What is Donative Intent and Why does it Matter?
Donative intent is a phrase used to describe the situation where a transfer of property is made as a gift. Simply put, it is an intent to gift. Someone is said to have donative intent if they give something of value to someone else and do not expect the property returned and do not expect some other property to be given in exchange for the transfer. Oftentimes, people give or exchange property without preparing a document to describe or “classify” the transaction. When my son asks for $20 to buy gas for his car, I don’t typically prepare a document to describe whether I am making a gift or a loan. In the context of a decedent’s estate, this situation can become problematic because the person making the gift or the loan is no longer available to tell us what they intended. Questions often arise in decedent’s estates whether a particular transaction was a gift or a loan. If the decedent wrote a check to a neighbor, friend, or even a girlfriend/boyfriend for $50,000 and no further documentation was available regarding that matter, should the estate seek to recover the funds as an unpaid loan or abandon the money as a prior gift. In Illinois, the law presumes that a payment to a family member is a gift and that a payment to non-family members is a loan. These presumptions are rebuttable – meaning that they can be overcome with specific testimony or evidence. Illinois law provides a rebuttable presumption of donative intent where the donor is a parent and the donee is his or her child. Jackson v. DBR Jackson Partnership, 2016 IL App (3d) 150229 (2016), 70 N.E.3d 641, 410 Ill.Dec. 514, citing Moore v. Moore, 9 Ill.2d556, 138 N.E.2d 562 (1956). The law, however, does not presume a gift if someone transfers property to a friend, even a close friend. Barnes v. Michalski, 399 Ill.App.3d 254, 925 N.E.2d 323, 338 Ill.Dec. 826 (4th Dist. 2010), citing Bowman v. Pettersen, 410 Ill. 519, 102 N.E.2d 787 (1951); Hall v. Eaton, 258 Ill.App.3d 893, 631 N.E.2d 833 (1994). In the context of handling a decedent’s estate, if the decedent made a payment to a non-family member, and the decedent was not paying a debt owed to that person at the time, then that payment will be deemed a loan unless the recipient can prove all the elements of a gift by clear and convincing evidence, including donative intent. For further reading on this topic, one should reference 38 Am.Jur.2d, §92. As is true with many legal issues arising in a decedent’s estate, it is wise to be familiar with the evidentiary restrictions imposed by the Dead Man’s Act.