293 Mass. 96 | Mass. | 1936
This is a petition brought in the Probate Court for the abatement of certain inheritance taxes assessed with respect to the estate of Hetty S. L. Cunningham, late of Brookline in this Commonwealth. G. L. (Ter. Ed.) c. 65, § 27. The case has been reserved and reported without decision for our determination upon the pleadings and an agreed statement of facts. Mrs. Cunningham died intestate in August, 1931, leaving as her sole heirs at law four children born in 1885, 1886, 1888 and 1890, who are the petitioners. The net amount of her own estate was $299,241.58. No question arises concerning the inheritance tax on that estate. At her death, each of her children also took interests in property held under three different trusts. All these interests have by the respondent been united with the interest in the estate of the intestate for the purpose of determining the tax. The petitioners contend that these interests under the several trusts cannot be so united. If that contention be sound, two of them are not taxable because not sufficient in amount, and the third must be taxed at a lower rate. The petitioners further contend that, apart from any question of uniting the interests, they are not of a nature taxable under the statute. The three trusts are as follows:
(1) In 1877, the intestate created a trust. Its pertinent terms were these: She reserved to herself only a life estate of the net income but no power to revoke, alter, or amend. From and after her death, for twenty years, the net income was payable by quarter-yearly payments in equal shares
(2) In 1862, Amos A. Lawrence, the father of the intestate, created a trust for her benefit, which was accumulated until 1877, and thereafter the income was paid to her during her life. At her death, the principal and unpaid income were to be distributed to such persons as she might by will appoint and, in default of appointment, to her surviving children. No one of these shares, thus passing directly to each of the four children of the intestate on her death in default of appointment, was large enough to be taxed by itself; such share is not taxable unless united.
(3) Each of the four children of the intestate succeeded on her death to an interest in a trust established under the will of her mother, Sarah E. Lawrence, who died in 1891. Property was thereby left in trust to pay the income to each of her six children, two of whom are now living, and to the issue per stirpes of any such child deceased, so long as any of the six children should live; and for twenty years after the death of the last survivor, the income was to be paid to the grandchildren and to their issue per stirpes. The will then provided that each child by will might “appoint the shares in which” the income given to his or her children and issue “shall be apportioned among such children and issue,” and might also appoint the proportions in which the principal given to such children and issue “shall be divided
Briefly stated, the contentions of the petitioners are (1) that the interests received under the three trusts are not of a nature taxable under G. L. (Ter. Ed.) c. 65, and (2) that the interests under the 1862 trust and the interests under the will of Sarah E. Lawrence cannot be united with each other or with other interests to determine the rate of the tax.
The governing statutory provisions are these: By G. L. (Ter. Ed.) c. 65, § 1, property as therein described “which shall pass by will, or by laws regulating intestate succession, or by deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money’s worth, made in contemplation of the death of the grantor or donor or made or intended to take effect in possession or enjoyment after his death . . . shall be subject to a tax at the percentage rates fixed by” a table. In this table progressive percentages are fixed increasing with the value of the property or interest passing. The last paragraph of said § 1 is in these words: “All property and interests therein which shall pass from a decedent to the same beneficiary by any one or more of the methods hereinbefore specified and all beneficial interests which shall accrue in the manner hereinbefore provided to such beneficiary on account of the death of such decedent shall be united and treated as a single interest for the purpose of determining the tax hereunder.” G. L. (Ter. Ed.) c. 65, § 2, reads as follows: “Whenever any person shall exercise a power of appointment, derived from any disposition of property made prior to September first, nineteen hundred and seven, such appointment when made shall be deemed a disposition of property by the person exercising such
The petitioners contend that their interests arising under the trust established by the intestate in 1877 are not taxable. That contention is based on the facts that the trust was created in 1877 without power to alter or revoke, with life interest in the intestate, and that the youngest of her children was born in 1890, before the passage of any statute imposing an inheritance tax. It is urged that the gift was completed before any tax was permissible. The petitioners invoke Coolidge v. Long, 282 U. S. 582, as decisive in their favor. In that case, by the terms of the deed and declaration of trust the income was to be paid to the settlors during their joint lives and then the entire income to the survivor, and upon the death of the survivor the principal was to be divided equally among their five named sons; provided that, if any of the sons should predecease the survivor of the settlors, his share should go to those entitled to take his intestate estate under the statute of distributions in force at the date of the death of such survivor. All the sons were living when the trust was established and were named in the trust instrument. That decision rests upon the ground that the remainder vested in the sons of the settlors at the time when the trust instrument was executed and delivered, which was prior to the enactment of the statute imposing the tax. The circumstance that each son was liable to be divested of his interest
