143 Misc. 742 | N.Y. Sur. Ct. | 1931
The ground of appeal is that the appraiser erroneously included as taxable property the present value of a joint and survivor annuity insurance policy as of the date of death of the decedent. The latter died a resident of the county of New York on December 19, 1929. On January 20, 1928, he and his wife entered into the insurance contract, referred to, with the New York Life Insurance Company. By the terms of the policy, upon the payment of the single premium of $50,000, the company agreed to pay the annuitants jointly during their lives the sum of $4,108 yearly. After the first death, that sum was to be paid to the survivor. The policy was irrevocable and could not in any way be altered or amended by either or both of the anmmitants. The wife survived the decedent. The amount of the transfer attempted to be taxed is $15,219. It has been computed as of the date of decedent’s death upon an annuity of $2,054, based upon the expectancy of the Ufe of the widow. The latter sum represents one-half of the total annuity and the State Tax Commission contends that this additional benefit passed to the widow as a taxable transfer upon the death of her husband. It is also contended that subdivision 5 of section 220 of the Tax Law (as amd. by Laws of 1929, chap. 383) subjects the transfer to a tax. That section, in general, provides for the taxing of the transfer of property held in the joint names of two or more persons as against the survivor. Where there are two joint tenants, the tax is assessed against the transfer of one-half of the fund or one-half of the value of the property. The appeal is sustained. Two grounds support this conclusion:
(1) The first is urged by counsel for the estate. It is contended that the contract was absolute at the time when it was made, that the rights of the parties were fixed as between themselves and the company, and that the annuities were based upon the expectancy of their joint fives. It is argued that the contract was irrevocable and not subject to modification in any way. It is also urged that the premium was contributed by both husband and wife and that the policy represented a valid and complete contract as between
(2) I prefer to base my conclusion, however, on a more fundamental ground. As a matter of public policy the Legislature, up to the time of the death of the decedent here, had never attempted to subject to a transfer or estate tax the proceeds of life insurance payable to designated beneficiaries. Where the proceeds of the life insurance policy are made payable to the assured, or to his estate, upon his death, they become part of the estate and are taxable. (Matter of Knoedler, 140 N. Y. 377; Matter of Reed, 243 id. 199.) But where the policy is payable to some specific beneficiary, its proceeds never come into the estate and are not taxable under the Tax Law. (Matter of Parsons, 117 App. Div. 321; Matter of Voorhees, 200 id. 259.)
Surrogate Wingate in Matter of Haedrich (134 Misc. 741) comprehensively reviewed the policy of the Legislature and the decisions of the courts with respect to the taxation of life insurance. In the Haedrich case, as in Matter of Voorhees {supra), the policies were assigned to a trustee and the rights of the life tenant with respect to the proceeds- of the insurance came into existence at the death of the settlor. In each case the new interest arising at death was determined to be free from tax. In so far as this legislative policy of non-taxation of insurance moneys has been applied in this State, there has been no distinction made between the outright payment of the proceeds to a designated beneficiary at the death of
While it has no effect upon the present controversy, because of the fact that the death of this decedent occurred in the year 1929, it should be noted that the Legislature has recently changed the rule with respect to the taxability of life insurance policies to designated beneficiaries by chapter 710 of the Laws of 1930 (in effect September 1, 1930).
Submit order on notice sustaining the appeal.
Adding article 10-C to Tax Law.