Blodgett v. Guaranty Trust Co. of New York

CourtSupreme Court of Connecticut
Citation114 Conn. 207,158 A. 245
PartiesBLODGETT, Tax Commissioner, v. GUARANTY TRUST CO. OF NEW YORK (In re SEWELL'S ESTATE). BLODGETT, Tax Commissioner, v. BENNETT et al. (In re BENNETT'S ESTATE). GIBSON (In re GIBSON'S ESTATE) v. BLODGETT, Tax Commissioner. BLODGETT, Tax Commissioner, v. MIDDLETOWN TRUST CO. (In re STARR'S ESTATE).
Decision Date26 January 1932

Case Reserved from Superior Court, Fairfield, New Haven Middlesex, and Litchfield Counties; Edwin C. Dickenson Ernest A. Inglis, and John Richards Booth, Judges.

Proceedings involving the application of the Connecticut succession tax statute to certain transfers of property against the estates of Harriet D. Sewell, Thomas G. Bennett, Emma L. B. Gibson and Wilbur F. Starr. From probate decrees, William H Blodgett, Tax Commissioner, took separate appeals, one in the matter of the estate of Harriet D. Sewell, Guaranty Trust Company of New York, executor, one in the matter of the estate of Thomas G. Bennett, Winchester Bennett and others, executors, and one in the matter of the estate of Wilbur F. Starr, the Middletown Trust Company, trustee, a similar appeal being taken by Hamilton Gibson, administrator c. t. a. of the estate of Emma L. B. Gibson, opposed by William H. Blodgett, Tax Commissioner. Appeals were taken to the superior court, and by that court reserved for the advice of the Supreme Court.

Questions answered.

Transfers of property reserving life estate therein in transferor are subject to succession tax assessed and based upon value of property transferred at transferor's death. Gen.St.1930, § § 1360, 1361 (Rev.1949, § § 2020, 2021); Pub.Acts 1931, c. 77, p. 101, § 245a.

Farwell Knapp, Inheritance Tax Atty., of Hartford, and Warren B. Burrows, Atty. Gen., for Tax Commissioner.

Charles M. Lyman and Clarence W. Bronson, both of New Haven, for Hamilton Gibson, administrator c. t. a.

James E. Wheeler, of New Haven, for Winchester Bennett et al., executors.

Alvan Waldo Hyde, of Hartford, for Middletown Trust Co., trustee.

Alvan Waldo Hyde, of Hartford, and R. L. Redfield, of New York City, for Guaranty Trust Co. of New York, executor.

Argued before MALTBIE, C.J., and HAINES, HINMAN, BANKS, and AVERY, JJ.

HINMAN, J.

Harriet D. Sewell died May 20, 1930, domiciled in Greenwich. On December 28, 1926, she executed an irrevocable deed of trust to a New York Trust Company of certain securities therein described, in which deed it was provided that the trustee collect the income and pay it to Mrs. Sewell during her life; upon her death the income was to be paid to her husband during his life, and upon his death the trustee was directed to pay and transfer the principal of the trust absolutely to their daughter, if she survive; but if not, then to the issue of the daughter, with a gift over in default of such issue.

Thomas G. Bennett died August 19, 1930, domiciled in New Haven. On June 18, 1921, he executed and delivered a warranty deed conveying to his three children four pieces of land with the dwelling house and other buildings thereon located in New Haven, reserving to himself " the use, improvements, occupation, enjoyment, and income from said premises, for and during the full term of (his) natural life." The real estate so conveyed had long been and thereafter remained the grantor's home, and he continued to live there until his death.

Emma L. B. Gibson died April 9, 1930, always having been domiciled in Washington, Conn. On May 4, 1918, she gave a deed of certain real estate in Washington to a trustee reserving to herself the net income thereof for her life with remainder at her death to her son in fee, or, if he should not survive, to her grandchildren in fee. On April 5, 1918, Mrs. Gibson, executed in New York an irrevocable trust deed covering certain intangible personal property consisting of stocks, bonds, and a check drawn by her to the order of the trustee. By the terms of the deed, the net income was required to be paid to the settlor during her life and at her death the principal to her son, or, in case he did not survive, to the settlor's grandchildren. The trustee was at all times domiciled in New York, and the certificates of stock and the bonds were located in that state.

