66 T.C. 250">*251 Respondent determined a deficiency in Federal estate tax due from the Estate of Semo A. Sulovich in the amount of $ 27,145.16. The sole issue for decision is whether the value of five separate savings accounts established by the decedent in his name as trustee for others is includable in his estate under either section 2038 or 2036. ¹

1976 U.S. Tax Ct. LEXIS 110">*112 FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

The petitioner is the Estate of Semo A. Sulovich, deceased, Helen Unkovich, executrix. The residence of the executrix at the time the petition was filed was Glennie, Mich. Semo A. Sulovich (decedent) resided in Dallas, Tex., at the time of his death on June 8, 1969.

On March 2, 1959, the decedent, an immigrant with a limited knowledge of English, established five separate savings accounts with the Dallas Federal Savings & Loan Association (Dallas Federal) in Dallas, Tex. The accounts were opened in decedent's name as trustee for his niece, Helen Unkovich, and each of her four children.

In connection with each of the savings accounts the decedent executed signature cards which contained on the reverse thereof the following language:

It is expressly understood that Semo Sulovich shall have the exclusive right during his lifetime, to assign, transfer, and sell the Share Account to be issued under the application on the reverse side hereof, and to withdraw the repurchase value of the said share account. In the event of death or incapacity to act of Semo Sulovich then and in that event the beneficiary, 1976 U.S. Tax Ct. LEXIS 110">*113 whether a minor or an adult, shall have the right to withdraw the repurchase value of said account to be so issued.

This reservation of rights was signed by decedent and accepted by Dallas Federal through its representative, Mr. William C. H. Jackson. The account cards also authorized the bank to act without further inquiry in accordance with writings bearing decedent's signature. It was, however, the general practice of 66 T.C. 250">*252 Dallas Federal not to permit withdrawals without a passbook but some exceptions were permitted.

Decedent intended the funds exclusively for his niece and her children. He never intended to withdraw any money from the accounts, did not at any time need the money, and in fact no money was ever withdrawn prior to his death. At the end of 1965, decedent wrote the following letter indicating he intended to transfer the trust account passbooks:

Dear Helen & Sara:

Today I received your card and letter in it. What in the H- you going to borrow money when you got in Bank & Savings & Loan, what's wrong with you and Mike? I give you that money for that purpose and here you borrow money and pay interest, what kind of monkey business is that? I am going to1976 U.S. Tax Ct. LEXIS 110">*114 send you after New Year's all the books of the Trust fund for the children. You mentioned to send me some kind of book. What the H- I want with them here. I have another account in one of the banks here, is nearly $ 11,000.00 thousand dollars, that I'm going to withdraw after January 1st, because I don't get any business from them, they moved 3 blocks further. Keep your book and write checks when you need it, for Ann and rest of the family. I am going to sleep little.

Your Uncle,

Semo

The following month, in accordance with decedent's letter, the passbooks were delivered to his niece.

In 1967 a robbery occurred at the restaurant which decedent owned. Since decedent mistakenly assumed the original trust account passbooks were still in his safe, he obtained duplicate passbooks and forwarded them to his niece. ²

1976 U.S. Tax Ct. LEXIS 110">*115 Decedent never asked that any of the passbooks be returned to him for any reason. Neither the original nor the duplicate passbooks were returned to decedent at any time and were still in his niece's possession at the date of his death.

The bank, through Mr. Jackson, asked for and received the social security numbers of decedent's niece and her four children for the trust accounts. Decedent's niece received annual statements from the bank indicating the interest attributable to each trust account. She reported the interest attributable to the account held as trustee for her on her Federal income tax return. 66 T.C. 250">*253 The interest attributable to the other trust accounts was not reported by the children because they had insufficient income and did not file income tax returns.

In addition to the trust accounts, decedent also established several joint accounts with his niece at Dallas Federal. He periodically withdrew various amounts from these accounts, and in some cases interest was automatically sent to him. He often forwarded the interest to his niece. However, he never attempted to make a withdrawal without a passbook. At the time of his death, the total balance of joint 1976 U.S. Tax Ct. LEXIS 110">*116 accounts at all savings institutions was $ 191,145.70.

OPINION

Respondent contends that the savings accounts here in issue were, at most, revocable trusts and must, therefore, be included in decedent's gross estate under section 2038. Section 2038(a)(1) ³ requires that the value of all property transferred during the decedent's life and subject at the date of death to a power by decedent to revoke the transfer be included in the gross estate. Thus, we must determine whether, at the time of his death, decedent possessed the power to revoke the transfer.

