Cairns v. Martin

• Decision Date: 05 November 1941
• Docket Number: No. 6022.,6022.
• Citation: 130 N.J.Eq. 313,22 A.2d 415
• Parties: CAIRNS v. MARTIN, State Tax Com'r. In re CAIRNS' ESTATE.
• Court: New Jersey Supreme Court

22 A.2d 415

130 N.J.Eq. 313

CAIRNS

v. MARTIN, State Tax Com'r.

In re CAIRNS' ESTATE.

No. 6022.

Prerogative Court of New Jersey.

Nov. 5, 1941.

[Copyrighted material omitted.]

Syllabus by the Court.

1. Under the transfer inheritance tax statute, R.S. 54:34-1, N.J.S.A. 54:34-1, an Inter vivos gift is taxable if it is made in lieu of testamentary disposition.

2. An inter vivos gift, in order to be made in lieu of testamentary disposition, must be intended to accomplish, and in fact accomplish, substantially the same purpose as would be accomplished by a testamentary gift, to wit, the post mortem enjoyment of the property by the donee.

3. An inter vivos gift, which transfers only ante mortem interests in the property, is not a substitute for testamentary gift.

4. An inter vivos gift which transfers only post mortem interests in property is a substitute for testamentary gift; the (immediate) purpose of the donor was to transfer post mortem (and only post mortem) interests in the property; his ultimate purpose—the reason why he had such immediate purpose is immaterial.

5. An inter vivos gift of the whole ownership of property accomplishes the transfer of both the ante mortem and post mortem interests in such property, and is intended to accomplish both purposes; in such a case the donor's ultimate purpose is material.

6. In the case of an inter vivos gift of the whole ownership of property, if the donor's chief ultimate purpose is one which cannot be accomplished in any other way than by a present transfer of whole ownership, such gift is not in lieu of testamentary disposition and is. not taxable.

7. In the case of an inter vivos gift of the whole ownership of property, if the donor's chief ultimate purpose for the transfer of the post mortem interests and the transfer of ante mortem interests could be accomplished in some way other than by a single present transfer of whole ownership, the gift is, as to the post mortem interests, a substitute for testamentary gift, and taxable.

8. An inter vivos gift is made in lieu of testamentary disposition if it is made as the result of a purpose (alone or with other purposes) that the donee shall thereby have and enjoy, after the death of the donor, the property transferred or some interest therein, and would not have been made in the absence of such purpose.

9. An inter vivos gift is not one in lieu of testamentary disposition if it would have been made irrespective of desire or expectation by the donor that the donee should thereby have and enjoy the property after the donor's death.

10. Whether or not any particular inter vivos gift was a substitute for testamentary disposition is a conclusion of fact to be drawn from the facts, specifically in evidence and such inferences of fact as are properly to be drawn therefrom.

11. The burden of proof rests on the state to establish such conclusion of fact affirmatively, by the preponderant weight of evidence.

12. Evidence considered; held, that in the instant case it appears by the preponderant weight of the evidence that the donor had two chief ultimate purposes in the making of the inter vivos gift, to wit, the purpose that the donees should enjoy the property after his death and the purpose of giving them benefit prior to his death; that both purposes could have been accomplished by means other than a single, present gift of whole ownership; that the donor's purpose that the donees should have and enjoy the property after his death was his principal and most important purpose and the gift would not have been made in the absence thereof; hence that as to the post mortem interests, the gift was in lieu of testamentary transfer and taxable.

Proceeding in the matter of the inheritance tax assessment against the estate of Irving Cairns, deceased, who named as his executor Edward Cairns. J. H. Thayer Martinj State Tax Commissioner, found that gifts by the deceased to his sons were made in contemplation of death and therefore subject to inheritance tax and the executor appeals.

Tax affirmed.

Philip Goodell, of Montclair, for appellant.

David T. Wilentz, Atty. Gen., and William A. Moore, Asst. Atty. Gen., for respondent.

BUCHANAN, Vice Ordinary.

Irving Cairns died, resident in New Jersey, February 17, 1939, aged 86, leaving a will whereby he gave all his estate in equal proportions to his two sons, Clifford I. Cairns and Edward Cairns, and named them executors. His net estate, at death, was a trifle over $90,000.

Prior to his death, on October 18, 1935, the decedent made two gifts to his two sons—one to Clifford amounting to $40,522.08, and one to Edward amounting to $46,793.59, total $87,315.67. It is the taxability of these two transfers which is in issue on this appeal. The sole question presented by the appellant is: Did the Commissioner err in finding that they were made in contemplation of death? Appellant concedes that if they were made in contemplation of death within the intendment of our statute, they are taxable, and the tax should be affirmed.

