 and 9 of Stewart
Christensen’s declaration clearly state that Floy
Christensen and her husband embarked upon a lifetime
gifting program, which program Floy Christensen contin-
ued upon the death of her husband. In later years,
this gifting program was carried out by Floy
Christensen’s son and daughter on her behalf, with her
concurrence, and in keeping with the long-established
gifting program.
We are not required to, and we shall not, rely on the
uncorroborated affidavit of Mr. Christensen. There is no reli-
able evidence in the record establishing to our satisfaction
either a lifetime gifting program by decedent and her husband or
decedent’s continuation of that alleged program after the death
of her husband. Although the record does contain a handwritten
summary prepared by Mr. Christensen which summarized certain
checks written on the Seafirst joint account during 1984, 1985,
and 1989 through Jan. 9, 1996, that summary is conclusory, and we
do not find it persuasive.
Assuming arguendo that we were to have found that a lifetime
gifting program had been carried out by decedent and her husband
and by decedent alone after her husband’s death, the record
belies the allegation of Mr. Christensen in his affidavit that
the issuance by him or Ms. Hastie of the November 1995 checks and
the January 1996 checks was done with the concurrence of dece-
dent. We have found that from at least Sept. 30, 1994, to the
date of her death, decedent suffered from progressive dementia
and exhibited severely impaired cognitive skills, including poor
short-term and long-term memory. On the record before us, we
find that the estate has failed to show that decedent possessed
the requisite mental ability to have concurred in the making of
any alleged gifts by the issuance of the November 1995 checks and
the January 1996 checks.
- 23 -
could write checks on the joint account does not char-
acterize all of those checks as gifts from Floy
Christensen as Petitioner argues. Petitioner cites to
Treas. Reg. §§ 25.2511-1(h)(4) and 25.2511-1(c)(1) for
support of its argument. Treas. Reg. § 25.2511-1(c)(1)
provides that gift tax applies to gifts indirectly
made; it does not, however, establish the recipient of
a particular gift. In the context of this case, Treas.
Reg. § 25.2511-1(c)(1) does not establish that the
payees shown on the checks in issue were the recipients
of gifts from Floy Christensen. Additionally, Treas.
Reg. § 25.2511-1(h)(4) provides that if Floy
Christensen created the joint account for herself and
her children, there is a gift to her children when they
draw upon the account for their own benefit to the
extent they have no obligation to account to Floy
Christensen for the amount withdrawn.
The regulation Petitioner relies on is inapplica-
ble to this case. Petitioner’s argument fails because,
under Washington State law, Floy Christensen’s children
had an obligation to account to her for amounts they
withdrew from the joint account. In determining
whether a person with access to a joint account created
by another has an obligation to account to the deposi-
tor, courts have looked to whether the depositor had
given up dominion and control over the deposited funds.
See, e.g., Haneke v. United States, 548 F.2d 1138 (4th
Cir. 1977). Floy Christensen did not give up dominion
and control over the funds in the joint account. In
fact, Petitioner stipulated to the fact that at all
times all of the funds in the joint account belonged to
Floy Christensen. Because all of the funds in the
joint account belonged to her, she had the right to
challenge any of the withdrawals made by her children.
Wash. Rev. Code § 30.22.130. [Fn. ref. omitted.]
We find the estate’s reliance on sec. 25.2511-1(c)(1),
(g)(1), and (h)(4), Gift Tax Regs., to be misplaced. We have
concluded that Mr. Christensen and Ms. Hastie had an obligation
to account to decedent for the amounts of funds withdrawn by the
respective checks in question that they signed and that decedent
had the right to sue them for recovery of those funds, which was
- 24 -
preserved by RCWA 33.22.130. On the record before us, we reject
the position of the estate that the gift tax regulations on which
the estate relies establish that the payees shown on the November
1995 checks and the January 1996 checks were the recipients of
gifts from decedent.
