309 Mass. 293 | Mass. | 1941
This is a petition in equity under G. L. (Ter.
Under the agreement and declaration of trust as amended, the trustees agreed to accept and hold such policies of insurance, issued upon the life of the settlor and payable to them as trustees, as he might deliver to them, and, upon his death, to collect the proceeds and pay the income therefrom to his wife during her life and then to his children and their issue and to his stepson and his issue; and upon the death of his widow, children and stepson to pay the principal discharged of any trust to the issue of his children and also to the issue of the stepson. Bigelow had the right under the agreement of trust to alter or revoke the trust, to assign, pledge or sell the policies, to exercise any option or privilege granted by them, and, during his lifetime, to receive the surrender value of any of the policies, and all payments, dividends and benefits arising from them. The trustees collected the proceeds of the policies. They paid a succession tax on September 26, 1939, in the amount assessed by the respondent, upon the value of the present interest which he determined passed upon the death of the settlor.
There is no contention that the policies were transferred to the trustees by the insured in contemplation of death, as that phrase has been construed in taxing statutes. United States v. Wells, 283 U. S. 102. Heiner v. Donnan, 285 U. S. 312. Matter of Einstein, 114 Misc. (N. Y.) 452. The trustees contend that their rights and those of the beneficiaries were finally established at the time the policies were deposited with them by the settlor, and that their right to
It is a general rule that, in the absence of statute, the proceeds of life insurance policies payable to the insured or to his estate become, upon their receipt after his death, a part of his estate and are properly included in the computation of an inheritance tax; but that the payment of the insurance money to a beneficiary designated in the policy is not subject' to such a tax because the proceeds were acquired by the beneficiary by virtue of the contract of insurance and not from the estate of the insured. Fagan v. Bugbee, 105 N. J. L. 85. Matter of Van Dermoor, 42 Hun, 326. Matter of Knoedler, 140 N. Y. 377. Matter of Reed, 243 N. Y. 199. Matter of Parsons, 117 App. Div. (N. Y.) 321. Myers’s Estate, 309 Penn. St. 581. Estate of Bullen, 143 Wis. 512.
It is settled in this Commonwealth that the proceeds of a fife insurance policy do not pass to the beneficiary named therein by will or by our statute regulating intestate succession; that such a beneficiary does not receive anything by way of “deed” or “grant” within the meaning of our taxing statute; and that if the designation of the beneficiary could be considered as “a gift,” then it was a present gift of a contractual right which, if it remained in force until the death of the insured, entitled the beneficiary to the proceeds of the policy even though the insured had reserved the right to change the beneficiary. “By designating a beneficiary both the 'grant' and the 'gift/ so far as either exist at all,
The fact that the beneficiaries are designated in the policies as trustees for the benefit of those named in the agreement and declaration of trust does not, in our opinion, bring the transaction within the statute. The indenture of trust and the designation of the trustees as benefióiaries and the delivery of the policies to them were all parts of a single plan. The rights of the trustees and those entitled to share in the proceeds from the policies attached at the same time and became effective when the policies were deposited with the trustees, and these rights continued so long as the relation of the trustees to the policies stood unchanged and the indenture of trust remained unaltered and unrevoked. The trustees acquired the legal interests in the contracts of insurance by virtue of being designated beneficiaries in the policies, and the equitable interests in these contracts were acquired by those entitled to share in the proceeds by virtue of the indenture of trust. Under succession statutes substantially similar to our own, it has been held that the designation of the beneficiary in trust for others does not constitute a taxable transfer of the proceeds of the policies upon the death of the insured. Matter of Voorhees, 200 App. Div. (N. Y.) 259. Matter of Elting, 78 Misc. (N. Y.) 692. Matter of Haedrich, 134 Misc. (N. Y.) 741. In re
The commissioner relies upon Fagan v. Bugbee, 105 N. J. L. 85, which held that a tax was properly imposed upon the receipt of the proceeds of policies in which the beneficiaries were designated as trustees and were required to distribute the proceeds in accordance with an indenture of trust, on the ground that those who took the equitable interests in the proceeds acquired these interests by virtue of the written trust and not by the contract of insurance. The courts of New York and Washington have expressly declined to follow this decision. Matter of Haedrich, 134 Misc. (N. Y.) 741. In re Killien’s Estate, 178 Wash. 335. Compare Thomson v. McGonagle, 33 Haw. 594. The New Jersey Legislature at the session next held after the decision in Fagan v. Bugbee amended the statute by exempting from the tax payment of policies to beneficiaries who had been named therein as trustees.
The commissioner urges that the gift of the proceeds of the policies was not complete as long as the insured retained the right to change the beneficiaries and to revoke the trust. He relies principally upon Chase National Bank v. United States, 278 U. S. 327. That case arose under § 402 (f) of the revenue act of November 23, 1921, c. 136, 42 U. S. Sts. at Large, 227, which provided for the inclusion in the gross estate of a decedent of the amounts receivable by the executor or administrator from the proceeds of policies issued upon the life of the decedent, and the amounts
The decision in the Chase case rested primarily upon the validity and application of an act of Congress that made provision for the taxing of amounts received from life insurance policies issued upon the life of the decedent. Our statute does not contain a similar provision. In fact, our taxing statutes have never contained any special provisions laying an excise based on the amounts. receivable from life insurance by the beneficiary designated in the policy. There is no power to tax in the absence of a statute expressly granting such authority. United States Trust Co. v. Commissioner of Corporations & Taxation, 299 Mass. 296. Commissioner of Corporations & Taxation v. Dalton, 304 Mass. 147. Commissioner of Corporations & Taxation v. Morgan, 306 Mass. 305.
It is true that the concept of transfers within both the Federal and the State taxing statutes has been greatly broadened since the decision in the Tyler case, and the courts in determining the existence of a taxable event upon which a transfer or succession tax has been based have not permitted themselves to be restricted by technical refinements of title arising from the form in which the transaction has been cast, but have .been more concerned with the practical
The instant case is settled in principle by the Tyler case. The Legislature subsequently to that decision has codified and amended the statute, but no change relative to the taxation of the proceeds of a fife insurance policy payable to a beneficiary designated in the policy has been made. As late as 1939, the Legislature has refused to enact a bill (House, No. 426) taxing the proceeds of life insurance policies. The legislative history of the statute shows that the Legislature did not intend by the statute construed in the Tyler case to impose a succession tax upon the receipt of such proceeds; that it has approved for nearly a quarter of a century the construction placed upon the statute in that case; that it has declined to change the statute so as to include such proceeds in the computation of the tax, and
A decree is to be entered ordering the abatement of the entire tax with interest at the rate of six per cent a year from the date of its payment, together with costs.
Ordered accordingly.