1976 U.S. Tax Ct. LEXIS 110">*117 When one person deposits money in his own name as trustee for another the legal implications of that transaction are determined by both the depositor's intent and the effect of that intent under the law of the relevant jurisdiction. Generally, the savings account trust has been recognized as an effective means of transferring to the beneficiary the balance of the account at the depositor's death.

In order to avoid collision with the Statute of Wills the courts have characterized the savings account trust as either a revocable trust in which the beneficiary has a present but defeasible interest or a tentative trust in which the beneficiary's interest in 66 T.C. 250">*254 the account is tentative until the depositor's death. Thus, although the depositor retains the unrestricted right to the account and the beneficiary has an interest only in the balance remaining at the depositor's death, failure to comply with the Statute of Wills has only infrequently resulted in an invalid testamentary transfer. Bogert, Trusts & Trustees, sec. 47 (2d ed. 1965); 1 Scott, Trusts, sec. 58 (3d ed. 1967). See "Savings Account Trusts: A Critical Examination," 49 Notre Dame Law. 686 (1974);1976 U.S. Tax Ct. LEXIS 110">*118 "Bank Account Trusts," 49 Va. L. Rev. 1189">49 Va. L. Rev. 1189 (1963); 1 Restatement, Trusts, sec. 58 (2d ed. 1959).

In Texas, ⁴ however, the savings account trust was declared invalid as a testamentary transfer not executed in compliance with the Statute of Wills. Fleck v. Baldwin, 141 Tex. 340, 172 S.W.2d 975 (1943). In order to establish a valid inter vivos trust, Fleck required compliance with the common law essentials for making a completed inter vivos gift. Thus, Fleck foreclosed the possibility of a valid trust in which the settlor retained either a power of revocation or a lifetime beneficial interest.

Recent Texas decisions as well as the enactment of the Texas Trust Act have circumscribed the holding in Fleck. In Land v. Marshall, 426 S.W.2d 841 (Tex. 1968),1976 U.S. Tax Ct. LEXIS 110">*119 the settlor reserved plenary powers, including "the power to require the trustee to sell, dispose of, or encumber the stock and to pay to him the proceeds even though it would extinguish the trust." Nevertheless, the Supreme Court of Texas indicated that the Texas Trust Act specifically sanctions that which Fleck prohibited, i.e., an inter vivos trust with retained powers of control. ⁵ Furthermore, the court held that a valid inter vivos trust need not meet all the requirements of an inter vivos gift. Rather, if the existence of the trust is not contingent on the death of the creator, a valid inter vivos trust has been created and a power of revocation will not delay or invalidate its existence.

Relying on Land v. Marshall, supra, a Texas appellate court has held 1976 U.S. Tax Ct. LEXIS 110">*120 that a trust over which the settlor-trustee retained the power of revocation, the power to modify, and a lifetime beneficial interest, was a valid trust at its inception and not an invalid testamentary transfer. Westerfield v. Huckaby, 462 S.W.2d 32466 T.C. 250">*255 (Tex. Civ. App. 1970), affd. 474 S.W.2d 189 (Tex. 1971). There, the settlor-trustee retained a power of revocation as well as the right to deal with the trust property for her own benefit during her lifetime. The interest retained by the settlor-trustee in Westerfield was quite similar to that retained by the depositor in a savings account trust, and the language of the Supreme Court of Texas in validating these trusts was very broad. Thus, while Texas law is not clear on this issue, we must conclude that the savings account trusts in the case at bar were valid revocable trusts at their inception.

Differing appellations and theoretical underpinnings are ascribed to savings account trusts, sometimes producing varying legal results. But whether they are called tentative trusts or revocable trusts, the depositor can deal with a savings account trust in essentially1976 U.S. Tax Ct. LEXIS 110">*121 the same manner as a bank account in his own name. He is under no duty to avoid commingling or to preserve the trust property; indeed he may appropriate the funds for himself or others, without regard to the duties normally imposed on trustees. The account will generally answer to the depositor's creditors, be subject to a surviving wife's statutory share, and may even be used for funeral expenses. See "Savings Account Trusts: A Critical Examination," 49 Notre Dame Law. 686, 694, 699 (1974). See also "Bank Account Trusts," 49 Va. L. Rev. 1189">49 Va. L. Rev. 1189, 49 Va. L. Rev. 1189">1205 (1963).

