Tax Commission v. Lamson, Exr.

183 N.E. 793 | Ohio Ct. App. | 1932

This is a proceeding in error from the court of common pleas of Hamilton county, Ohio, in which court the ruling upon exceptions by the probate court, in favor of the executors, defendants in error herein, was affirmed.

The probate court in its original determination of the inheritance tax due upon the estate of John Gates, deceased, included the approximate sum of $412,815.09, representing the value of a trust fund in the custody of the New York Trust Company. Exceptions were filed by the executors, and sustained by the probate court as to the taxability of the trust fund, and overruled as to the value of the fund.

The tax commission claims the fund was intrusted in contemplation of death, in that the transfer to the trustee occurred within two years of the decedent's death. Under Section 5332-2, General Code, such a transfer is presumed to have been made in contemplation of death. To rebut this presumption, the executors, upon whom this burden rested, produced evidence of the following facts:

Frances A. Gates predeceased her husband, John Gates, on February 5, 1926. By her will he received that portion of her estate which he would have received by law had she died intestate. At the date of his wife's death he had an estate, exclusive of that portion of his wife's estate so willed to him, of approximately $800,000. Upon being advised of the effect of the terms of the will of his wife, he expressed the desire to renounce the bequest, and a desire that his portion of the estate should be incorporated in a trust fund created by her for their three children. His attorneys advised against attempted renunciation, and suggested a transfer in trust for them similar to that provided by his wife. The trust agreement, executed March 30, 1927, was irrevocable and in substantial conformity to the trust created by the wife of John Gates. A different trustee was selected, and a distribution and reversionary clause was inserted in the following terms:

"12. This trust agreement shall remain in force during the life of the survivor of Frances E. Lamson and Alfred W. Lamson, grandchildren of the donor. On the death of such survivor, if prior to February 5, 1935, or on that date if the survivor shall be then living, this trust shall terminate and the trust fund, together with all accumulations thereon, shall, after the payment of all proper charges and commissions, be distributed on such termination to the children of the Donor, share and share alike, the issue of any deceased child to take per stirpes the share to which the parent would have been entitled if living. In the event all issue of the Donor shall be extinct on the termination of this trust, as hereinabove in this paragraph provided, and the Donor be still living, the principal of the trust fund, with all accumulations thereon, shall, after the payment of all costs, charges and commissions, be paid over to the Donor; but in the event the Donor shall have died prior to such termination, then the principal of the trust fund, together with all accumulations thereon, shall, after the payment of all costs, charges and commissions, be distributed equally to the University of Cincinnati and the Cincinnati Art Museum, to be added to their respective endowment funds."

The corpus of the fund was merely described in the indenture as being "all right, title, and interest of the donor in and to the personal property bequeathed to him by the will of his wife Frances A. Gates."

No change was made in the will of John Gates, previously executed July 16, 1925.

John Gates died April 21, 1927, being then 74 years of age. No distribution of the estate of his wife had been made before his death, and under the order of the probate court distribution of the bequest to him was made directly to the trustee under the trust indenture.

There is positive undisputed evidence that John Gates, regardless of any other motive prompting the transfer in trust of his wife's bequest to him, was determined to have this bequest pass directly to the beneficiaries selected by his wife for the major portion of her estate. His first thought was renunciation, and he abandoned this plan only upon being advised by his attorneys that it was not feasible.

It is true that his attorney stated that "he was not an active man," "was not well for a great many years before he died;" that he "could see no great change in his condition in the last year or two;" that "as an older man, he was failing, and that more steadily as time went on;" and that he "knew nothing of his ailments."

The tax commission makes three separate contentions.

"First. That the transfer was made in contemplation of death or intended to take effect at or after death.

"Second. That the transfer was a testamentary disposition of property.

"Third. That the interest conveyed to each child was contingent and was subject to be divested, and that the donor retained a reversionary fee title which constitutes a taxable interest at his death and should have been included in the gross estate for inheritance tax determination."

Answering the last contention first: There can be no taxable reversionary interest in the donor, for the reason that he is dead; there can be no reversion to him; and the indenture provides for other distribution in the event of that contingency.

As to the second contention: The instrument was executed at a time when the donor had a will in existence, which he could have amended by codicil, and the trust instrument took effect as a transfer at once and not upon the death of the donor. It cannot, therefore, be said to be testamentary in character, unless the first contention of the commission is tenable.

Previous pronouncements of even authoritative courts are of little aid to a court in reaching a conclusion upon issues such as are presented in the instant case. Two judges, constituting two separate courts, in considering the trust instrument here involved, however, have concluded that the circumstances surrounding its execution indicate that it was not executed in contemplation of death, and that the evidence submitted is sufficiently strong to meet the presumption provided in the statute. Such presumption, of course, is not conclusive.

Agreeing with these previous conclusions of the lower courts, we are convinced that the evidence clearly indicates that John Gates, even if he had been a young man with a long expectancy of life, would have executed the trust indenture, and that neither the certainty of the event of death nor the uncertainty of its occasion influenced his action.

While the facts are somewhat different from those in Burton,Exr., v. Tax Commission, 37 Ohio App. 183, 174 N.E. 361, in which a motion to certify was overruled, there is this similarity, that in each case there was a distinct determination upon the part of the recipient of the bequest to have no part in the benefits thereof. That the motives prompting such conclusions were different does not affect the fact of the existence of an intent, wholly separate, distinct, and entirely uninfluenced by the sentiments aroused by a contemplation of death.

The transfer was therefore not a testamentary distribution of the estate of the donor, but rather the performance of an act prompted by a sense of justice and propriety, and performed with sufficient promptness to indicate that no ulterior motive intervened.

The judgment of the court of common pleas, sustaining the ruling of the probate court of Hamilton county upon the exceptions in favor of the executors, and holding that the trust fund was not taxable, is affirmed.

Judgment affirmed.

HAMILTON and CUSHING, JJ., concur.