Opinion ID: 288298
Heading Depth: 1
Heading Rank: 2

Heading: Split Gift Theory

Text: 14 We turn next to the government's splitgift theory. Part of the direct testimony proffered by the government consisted of the values based on actuarial computations of the life estate to the decedent's daughter and of the remainder to the grandchildren. On the basis of this evidence the government contends that there were actually two gifts, the life income to the daughter and the remainder to the grandchildren. The government argues that the motive for each gift must be examined and that the estate failed to introduce any evidence at all of the motivation for the gift of the remainder interest to the grandchildren other than 'family reasons.' 15 The government admits that this multimotive split-gift theory has been tested in only two previous cases and upheld in only one of them. In Garrett's Estate v. Commissioner of Internal Revenue, 180 F.2d 955, 17 A.L.R.2d 780 (2d Cir. 1950), the Court held that a trust consisting of life insurance policies and securities, with direction to use the income from the securities to pay the premiums on the life insurance, constituted separate gifts with separate motives. The Court stressed, however, the unambiguous intention to make two separate gifts, one of the income from the securities (less the amounts used to pay the life insurance premiums), the other the life insurance policies themselves. The Court also found it clear that the donor did not intend the beneficiaries of the trust to have any interest in the insurance policies until after his death. Thus the Court had no difficulty finding separate motives for the obviously separate gifts contained in the same trust agreement. 16 However, in a case more factually similar to the case at bar, Studebaker v. United States, 195 F.Supp. 841 (N.D.Ind.1961), modified, 211 F.Supp. 263 (N.D.Ind.1962), the Court refused to apply the split-gift theory to a gift in trust providing for a life income to the settlor's daughter-in-law with a remainder over to the settlor's grandchildren. We agree with the Court in Studebaker, supra, that it is 'unrealistic' to apply the splitgift theory to the type of gift at issue here. It is not reasonable to assume that the decedent had one motive for the gift of the life income and another for the disposition of the corpus upon the termination of the life interest. We must conclude therefore that the decedent had only one, albeit ambiguous, motive for the entire gift in trust, and we hold that the District Court committed no error in refusing admission of the evidence proffered to support the split-gift theory.