Avery v. Walsh.

• Decision Date: 08 May 1946
• Citation: 46 A.2d 912
• Parties: AVERY v. WALSH.
• Court: New Jersey Prerogative Court

46 A.2d 912

AVERY

v.WALSH.

Prerogative Court of New Jersey.

May 8, 1946.

Proceeding in the matter of the Transfor Inheritance Tax Assessment in the estate of Frank M. Avery, deceased. On the petition of Marion F. Avery, executrix of the last will and testament of decedent, against Frank E. Walsh, Director, Division of Taxation, Department of Taxation and Finance of the State of New Jersey, to review such assessment.

Assessment affirmed.

Syllabus by the Court.

1. The object of the transfer inheritance tax statute (R.S. 54:34-1, N.J.S.A. 54:34-1) is to tax not only testamentary and intestate transfers but also inter vivos transfers which as mere substitutes for testamentary dispositions are employed to effectuate a purpose normally accomplished by will.

2. There is no statutory or evidential presumption that a transfer made by a decedent more than two years before his death was not made by him in contemplation of death. However, in such case the burden of proof devolves upon the taxing authorities to adequately establish that contemplation of death was an impelling motive for the transfer.

3. Where an inter vivos gift is, as a a result of considered choice, intentionally made in the place and stead of a testamentary disposition, it is taxable. The substance of the transfer rather than the form controls.

4. The determinant of the taxability of an inter vivos transfer as in contemplation of death is the intent and purpose of the transferor.

5. Whether or not a transfer comes into enjoyment or possession at transferor's death is a matter of a realistic examination of the shifting of economic burdens and benefits, the actual succession to property.

6. Evidence examined, held that under the facts established sub judice the transfers in question fall within the orbit and taxable category of the statute.

Dolan & Dolan and William A. Dolan, all of Newton, John T. Madden, of Ogdensburg, and Phillips & Avery and Royd C. Lutz, all of New York City, for petitioner.

Walter D. Van Riper, Atty. Gen., and William A. Moore, Special Counsel, of Trenton, for respondent.

JAYNE, Vice Ordinary.

The late Frank M. Avery, formerly a member of the law firm of Phillips and Avery of New York City, is reputed to have been a scholarly and perspicacious person. He died on March 3, 1944, at the age of eighty-six, a resident of Sparta, Sussex County, New Jersey. Death caused by an embolism following a prostatectomy visited him suddenly. Surviving him were his daughter, Marion F. Avery, and two sons, Irving M. Avery and Henry C. Avery.

In February 1932 the decedent at the age of seventy-four transferred all of his real estate including his menage and all of his personalty, valued collectively for inheritance taxation at $120,437.56, to his daughter, Marion, and his son Irving. Associated with the transfers was a written agreement bearing date February 26, 1932. Cf. Nicholas v. Martin, 128 N.J.Eq. 344, 356, 357, 15 A.2d 235, modified 127 N.J.L. 35, 21 A.2d 323, affirmed Rutgers v. Martin, 127 N.J.L. 603, 23 A.2d 406; In re Kellogg's Estate, 123 N.J.Eq. 322, 197 A. 263; In re Hartford's Estate, 122 N.J.Eq. 489, 493, 194 A. 800, affirmed Hartford v. Martin, 120 N.J.L. 564, 1 A.2d 13, further affirmed 122 N.J.L. 283, 4 A.2d 31, 121 A.L.R. 354.

I have said that the decedent was a man of acute discernment. A preception of transfer inheritance taxation seems also to have been one of his attainments. He not only scented, perhaps, from afar, the eventual incursion of such taxes, but he sought vigilantly to erect a stockade. Give attention initially to the preamble which more than ornaments his agreement:

‘Whereas the party of the first part is in good health considering that he is 74 years of age, has no contemplation of death, is not under the care of any physician, and has a normal expectancy of life, according to the mortality tables, of 6.7 years; and

‘Whereas the party of the first part, having now arrived at an advanced age in life, has for some time past desired to retire definitely from active business and to relieve himself of the management of his affairs and to leave same in the hands of two of his children, namely the parties of the second part; and

‘Whereas pursuant to his foregoing desires the party of the first part has heretofore deeded, conveyed, assigned and/or transferred to the parties of the second part, individually or as tenants in common, all of his property of every nature and description, real, personal and mixed and wheresoever the same may have been situated, upon the agreement of the parties of the second part in general to support him for the remainder of his natural life in the manner he has been accustomed to live; and