Based on our examination of the entire record before us, we
find that the estate has failed to show that decedent (or a
legally appointed representative acting on behalf of decedent)
could not have revoked the transfers of funds that decedent’s
children made by the issuance of the November 1995 checks and the
January 1996 checks.7 We further find on that record that the
7
Respondent argues in the alternative that, assuming
arguendo the Court were to find that decedent authorized Mr.
Christensen and Ms. Hastie to make gifts of the amounts of funds
withdrawn by the November 1995 checks and the January 1996
checks, four of those checks (i.e., check Nos. 1363, 1364, 1834,
and 1835) were not cashed prior to decedent’s death. Conse-
quently, according to respondent, those four checks did not
result in completed transfers as of the date of decedent’s death
and are includible in decedent’s gross estate. We agree. See
Estate of Gagliardi v. Commissioner, 89 T.C. 1207, 1211-1213
(1987).
A gift is not consummated until it is placed beyond the
donor’s recall. See sec. 25.2511-2(b), Gift Tax Regs. State law
determines whether decedent parted with dominion and control over
the funds in the Seafirst joint account that were withdrawn by
the November 1995 checks and the January 1996 checks. See Estate
of Dillingham v. Commissioner, 88 T.C. 1569, 1575 (1987), affd.
903 F.2d 760 (10th Cir. 1990). Under the law of the State of
Washington, where a donor uses a check to make a gift, the donor
does not immediately relinquish control over the funds repre-
sented by the checks. See Wash. Rev. Code Ann. sec. 62A.3-408
(West 1995). Delivery of the check will not perfect a monetary
gift because the donor may stop payment or withdraw all the funds
in the bank account, thereby effectively revoking the gift. See
(continued...)
- 25 -
estate has failed to show that the transfers of those funds
constitute nontaxable gifts. The parties agree that if the Court
were to find that the transfers of funds represented by the
November 1995 checks and the January 1996 checks do not consti-
tute nontaxable gifts, the determination in the notice with
respect to those funds should be sustained. Consequently, we
sustain that determination.
Decedent’s Power To Withdraw
The estate concedes that, unless one of the exceptions in
section 2041(b)(1)(A), (B), or (C) applies to decedent’s power to
withdraw, that power constitutes a general power of appointment
as defined in section 2041(b)(1), and 5 percent of the value of
the property with respect to which decedent held that power for
1996 is includible in decedent’s gross estate. The estate
contends, however, that the exception in section 2041(b)(1)(A)8
applies to decedent’s power to withdraw. According to the
7
(...continued)
Wash. Rev. Code Ann. sec. 62A.4-403 (West 1995). Check Nos.
1363, 1364, 1834, and 1835 did not clear Seafirst Bank until
after the date of decedent’s death. As of the date of her death,
decedent had not relinquished control over the funds represented
by those four checks, and delivery of those four checks did not
perfect monetary gifts to the payees indicated on those checks.
See Wash. Rev. Code Ann. secs. 62A.3-408 and 62A.4-403 (West
1995).
8
Section 2041(b)(1)(A) excepts from the definition of a
general power of appointment “A power to consume, invade, or
appropriate property for the benefit of the decedent which is
limited by an ascertainable standard relating to the health,
education, support, or maintenance of the decedent”.
- 26 -
estate, Wash. Rev. Code Ann. sec. 11.95.100 (West 1998) (RCWA
11.95.100)9 imposed on decedent’s power to withdraw an ascertain-
able standard relating to the health, education, support, or
maintenance of decedent within the meaning of section
2041(b)(1)(A). Consequently, the estate maintains, decedent’s
power to withdraw does not constitute a general power of appoint-
ment.
Respondent counters that RCWA 11.95.100 did not apply to
decedent’s power to withdraw. In support of that position,
respondent relies on Wash. Rev. Code Ann. sec. 11.95.140 (West
Supp. 1996) (RCWA 11.95.140).