The case at bar seems to us distinguishable from Coolidge v. Long. By the instant trust instrument the income was to be paid to the intestate during her life, and after her death the net income was to be paid by quarter-yearly payments to such of her children “as may be living at the time of payment, in equal shares,” with provision for payment to issue of any deceased child, “until the expiration of twenty years next succeeding the death of” the intestate; “and upon the expiration of the said twenty years” to transfer in absolute ownership the corpus of the trust “in equal shares, to and among the children, then living” of the intestate. It is open to doubt whether this gift over could take effect as a remainder and whether its true nature is not an executory limitation. 1 Fearne on Contingent Remainders (10th ed.) 397, 398. Simonds v. Simonds, 199 Mass. 552. It is not necessary to discuss this point. It appears clear that at most the remainder was contingent and not vested until the death of the intestate. None of her children was born at the time the trust was established. Nothing then vested in them. The children of the intestate up to the moment of her death had no interest in the trust except, at best, “a bare contingent remainder expectant upon her death and their surviving her.” Wright v. Blakeslee, 101 U. S. 174, 177. There are many decisions to the effect that trust instruments of a tenor similar to the one here in issue create contingent remainders, and until the event or date designated for the
The.trust created by Amos A. Lawrence in 1862 gave the intestate a life estate with full power of testamentary appointment and, in failure of such appointment, directed distribution of the corpus of the fund among her children. The succession of the petitioners to the interest in this trust was dependent entirely upon the failure of the intestate to exercise the power of appointment. The intestate was in control of the succession to the interest in this trust so long as she lived, notwithstanding the fact that if no appointment should be made her children would take. The right to enter into enjoyment and possession of this particular trust interest was vested in no one until her death in 1931. It awaited her death and her exercise of, or failure to exercise, the power of appointment before it could descend and vest. Minot v. Treasurer & Receiver General, 207 Mass. 588, 592-593. Saltonstall v. Treasurer & Receiver General, 256 Mass. 519, 523-524. Manning v. Board of Tax Commissioners, 46 R. I. 400, 411. The succession, therefore, took effect upon the death of the intestate in 1931. The tax law had been enacted long before that date. The succession was subject to the tax. This point is covered by the decision in Saltonstall v. Saltonstall, 276 U. S. 260, 270, 271, 272. We are unable to perceive anything inconsistent with this conclusion in Coolidge v. Long, 282 U. S. 582, or in Helvering v. Grinnell, 294 U. S. 153.
The interests accruing to the petitioners as children of the intestate under the will of Sarah E. Lawrence did not vest upon the death of the latter in 1891. Under the terms of that
The contention that the failure of the intestate to exercise the special testamentary power of appointment given to her by the will of Sarah E. Lawrence does not afford basis for a tax cannot be supported. The argument is that the intestate was given a special nonexclusive power of appointment which must be exercised, if at all, in favor of her children or issue of a deceased child, that she was not at liberty to exclude any of her children or issue of a deceased child from a share, and that she must give to each a substantial share and could not give a merely nominal or illusory amount. That argument cannot prevail in this Commonwealth. The case at bar on this point is governed by Burnham v. Treasurer & Receiver General, 212 Mass. 165. The failure of the intestate to exercise the power of appointment is indicative of approval of equal division. There appears to be no reason to overrule this controlling authority. It has not been shaken or weakened by any
There was no error in uniting the several interests passing to the petitioners on the death of the intestate for the purpose of determining the tax under the last paragraph of G. L. (Ter. Ed.) c. 65, § 1, already quoted. Manifestly the interests passing under the 1877 trust established by the intestate were properly united with those passing from her by intestate succession. Marble v. Treasurer & Receiver General, 245 Mass. 504. Pratt v. Dean, 246 Mass. 300. The interests established by the Amos A. Lawrence trust of 1862 and those created by the will of Sarah E. Lawrence may likewise be so united. It is expressly provided by G. L. (Ter. Ed.) c. 65, § 2, that, whenever property passes by omission or failure of the donee of a power to exercise a power of appointment, “a disposition of property taxable under section one shall be deemed to take place ... as though the persons thereby becoming entitled . . . had succeeded thereto by a will of the donee of the power. ...” Those words are thus imported into § 1 of said c. 65 and the property is taxable according to its terms. It follows that these interests by virtue of these sections are taxable as property of the intestate passing upon her death. See Ames v. Commissioner of Corporations & Taxation, 269 Mass. 352.
The provisions of G. L. (Ter. Ed.) c. 65, § 2, are not violative of the constitutional guaranty of equal protection of the laws. They apply only to the exercise or non-exercise of powers of appointment derived from any disposition of property made prior to September 1, 1907. This constitutional guaranty does not prevent reasonable classification nor condemn differences resulting from such classification. Tax laws must become operative on some date. The date named was when St. 1907, c. 563, became effective by which the tax was made applicable to direct as well as to collateral inheritances. The legislative intent possibly was to tax succession under St. 1907, c. 563, not as from the donee but from the donor of the power. Whatever the reason, the classification cannot be pronounced arbitrary or unreasonable. The
No argument has been made as to the calculation of the tax. What has been said disposes of the controversies as presented. It follows that the petition for abatement must be denied.
Ordered accordingly.