Indeed, the contract of deposit between decedent and the bank states that it is "expressly understood" that decedent had the "exclusive right" during his lifetime to "assign, transfer, and sell" the account or to "withdraw" the balance therefrom. It seems crystal clear from both the body of law defining savings account "trusts" and the specific contract here involved that decedent could deal with the account as his own property. We therefore believe that decedent could make a gift of the account in the same manner as if the account were in his own name. ⁶Fasano v. 66 T.C. 250">*256 , 146 Conn. 496">146 Conn. 496, 152 A.2d 512 (1959);1976 U.S. Tax Ct. LEXIS 110">*122 Hickey v. Kahl, 129 N.J. Eq. 233">129 N.J. Eq. 233, 19 A.2d 33 (1941).

1976 U.S. Tax Ct. LEXIS 110">*123 To make a valid inter vivos gift the donor must intend to transfer all dominion and control over the property to the donee and the subject matter of the gift must be delivered to the donee. Wells v. Sansing, 151 Tex. 36">151 Tex. 36, 245 S.W.2d 964 (1952); Forbes v. Forbes, 430 S.W.2d 947 (Tex. Civ. App. 1968); Christian v. Walker, 381 S.W.2d 675 (Tex. Civ. App. 1964). When a gift of a chose in action is made, the instrument evidencing the chose must be transferred to the donee.

It is undisputed that a depositor can, with the requisite donative intent, make a gift of an account held in his name by transferring the passbook representing the account. See O'Donnell v. Halladay, 152 S.W.2d 847 (Tex. Civ. App. 1941); Benavides v. Laredo Nat. Bank, 91 S.W.2d 372 (Tex. Civ. App. 1936); Weems v. First Nat. Bank of Winnsboro, 234 S.W. 931">234 S.W. 931 (Tex. Civ. App. 1921). See also Brown, Personal Property, sec. 8.3, pp. 161-164 (3d ed. 1975). Similarly, a depositor can make a gift of an account held in his name1976 U.S. Tax Ct. LEXIS 110">*124 as trustee for another by transferring the passbook with the requisite donative intent. 129 N.J. Eq. 233">Hickey v. Kahl, supra;146 Conn. 496">Fasano v. Meliso, supra.See Bogert, Trusts & Trustees, sec. 47, p. 366 (2d ed. 1965). ⁷

1976 U.S. Tax Ct. LEXIS 110">*125 In 129 N.J. Eq. 233">Hickey v. Kahl, supra, decedent opened two savings accounts in his name in trust for his daughter, with whom he lived. He indicated on several occasions that he had established savings account trusts for his daughter. Sometime later, he gave the two passbooks to his daughter with instructions to hide them and say nothing. The Court found a present gift, stating:

66 T.C. 250">*257 That Horvath opened the accounts in the form he did, deposited his money therein and made no withdrawals therefrom, is evidence that he had a donative intention toward Mrs. Kahl with reference to the money so deposited, especially when he maintained other savings accounts in his individual name from which he made withdrawals for his own use * * *. * * * Horvath had a heart attack in July, 1939 * * *. Having after his wife's death opened the bank accounts with a donative intent toward his daughter and considering his affection for her, it would be but natural that at that time he would * * * place the passbooks in his daughter's possession. By so doing he carried out his intention to make an absolute gift to her, and he stripped himself of control over the accounts. 1976 U.S. Tax Ct. LEXIS 110">*126 While mere delivery of the books to her did not transfer full control to her, because she could not make withdrawals without Horvath's signature, that concerned the banks only and did not prevent delivery operating as a then present gift * * * [19 A. 2d at 37].

The case before us is very similar to Hickey v. Kahl, but provides even stronger evidence of intent to make a gift. In opening the accounts, decedent had a firm desire to benefit his niece, of whom he was particularly fond, and her children, the last of whom was named "Semo" after decedent. On numerous occasions, decedent communicated this intent to Mr. Jackson of the bank and to his niece. While originally retaining control over the deposits, he never had any intention of withdrawing any money from the accounts; and, true to this intent, he never withdrew a penny in principal or interest, either prior to or subsequent to his delivery of the passbooks to his niece.

Decedent's business and numerous other savings accounts generated income substantially in excess of his ability to spend consistent with his life style. In fact, from about 1953 until his death, decedent sent his1976 U.S. Tax Ct. LEXIS 110">*127 niece over $ 30,000, mostly from interest on other accounts he maintained jointly in his own and his niece's name.

Petitioner never drew any money out of his savings accounts without the passbooks and aside from exceptional situations, the bank did not permit withdrawals without a passbook. Given his limited formal education and difficulty with English, his practice of identifying the passbook with the right to withdraw and the act of withdrawing, and the bank's practice to require the passbook, petitioner undoubtedly regarded possession of the passbook as possession of the savings account, not simply a symbol of dominion and control, but dominion and control in itself.

