Was it a Loan or was it a Gift? | Estate Planning Newsletter

In the case of the Estate of Timothy R. Curtis, the Court dealt with the issue of whether a check written by a mother to her son was a loan or a gift. The facts in the case were that Timothy Curtis died testate and his Will was admitted to probate. The Decedent’s girlfriend, Jill Henry, was appointed as Executrix. The Decedent’s mother, Judith Downing, filed a claim against the Estate seeking repayment of $30,000.00 which she claims to have been loaned to the Decedent to purchase a house. Attached to the claim was a copy of a cashier’s check and a Real Estate Data Assessment demonstrating that the Decedent purchased the property for $34,500.00. The mother also attached a letter that she purportedly sent to the Decedent along with a cashier’s check addressed to “Tim” from “Mom” stating that the $30,000.00 was a loan for the Decedent’s home purchase. The Executrix filed an Exception to the Claim alleging that the funds were a gift to the Decedent.

The Trial Court wrote that under Tennessee law, a presumption arises from the delivery of a check that the check indicates a loan and not a gift. When the presumption is found, there is a burden of proof that shifts because there has been prima fascia evidence shown. Thus, at that point, it was upon the Estate to produce evidence to show that the check was intended to be a gift.

The Executrix was unable to present satisfactory evidence to the Court, and the Court ruled that the check constituted a loan to the Decedent and was therefore a valid claim against the Estate. The Trial Court ruling was affirmed by the Court of Appeals.

The Court of Appeals reiterated the basic rule of law in Tennessee and found that the Executrix did not meet the burden of proof to rebut the presumption that the check constituted a loan and not a gift.

MY COMMENT:  Loans should always be evidenced by Promissory Notes, even in the context of a family situation. Had the mother had a Promissory Note signed by the son, all of the litigation could have been avoided. Although the mother won the case, she had the expense of trial court litigation and Cout of Appeals litigation. 

Yours very truly,
RAINEY, KIZER, REVIERE & BELL, P.L.C.
William C. Bell, Jr., Attorney at Law

This letter is intended to provide you with ideas for consideration in commercial transactions.  It is not intended to give a general solution applicable to all apparently similar individual problems, since slight changes in facts may require variance in legal advice.  Please contact legal counsel with specific questions.