RCWA 11.95.140, which prescribed rules as to the applicabil-
ity of RCWA 11.95.100 (and Wash. Rev. Code Ann. sec. 11.95.110
(West 1998)), provided in pertinent part as follows:
11.95.140. Exercise of power in favor of holder–-
Applicability
9
RCWA 11.95.100 provided:
11.95.100. Exercise of power in favor of holder–-
Limitations
If the standard governing the exercise of a life-
time or a testamentary power of appointment does not
clearly indicate that a broader or more restrictive
power of appointment is intended, the holder of the
power of appointment may exercise it in his or her
favor only for his or her health, education, support,
or maintenance as described in section 2041 or 2514 of
the Internal Revenue Code and the applicable regula-
tions adopted under the section.
- 27 -
(1)(a) RCW 11.95.100 and 11.95.110 respectively
apply to a power of appointment created under a will,
codicil, trust agreement, or declaration of trust,
deed, power of attorney, or other instrument executed
after July 25, 1993, unless the terms of the instrument
refer specifically to RCW 11.95.100 or 11.95.110 re-
spectively and provide expressly to the contrary.
(b) Notwithstanding (a) of this subsection, for
the purposes of this section a codicil to a will, an
amendment to a trust, or an amendment to another in-
strument that created the power of appointment in
question shall not be deemed to cause that instrument
to be executed after July 25, 1993, unless the codicil,
amendment, or other instrument clearly shows an intent
to have RCW 11.95.100 or 11.95.110 apply.
(2) Notwithstanding subsection (1) of this sec-
tion, RCW 11.95.100 through 11.95.150 shall apply to a
power of appointment created under a will, codicil,
trust agreement, or declaration of trust, deed, power
of attorney, or other instrument executed prior to July
25, 1993, if the person who created the power of ap-
pointment had on July 25, 1993, the power to revoke,
amend, or modify the instrument creating the power of
appointment, unless:
(a) The terms of the instrument specifically
refer to RCW 11.95.100 or 11.95.110 respectively and
provide expressly to the contrary; or
(b) The person creating the power of appointment
was not competent, on July 25, 1993, to revoke, amend,
or modify the instrument creating the power of appoint-
ment and did not regain his or her competence to re-
voke, amend, or modify the instrument creating the
power of appointment on or before his or her death or
before the time at which the instrument could no longer
be revoked, amended, or modified by the person.
At the time it enacted RCWA 11.95.100, which was effective
as of July 25, 1993, the legislature of the State of Washington
decided that that section was to apply to any power of appoint-
ment created under an instrument executed after that effective
date. See RCWA 11.95.140(1). The legislature of the State of
- 28 -
Washington further decided when it enacted RCWA 11.95.100 that
RCWA 11.95.100 also was to apply to any power of appointment
created under an instrument executed prior to July 25, 1993, if
the person who created such a power had on July 25, 1993, the
power to revoke, amend, or modify the instrument creating that
power. See RCWA 11.95.140(2).10
In order for RCWA 11.95.100 to apply to decedent’s power to
withdraw, Carl A. Christensen, decedent’s spouse who created
decedent’s power to withdraw pursuant to the will that he exe-
cuted on August 26, 1980, was required to have on July 25, 1993,
the power to revoke, amend, or modify that will. See RCWA
11.95.140(2). Carl A. Christensen died on February 25, 1982.
Obviously, he did not have, and could not have had, on July 25,
1993, the power to revoke, amend, or modify his will creating
decedent’s power to withdraw.
On the record presented, we find that RCWA 11.95.100 did not
apply to decedent’s power to withdraw. The estate acknowledges
that if the Court were to find that RCWA 11.95.100 did not apply
to decedent’s power to withdraw, that power would constitute a
general power of appointment as defined in section 2041(b)(1).
Consequently, we sustain respondent’s determination in the notice
with respect to that power.
10
RCWA 11.95.140(2) contains two exceptions specified in
RCWA 11.95.140(2)(a) and (b) that do not apply in the instant
case.
- 29 -
We have considered all of the contentions and arguments of
the estate that are not discussed herein, and we find them to be
without merit and/or irrelevant.
To reflect the foregoing,
Decision will be entered for
respondent.