185 Misc. 21 | N.Y. Sur. Ct. | 1945
Testator died August 30, 1938. He left a will which was proved September 6, 1938, letters testamentary issuing to the nominated executor. The will disposes of the entire estate to a son of testator and contains no other dis-positive provisions of any kind.
Upon the judicial settlement of his account, the executor prays that the estate taxes be allocated and that in each case in which property required to be included in the taxable estate has not come into Ms possession, an order be made directing the payment of the proportionate amount of such taxes by the persons in possession of such property, or by the persons interested in the estate and chargeable therefor pursuant to section 124 of the Decedent Estate Law.
The gross taxable estate included, among other items of property or interests passing by the death of testator, a policy of insurance upon Ms life, in the face amount of $7,500. By its terms the proceeds of the policy were made payable to a designated beneficiary in thirty-six monthly installments. Upon the death of testator, the insurance company gave the notice required by section 249-cc of the Tax Law to the State Tax Commission, and proceeded to make the payments to the beneficiary in accordance with the terms of the policy. The total amount due under the policy was $5,518 and on August 9, 1941, the company made the last payment so required. Prior thereto, however, and in August of 1939, the executor sent to the insurance company a letter notifying; it that it was chargeable in respect to said policy with a proportionate amount of the death taxes, then estimated at $588.44, and that he intended to hold the company liable for the payment of such proportionate amount. It is conceded that the insurance company received f such letter, and that on the date of receipt thereof, there was still unpaid to the beneficiary, the sum of $3,598.
The beneficiary of the policy and the insurer thereunder have each been made a party to tMs proceeding. The former has failed to respond to the citation served upon her, but the latter has appeared and filed an answer, denying any liability to the executor. No dispute exists as to. the facts and the sole issue raised by the pleadings is one of law.
The executor relies upon section 124 of the Decedent Estate Law and subdivision (c) of section 826 of the Internal Revenue
The respondent insurance company maintains that it is not a person presently in possession of any property or interest belonging to the beneficiary of the policy, and disclaims any liability for the prorata share of the tax allocated to the beneficiary of the policy. If the respondent is correct in the position it has adopted, then no legal effect may be given to the notice given to it in the form of the letter hereinbefore adverted to.
It is the view of the court that the respondent insurance company is not liable to the executor. It is not now in possession of any property or interest to which the beneficiary is entitled. The text of section 124 insofar as it subjects persons in possession of property or interests of persons against Whom a share of the tax has been charged, to liability therefor, is expressed in the present tense.
The court is.fully cognizant that the effect of the result here reached is to cast a heavy burden upon executors. Upon him is placed the primary duty of paying the tax, and of compelling the beneficiaries of property or interests passing outside the true estate to contribute their equitable share of the tax. The executor may at all times pursue the beneficiary, but while in theory all persons are deemed able to respond for their just obligations, it is far from universally true in practice. The executor must deliver to the residuary legatee the true residuary estate, and not one reduced to the extent of uncollectible
The executor is in any case entitled to a direction to the beneficiary of the insurance policy, requiring her to pay to him the prorata share of the tax allocated to her, and the decree to be entered herein may so provide.
Submit decree on notice in accordance herewith.