‘Whereas the party of the first part desires to live with one and/or both of the parties of the second part in his, her or their home, where he can be comfortable the remainder of his life, and whereas he is now in fact so living in the apartment of one of the parties of the second part, and whereas the parties mutually desire that their general agreement shall be reduced to writing;

‘Now, therefore, * * * in consideration of the fact that the party of the first part has heretofore deeded, conveyed, assigned and/or transferred to the parties of the second part, individually or as tenants in common, all of his property of every nature and description * * * the parties of the second part jointly and severally covenant, promise and agree to and with the party of the first part as follows:

‘1. They will provide him with a comfortable home and support, treat him kindly and respectfully and maintain him, giving him food, clothes, nursing and medical attention, medicine and all other reasonable necessities suitable to his condition, age and standing in life; the said home shall be in the apartment or home of either and/or both of the parties of the second part; they will provide him with spending money not to exceed the sum of $100 per month, to be used by him as he sees fit for his own personal use and expenses or for traveling or for anything that he reasonably needs for his own personal benefit; as and when they are able, they will furnish him with the use of an automobile; they will pay his dues for clubs and such other organizations of which he has usually been or may properly be a member; and, upon his death, they will provide him with a reasonable and commendable burial and erect an appropriate tombstone. (Emphasis supplied.)

‘2. The parties of the second part will respectively make provisions in their last wills and Testaments necessary to carry out their obligations under the preceding paragraph of this instrument, and keep the same effective at all times during the life of the party of the first part.

‘3. The parties of the second part jointly and severally bind themselves, their heirs, executors, administrators and assigns, by this agreement, but in the event of the death of either of them before the death of the party of the first part, it is understood as between the parties of the second part that the mutual obligations hereunder of the survivor and the decedent's estate shall be as nearly as possible equal.

‘4. The party of the first part hereby confirms the transfer of all his property as by preamable hereto above stated for the purposes herein set forth.’

The taxing authorities have resolved that the inter vivos transfers by the decedent to his two children are assessable because they were made by the decedent ‘in contemplation of * * * death’ or ‘intended to take effect in possession or enjoyment at or after’ the death of the donor. R.S. 54:34-1, subd. c, N.J.S.A. 54:34-1, subd. c. The representative of the decedent's estate protests, hence this appeal.

Many of the rules applicable to the taxing statute and its operation are now too inveterate to be further agitated. The object of the statute is to tax not only testamentary and intestate transfers but also inter vivos transfers which as mere substitutes for testamentary dispositions are employed to effectuate a purpose normally accomplished by will. Squier v. Martin, 131 N.J.Eq. 263, 24 A.2d 865; Dommerich v. Kelly, 132 N.J.Eq. 220, 27 A.2d 871, affirmed 130 N.J.L. 542, 33 A.2d 893, affirmed 132 N.J.L. 141, 39 A.2d 30; Voorhees v. Kelly, 132 N.J.Eq. 230, 28 A.2d 61, affirmed 130 N.J.L. 61, 31 A.2d 404, affirmed 131 N.J.L. 226, 35 A.2d 895.

There is no statutory or evidential presumption, express or to be implied solely from the statute, that a transfer made by a decedent more than two years before his death was not made by him in contemplation of death. Voorhees v. Kelly, supra; Coffin v. Kelly, 133 N.J.Eq. 188, 31 A.2d 186, affirmed 131 N.J.L. 241, 36 A.2d 11, further affirmed 133 N.J.L. 252, 44 A.2d 29. If the transfer is made beyond the two-year period, the burden devolves upon the taxing authorities to adequately establish that contemplation of death was an impelling motive for the transfer. Folsom v. Martin, 126 N.J.L. 472, 479, 20 A.2d 8; Voorhees v. Kelly, supra.

In the present appeal, it is emphasized that the transferor expressly announced that he had ‘no contemplation of death.’ Of death and taxes, I do not fancy that the transferor ever supposed he could elude the former. If he made the transfer in contemplation of the knowledge that his death would be eventually inevitable and with the intent and purpose of accomplishing a distribution or transfer in lieu and stead of a testamentary disposition, which purpose he accomplished, the transfer is taxable under the statute, even though he did not apprehend that his death was imminent or closely approaching. Bank of New York v. Kelly, 135 N.J.Eq. 418, 38 A.2d 899.

Where an inter vivos gift is, as a result of considered choice, intentionally made in the place and stead of a testamentary disposition, it is taxable. The substance of the transfer rather than the form controls. Perry v. Martin, 125 N.J.L. 46, 14 A.2d 266; Nicholas v. Martin, supra; Dommerich v. Kelly, s...