Wilbur F. Starr died July 23, 1929, domiciled in East Hampton. On May 31, 1928, he and his wife (who survived him) transferred by one trust deed certain real estate in East Hampton and certain securities, each contributing equal shares, to a trustee. It was provided that the income be paid to or for the benefit of either of the donors during their joint lives, upon the death of one to the survivor for his or her life, the donors to have the use and occupancy of any real estate forming a part of the trust, and provision was made for the distribution of the fund upon the death of both to, certain other persons and corporations. The tax commissioner claimed that the one-half of the fund contributed by the decedent was taxable.

The four cases involve, and the reservations present, the same general questions, and were argued together in this court.

The first question reserved in each case is: Did the property which was the subject of transfer " pass by deed, grant, or gift *** intended to take effect in possession or enjoyment at the death of the grantor or donor" within the meaning of the Connecticut succession tax statute, in force at the date of the deed, or within the meaning of any subsequent amendment or revision of said succession tax statute?

The common and perhaps not unnatural aversion of property owners to the burden of taxation appears to have applied with special force to the diminution of the estates left by them at death through the imposition of estate, inheritance, or succession taxes. The early statutes taxing property passing by will or inheritance were followed by resort to various means for avoiding subjection to the tax. Among the devices most simple and commonly resorted to were gifts in contemplation of death, and transfers, in trust or otherwise, whereby the transferor reserved to himself the life use or income for life. These artifices were met by provisions in the taxing statutes calculated to close such avenues of tax avoidance. In consequence, the inheritance tax statutes of most of the states imposing taxes of that character include, among the taxable transfers, those made in contemplation of death, and those intended to take effect in possession or enjoyment at or after the transferor's death. The federal estate tax, on the transfer of a decedent's net estate, includes in the gross estate property to the extent of any interest therein of which the decedent has, during his lifetime, made a transfer or created a trust intended to take effect in possession or enjoyment at or after the death of the transferor or settlor.

The original Connecticut Act, chapter 180, Public Acts 1889, § 1, included provisions for a tax on " property within the jurisdiction of this state, and any interest therein, *** which shall pass *** by deed, grant, sale, or gift made or intended to take effect in possession or enjoyment after the death of the grantor, to any person in trust or otherwise." In 1897 (Public Acts, chap. 201) this provision does not appear; but it was restored, in substance, by section 3 of chapter 332, Public Acts of 1915, and has since continued unchanged in any respect materially affecting the present inquiry. General Statutes (1918), § § 1261-1271; Public Acts 1929, chap. 299, § § 1 and 2, General Statutes (1930), chap. 77, § § 1360, 1361.

These provisions of State and Federal statutes have occasioned an immense amount of litigation, although Connecticut has been conspicuously free therefrom. The most cursory review of the cases on this subject is impracticable here. The general subject is exhaustively covered in an article by Professor Rottschaefer of the University of Minnesota, in the Minnesota Law Review, April and May, 1930. See, also, Gleason and Otis, " Inheritance Taxation" (4th Ed.) p. 380 et seq. The more recent cases are collected in A.L.R. annotations, Vol. 49, page 864 et seq. and Vol. 67, page 1247 et seq. It is sufficient for present purposes to state that for a long period the power of the states constitutionally to enact such provisions, at least of prospective application, has not been regarded as open to question. None of the transfers involved in the cases now under consideration involve retrospective operation of the law, questions of construction as to whether the gift took effect, in possession or enjoyment, in the ultimate beneficiaries or in persons other than the transferor, before his death, or other complications which have furnished occasion for a large part of the litigation. Transfers such as here involved, except in the Bennett case, that is, to trustees to pay the income to the transferor during life with directions that upon his death the corpus shall be paid to designated beneficiaries, though the trust be irrevocable, have been held by practically all courts, federal and state, to fall within the meaning of a transfer intended to take effect in possession or enjoyment at or after the death of the transferor, and therefore subject to tax under statutes covering transfers of the class last mentioned. 49 A.L.R. page 878, 67 A.L.R. page 1250.

This court has not had occasion to pass directly upon the question, freed from the element of retrospective operation but our full concurrence with the general view just stated is clearly indicated in Blodgett v. Union & New Haven Trust Co., 97 Conn. 405, 410, 116 A. 908, 910. We there pointed out that the " qualifying and enlarging phrase" " in possession or enjoyment," included in our original succession tax Act (1889), dropped...

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