Debts Not Forgiven At Death Without Proper Documentation

FEBRUARY 4, 2002 VOLUME 9, NUMBER 32

Virginia Lee Bessett was fond of Edwin Huson. Ms. Bessett loaned Mr. Huson money several times over a two-year period. For each loan, Mr. Huson signed a promissory note that Ms. Bessett held as evidence of the loan.

Upon Ms. Bessett’s death, a sealed letter addressed to Mr. Huson was discovered in her safe. In part, the letter read: “Please mark all unpaid notes paid in full upon my death.” Ms. Bessett made clear in her letter that it was out of affection for Mr. Huson that she wished to forgive his debt to her. However, Ms. Bessett failed to date her letter, and although the envelope indicated that it was to be delivered to Mr. Huson upon her death, she did not deliver the letter to him or anyone else during her life.

The personal representative of Ms. Bessett’s estate sued to collect on the promissory notes in the Oregon courts. He agreed that he had owed the debt as described in the notes, but Mr. Huson claimed that Ms. Bessett cancelled the debt in the letter found after her death. The trial court agreed with Mr. Huson and found that he did not owe the estate any money because Ms. Bessett had cancelled the debts in her handwritten letter.

Ms. Bessett’s personal representative appealed to the Oregon Court of Appeals. The appellate court reversed the trial court’s holding and found that Ms. Bessett’s letter was insufficient to establish a gift to Mr. Huson.

The Oregon appellate court ruled that in order for any gift to be valid, the intent of the person making the gift must be clear, and the gift must be delivered to and accepted by the person for whom it is intended. The gift’s recipient must have a present interest in the gift even if the gift may not be complete until after the donor’s death. It reasoned that Mr. Huson had received no present interest in the gift since he had not received or accepted the gift during Ms. Bessett’s life. Since the letter was undated, it was impossible to determine whether she drafted the letter in contemplation of her death, or some years prior.

Because Ms. Bessett failed to deliver her gift to Mr. Huson during her lifetime, there is no way to tell that Ms. Bessett still intended the gift described in her letter at the time of her death. While gifts made in contemplation of death may be valid, Oregon law has long disfavored such gifts. Quoting the Oregon Supreme Court from an eighty-year-old case, the Court of Appeals noted that allowing a gift like the one involved in Ms. Bessett’s estate would be to approve transfer documents that are made “without the safeguards cast by the law around the execution of wills.” In other words, without witnesses or the formal requirements of a will it is simply too difficult to determine whether Ms. Bessett’s true intention was to make a gift to her friend, and any intended gift failed. Estate of Bessett, January 23, 2002.

Ms. Bessett could, of course, have made her wishes clear—and effective—by just signing a will. The attempt to avoid cost (or formalities) sometimes results in a failure to accomplish one’s legal goals.

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