Opinion ID: 2614601
Heading Depth: 1
Heading Rank: 3

Heading: Dean M. Schmanski Carsonite Trust

Text: In November 1994, Don Schmanski's attorney drafted the Dean M. Schmanski Carsonite Trust (Carsonite Trust). Don testified that his intention was to create a separate property interest in Dean via the Carsonite Trust. His intent was to distribute his estate to his sons over a period of time. Pursuant to the Carsonite Trust's terms, Dean is the trustee and lifetime beneficiary of the trust, and Dean and Kim's children are the residual beneficiaries. The Carsonite Trust corpus consisted of 756,000 shares of Carsonite International stock. Under the terms of a Stock Sale Agreement drafted by Don's attorney, the Carsonite Trust was required to purchase the stock for $168,000. The Agreement required the Carsonite Trust to make an initial down payment of $25,000, with the balance of $143,000 to be paid over ten years in annual installments of $21,000. The debt was evidenced by a promissory note signed by Dean in his capacity as trustee for the trust. Additionally, the sole recourse in the event of a default on the note by the Carsonite Trust was recovery of the Carsonite stock. Don and his wife provided $25,000 to the Carsonite Trust so it could pay the first installment required by the stock sale agreement. Further, Don testified that he intended to give the Carsonite Trust annual gifts to enable it to make the payments on the note. However, Don sold the business again in early 1995, and the Carsonite Trust sold its stock to the buyer. Therefore, no annual payments of $21,000 were required. The district court concluded that the $25,000 down payment for stock in the Carsonite Trust was a gift from Don, and therefore Dean's separate property. However, the court found that the $143,000 balance on the promissory note was a community obligation. Therefore, the district court apportioned the Carsonite Trust as 85.12% community property, and 14.88% as Dean's separate property. Dean maintains that the district court erred in determining that 85.12% of the Carsonite Trust was community property. We agree and therefore reverse the district court's order with respect to this issue. NRS 123.130, regarding the separate property of spouses, provides in relevant part: 2. All property of the husband owned by him before marriage, and that acquired by him afterwards by gift, bequest, devise, descent or by an award for personal injury damages, with the rents, issues and profits thereof, is his separate property. The record indicates that the funds used to purchase the stock constituting the corpus of the Carsonite Trust were a gift from Don to the Carsonite Trust. According to American Jurisprudence: A valid inter vivos gift requires an intention on the part of the donor to make a present transfer, actual or constructive delivery of the gift to the donee, and acceptance by the donee. 38 Am.Jur.2d Gifts § 17 (1999)(footnotes omitted). We conclude that these elements are met here. First, Don's testimony established that his intent was to make a gift to the trust for the benefit of Dean and Dean's children only, and not to create a community property interest in Kim. Second, the stock was transferred directly to the Carsonite Trust, and thus the gift was delivered. Third, Dean accepted the stock on behalf of the trust. Furthermore, the promissory note evidencing the $143,000 debt was a non-recourse note, and therefore Carsonite International, the creditor, could only pursue the collateral, which was the stock in the Carsonite Trust, in the event of a default. Thus, the $143,000 was not a community debt, and Kim produced no evidence that she would be personally liable if a default on the promissory note occurred. Dean alone signed all of the documents for the Carsonite Trust as trustee. Therefore, it appears that the entire Carsonite Trust was Dean's separate property, subject to the children's interest as residual beneficiaries.