In the instant case the donor admittedly, although 83 years old, was in excellent health and strength, had had no prior illness, and came of an extremely long-lived family. There is no evidence upon which there could validly be based a conclusion that he had any actual contemplation of death other than as something which would occur at some indefinite time in the future.

Gifts taxable as having been "made in contemplation of death" are however not limited to transfers made in, and because of, the transferor's contemplation and belief that his death is imminent, or that it is apt to occur in the not distant future. Schweinler v. Martin, 117 N.J.Eq. 67, 175 A. 71; Nicholas v. Martin, 128 N.J.Eq. 344, at page 346, 15 A.2d 235. What does constitute an inter vivos gift "made in contemplation of death"? It has been frequently stated that it is meant to comprise those inter vivos gifts which are the result of that kind of contemplation of death which leads to testamentary disposition. This however is not as helpful as could be desired, in the way of a practical definition.

It seems clear from a consideration of the purpose and history of the legislation, the statutory language, and the adjudicated cases, that it is the true intent and meaning of the statutory provisions comprised in R.S. 54:34-1, subd. c, N.J.S.A. 54:34-1, subd. c, that any inter vivos transfer which is in fact a substitute for a testamentary (or intestate) transfer shall be subject to the tax (and conversely, that any inter vivos transfer which is not such a substitute, is not to be taxed).

The object and purpose of the statute as a whole is to tax transfers occurring at death, testamentary and intestate transfers, and also inter vivos transfers which are testamentary in character and made in place of testamentary or intestate transfers. The first provision made by the legislature in the way of making some inter vivos gifts taxable in addition to the testamentary and intestate transfers, was that which made taxable inter vivos gifts "intended to take effect in possession or enjoyment at or after the death of the transferor." Such transfers zvere obviously substitutes for testamentary disposition. Some years later it recognized that there were other transfers inter vivos which were substitutes for testamentary disposition (in addition to those transfers made presently but intended to take real effect at death), and added transfers "made in contemplation of death" as subjects of taxation. By this clause the legislature intended to make taxable, in addition to inter vivos transfers intended to take real effect at or after death, all other transfers inter vivos made as substitutes for testamentary transfers. See Schweinler v. Martin, supra, 117 N.J.Eq. pages 72 bottom to 75, top, 88 bottom, 90 top, 175 A. pages 74, 75, 80, 81; Hartford v. Martin, 122 N.J.L. 283, at page 286, 4 A.2d 31.

It is deemed thoroughly settled that if, and whenever, an inter vivos gift is intentionally made in the place and stead of a testamentary disposition, it is taxable under the statutory provisions. Central Hanover Bank, etc., v. Martin, 129 N.J. Eq. 186, at page 189, 18 A.2d 45; Perry v. Martin, 125 N.J.L. 46, at page 47, 14 A.2d 266; Scheider v. Martin, 124 N.J.L. 567, 12 A.2d 678, affirming Id., 127 N.J.Eq. 323, at pages 324, 325, 13 A.2d 223; Nicholas v. Martin, 127 N.J.L. 35, 21 A.2d 323, affirming Id., 128 N.J.Eq. 344, 15 A.2d 235; MacGregor v. Martin, 126 N.J.L. 492, at page 497, top, 20 A.2d 427; In re Grabfelder's Estate, 107 N.J.L. 520, 153 A. 532. Conversely, of course, inter vivos gifts which were not made in lieu of testamentary disposition are not taxable.

The further question, however, remains to be ascertained and determined, under what circumstances is an inter vivos gift a transfer in lieu of testamentary disposition, a substitute for testamentary gift?

A transfer inter vivos in order to be a substitute for testamentary disposition must needs be substantially similar in nature and character to a testamentary transfer, both as regards the thing transferred and the purpose of the transfer. To be thus substantially similar it must be one which is made for the purpose of accomplishing, and which does accomplish, substantially the same results as those accomplished by a testamentary (or intestate) transfer. A transfer which is not made for such purpose or which does not accomplish such results, is not a substitute for testamentary disposition.

Testamentary and intestate transfers accomplish the transfer of those interests in property which exist after the transferor's death—"post mortem interests." They do not (obviously they cannot) transfer any purely "ante mortem interests" in the property—interests which exist only prior to, and not after, the transferor's death.

The purpose of the testamentary (or intentionally intestate) transfer is, therefore, that of accomplishing the transfer of post mortem...