Against this background, petitioner, in a letter written in December 1965, told his niece that he was sending her the 66 T.C. 250">*258 passbooks for the trust accounts, implying if not stating that the transfer was a continuation of a policy of making gifts, at least in part to eliminate any need for his niece to borrow. In January of 1966, the passbooks were forwarded. The following year, after his safe was broken into, petitioner had duplicate passbooks made and again sent the passbooks to his niece. Decedent, in responding1976 U.S. Tax Ct. LEXIS 110">*128 to his temporary lapse of memory, unequivocally indicated that the accounts belonged to his niece.

Decedent's handling of these accounts stands in distinct contrast to his handling of the other accounts he held jointly with his niece. From the inception he never intended to touch the principal and interest on these accounts; he always intended to use the income and principal of the joint accounts as his needs required. He intended these accounts to be held inviolate for his niece and her children; he intended his niece to have only the residue of the joint accounts remaining at his death. He never withdrew any principal or interest from these accounts; he often withdrew the interest on the joint accounts, sending substantial portions of the interest to his niece. He sent his niece all of the passbooks to these accounts early in 1966, while retaining all of the passbooks for the joint accounts. After the burglary, he again sent her (duplicate) passbooks for these accounts, while retaining the passbooks for the joint accounts. The passbooks for these accounts were in his niece's possession at his death several years later, while he retained possession of the passbooks relating1976 U.S. Tax Ct. LEXIS 110">*129 to the joint accounts.

Mrs. Unkovich regarded the accounts as her own and this apparently accorded with the bank's understanding, since Mr. Jackson asked decedent for the social security numbers of his niece and her children, for these accounts. These numbers were supplied to the bank, the income information was sent to Mrs. Unkovich, and she reported the income on her return. (The children had insufficient income to require filing returns.)

In summary, decedent never intended to use the money from these accounts; he had no need for the funds; the beneficiaries were his main objects of affection; and he never withdrew any money from these accounts, although he withdrew money from his other accounts. He directly identified ownership and control of the accounts with the passbooks he transferred in January of 1966, and unequivocally indicated his intent that his niece should have the accounts by again transferring duplicate 66 T.C. 250">*259 passbooks a year later. His niece reported the income from her account on her Federal return. On this record, we can only conclude that when decedent transferred the passbooks to his niece, he intended to make a gift of these accounts, and that a gift1976 U.S. Tax Ct. LEXIS 110">*130 was effected under the applicable law. ⁸

This case is to be sharply distinguished from the Estate of Michael A. Doyle, 32 T.C. 1209">32 T.C. 1209 (1959); Estate of Eva Wasserman, 46 B.T.A. 1129">46 B.T.A. 1129 (1942), affd. 139 F.2d 778">139 F.2d 778 (1st Cir. 1944); and Estate of Mae Elliott, 57 T.C. 152">57 T.C. 152 (1971), affd. per curiam 474 F.2d 1008">474 F.2d 1008 (5th Cir. 1973), all cited by respondent to justify his determination of a deficiency herein. In Doyle, we were unable to find "any unequivocal act or declaration * * * during [decedent's] 1976 U.S. Tax Ct. LEXIS 110">*131 lifetime indicating an intention to surrender dominion and control" of the account since his "retention of possession and control over the passbook gave him the power to make such withdrawals had he chosen to do so." (32 T.C. 1209">32 T.C. 1214.) In Wasserman, with the exception of brief periods after which the passbooks were returned, decedent had possession of the passbooks and actually made withdrawals from the accounts on several occasions. We found that "the decedent alone had access to the accounts and had absolute control over them." (46 B.T.A. 1129">46 B.T.A. at 1133.) On these facts, we decided there was no gift. ⁹ In Elliott, the bonds in question were never delivered, but were retained in decedent's safe-deposit box to which she had access.

1976 U.S. Tax Ct. LEXIS 110">*132 Respondent's alternative contention that the funds must be included in decedent's gross estate under section 2036 ¹⁰ is 66 T.C. 250">*260 similarly without merit. Since we have decided that decedent made a gift of the accounts, he did not retain the right either to possess or enjoy the property or income therefrom or the right to designate the persons who would possess or enjoy the property or the income therefrom. Rather, at the time of the transfer of the passbooks decedent gave up all rights and interests in the property.

1976 U.S. Tax Ct. LEXIS 110">*133 Additionally, since we have decided that the decedent made a present gift of the accounts in issue, we need not discuss the difficult issue of whether or not a transfer of the passbooks, even if it was not a gift, made the trust irrevocable. ¹¹ Since decedent made a gift of the accounts, the funds in the accounts were properly excluded from his gross estate. Consequently,

1976 U.S. Tax Ct. LEXIS 110">*134 Decision will be entered for the petitioner.