123 N.J. Eq. 315 | N.J. Super. Ct. App. Div. | 1938
The executor of Eobert Gemmell, a resident decedent, appeals from the transfer inheritance tax assessment against the estate, contending that the comptroller erred in his determination that there had been a taxable transfer in respect of two policies of insurance on the life of decedent, and in levying a tax thereon.
The two policies,— (they were in fact certificates under a group insurance policy), — -were issued each for $5,000, payable at the death of decedent to his estate, with power to the insured at any time to name or change the beneficiary.
Six months before his death decedent executed proper documents directing the insurance company to name his wife as beneficiary under the policies. The change was duly effectuated; and the proceeds of the policies were paid to the wife after his death.
The tax in question, amounting to $100.74, was assessed and levied as in respect of a taxable transfer to the decedent’s wife, of the $10,074.80 proceeds of the insurance policies. It seems clear that it must be affirmed.
The statute imposes a tax upon “the transfer of any property, real or personal * * * or of any interest therein * * * in trust or oihenvise * * * made * * * by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor or intended to take effect in possession or enjoyment at or after such death.”
By -changing the beneficiary entitled to receive the insurance moneys, substituting his wife in place of his estate, obviously he effectuated a transfer of property or “an interest in property,” — he transferred from his own estate, to his wife, the right to claim, receive and be entitled to the proceeds of the policies at his death. He made a transfer just as clearly and effectively as if he had executed an assignment to B of a promissory note made by X payable at decedent’s death to decedent or his order.
That transfer was a gift to the wife, — no consideration was paid by her nor was there any valuable consideration received by the decedent therefor.
Obviously it was a transfer intended to take effect in possession or enjoyment at or after the transferor’s death. Even if the change of beneficiary had been absolute, complete and
Under the facts of this case it was also, unquestionably, a transfer made in contemplation of death. Aside from the fact that every taking out of life insurance policy (except possibly an endowment policy) and every change of beneficiary, is necessarily from the nature of thing, done in contemplation of death, in the instant case it was done in actual contemplation of the actual expectancy of death in the near future. It was done six months prior to death; and the statutory presumption (in sub-section “third”) applies if it be done within two years prior to death. It was done, in fact, while the decedent was, to his own knowledge, suffering from a fatal disease, — from which he subsequently died. This indeed is not disputed by the appellant.
The fact that the decedent, under the terms of the policy, still retained the right to change the beneficiary after the change to his wife, in nowise militates against the taxability of the transfer. That circumstance simply adds further evidence of the fact that the transfer was not complete (and not intended to be complete), — not intended to take effect in possession or enjoyment until after the transferor’s death. Such is always the legal result where any transfer is made with reservation to the transferor of the power of revocation during his life. In re Fosdick, 102 N. J. Eq. 45, 139 Atl. Rep. 318; Chase National Bank v. United States, 278 U. S. 327.
It is contended by appellant that the right to receive the proceeds of these policies was never owned by the insured decedent, hence that the change of beneficiary was not a transfer from him, and is therefore not taxable. The statute however does not say that the transfer to be taxable must be of property or property rights owned by the transferor. True it is that by fair and reasonable inference some such implied provision doubtless should be read into the statute in construing its provisions. The object and purpose of the
The appellant further contends that it was not the purpose of the legislature by the statute in question, to tax transfers made by insurance companies to beneficiaries named in insurance policies taken out and paid for by the insured decedent; that transfer of the proceeds of such insurance policies is made by the insurance company to the beneficiary pursuant to a contract between the insurance company and the insured; that such a transfer is not specifically made taxable by the language of the statute; and that the change of beneficiary from the insured’s own estate to a specific third party beneficiary is in nowise different from the taking out of an original policy payable to such third party beneficiary.
It has never been decided in this state that the purchase, and subsequent performance, of an insurance policy payable at the death of the insured to a specific named beneficiary, without any reservation to the person insured (and who pays the premiums) of any right to change the beneficiary, does not constitute or involve a transfer taxable under the statute in question,— (although there are dicta to that effect in Fagan v. Bugbee, supra, pp. 88, 89). Neither has the converse been decided in this state. It is not necessary here to decide that question. In the instant case there was a reservation of complete power to change the beneficiary; and in view of that circumstance it would seem logical, under the
There is no weight in the appellant’s contention that the transfer here sub judice was by contract between the insured and the insurance company and as such is not made taxable by the statute. The statute taxes transfers “in trust or otherwise,” made “by deed, grant, bargain, sale or gift.” It has repeatedly been held that it is the substance, not the form, which controls. The transfer here, as has already been set forth, was a gift from the transferor to the transferee. The statute does not require that the gift be irrevocable in the first instance; neither does it require that there be an actual delivery or other direct contract or dealing between the donor and donee. Hone such occurs when the gift is made to a transferee in trust for the donee,- — which have repeatedly been held taxable. The fact that the transfer is effectuated through the medium of a third party does not save it from taxability under the statute. It is the transfer to the ultimate beneficiary which is taxed. If a transfer made by means of a deed of trust to a third party is taxable, as has repeatedly been held, what logical basis is there for argument that a transfer made by contract or “bargain” with a third party is not taxable. The beneficiary is no more a party to the deed than to the contract.
It is true that in Fagan v. Bugbee, supra, there is a dictum, to the effect that where a beneficiary takes under the terms of an insurance policy, the transfer is not taxable because it
It may also be noted that under the terms of the policies in question, the insured had the right to receive the proceeds of the policies himself, during his lifetime, if he became totally disabled, — -and that he had in fact become totally disabled. There was a property right therefore not only in the insured’s executor or administrator but in himself, personally; and these property rights were, by the change of beneficiary and the subsequent failure to exercise the reserved right of revocation, transferred to the wife. Cf. Cohen v. Samuels, 245 U. S. 50.
The tax will be affirmed.