Carpenter v. Carpenter

• Decision Date: 12 April 1954
• Docket Number: 43583,Nos. 43582,No. 1,s. 43582,1
• Parties: , 46 A.F.T.R. 480 CARPENTER et al. v. CARPENTER. CARPENTER et al. v. CARPENTER'S ESTATE
• Court: Missouri Supreme Court

Page 632

267 S.W.2d 632

364 Mo. 782, 46 A.F.T.R. 480

CARPENTER et al. v. CARPENTER.

CARPENTER et al. v. CARPENTER'S ESTATE.

Nos. 43582, 43583.

Supreme Court of Missouri, Division No. 1.

April 12, 1954.

Motion for Rehearing and to Transfer to Court en Banc Denied

May 10, 1954.

Marion D. Waltner, Thomas M. Brandom and W. Raleigh Gough, Kansas City, for appellant.

John H. Lathrop, Horace F. Blackwell, Jr., Lathrop, Righter, Blackwell & Parker, Kansas City, for respondents.

DALTON, Judge.

Two appeals involving the same issue have been consolidated. One appeal is from a declaratory judgment and the other is from a judgment affirming an order of the Probate Court. The parties have stipulated that 'the parties and the issues of law and fact in the two cases are the same'; that 'the demands in the two cases are liquidated and for the same amount'; and that 'the result in one will necessarily be the same as the result in the other.' Cause No. 43,582 is an appeal by defendant from a declaratory judgment fixing the rights of the parties with respect to liability for that portion of the federal estate tax paid by the testamentary estate, but attributable to the value of an annuity and ordering that said portion of said tax be paid by the beneficiaries of the annuity individually and not out of the residue of the estate. Cause No. 43,583 is an appeal by defendant from a judgment sustaining an order of the Probate Court of Jackson County sustaining exceptions filed by the parties, who are plaintiffs-respondents in Cause 43,582, to the final settlement of the executrix, who is defendant-appellant in the declaratory judgment proceeding. The circuit court judgment on appeal in the probate proceeding had the effect of requiring defendant-appellant, the executrix of the estate of Edward E. Carpenter, deceased, to collect the federal estate tax attributable to the annuity from the beneficiaries thereof individually.

Plaintiffs-respondents are the surviving sons of Edward E. Carpenter who died testate in Kansas City, Jackson County, April 23, 1948, in his 68th year. Defendant-appellant is the widow and executrix of the estate of Edward E. Carpenter, deceased. The deceased is hereinafter referred to as Mr. Carpenter. Mr. Carpenter had been married to one Maude E. Carpenter, but she died in 1940, and he, thereafter, on April 15, 1943, married the appellant. She was 27 years of age at that time, Mr. Carpenter was 62 and his two sons by his first marriage, Robert and Edward, were approximately 36 and 38 years of age, respectively.

In 1933, Mr. Carpenter had purchased an annuity contract from The Penn Mutual Life Insurance Company of Philadelphia, Pennsylvania under which his then wife, Maude E. Carpenter, was named beneficiary if she survived him and, if she did not so survive him, then his two sons, Edward C. Carpenter and Robert L. Carpenter, in equal shares. The annuity contract provided for a monthly income for life to the annuitant after attaining the age of 70, or, if he died before attaining such age, the payment of a 'death benefit' to the beneficiary. The amounts of such 'life income' installments or of such 'death benefit' were to be determined, under certain tables set out in the contract, by the amount of the initial and subsequent deposits under the contract, the age of the annuitant, et cetera. The maximum amount that could be deposited under the contract was $100,000. Mr. Carpenter reserved the right to change beneficiaries, also to designate certain 'options' for receiving the death benefit in annual or monthly installments, instead of in one lump sum, by notice in writing to the company.

On February 1, 1946, Mr. Carpenter executed a designation of change of beneficiary of the annuity contract under which he elected that the 'death beneift' thereunder should be paid in monthly installments over a period of twenty years Option B, and designated his wife, Suzanne Virginia Carpenter, as primary beneficiary, and his two sons as contingent beneficiaries, that is, to receive any part of the death benefit not paid to his wife during her lifetime. (Appellant now receives close to $500 per month under the annuity contract.)

On November 9, 1944, Mr. Carpenter executed his last will. Specific legacies of a ring, certain corporate stock, and onehalf of his club memberships were made to his son, Robert L. Carpenter. His watch and $1,000 in cash and the other one-half of his club memberships were given to his son Edward C. Carpenter. He gave his residence and all furnishings therein and also all of his automobiles to Suzanne Virginia Carpenter, his wife. The will provided that all moneys to be paid his certain for the purchase of his interest in a certain partnership business, together with all future earnings payable to his estate, should be paid at least quarterly to his wife as long as she lived, all installments unpaid at her death to be divided equally between his two sons. The residue of the estate was left to his wife and sons, 'share and share alike.' His wife and son Robert were named co-executors.

Article X of the will provided: 'Should there be any federal estate or state inheritance or succession taxes assessed or levied upon any bequests or devise herein made, then I direct my Executors, out of my estate, to pay any such tax or assessment, the intention being to give said bequests and devises free and clear from all such charges, and should there be any city, state, county, school district, or other public taxes, which are a lien and can be paid, upon any of the real or personal property at the time of my death, I direct my Executors to pay any and all such taxes out of my estate, so that any bequest may be as free as possible from liens on account of any such taxes.'

On March 21, 1946, subsequent to change of beneficiary in the annuity, Mr. Carpenter executed a codicil to his will, which stated that 'having made additional provisions for my beloved wife, Suzanne Virginia Carpenter, separate and apart from the provisions of the aforesaid will,' he revoked the provision of the will giving her the entire interest, for life, in the proceeds from the partnership, and substituted therefore a provision that one-third of such proceeds should be paid to her and two-thirds to his son, Edward C. Carpenter. All other provisions of the will remained unaffected by the codicil.

As stated, Mr. Carpenter died on April 23, 1948, survived by his said wife and two sons. Robert L. Carpenter being a nonresident of Missouri, Mrs. Carpenter was appointed sole executrix.

Mr. Carpenter had been engaged in the window cleaning besiness in Kansas City, Missouri, for a number of years under the names of 'Kansas City House and Window Cleaning Company' and 'Building Maintenance Company.' This business was first carried on as a corporation, but the corporation was dissolved and a partnership was formed on July 31, 1937. The partners and their respective interests were: Edward E. Carpenter, 60%; Edward C. Carpenter, 20%; and Robert L. Carpenter, 20%. On October 20, 1944, the partnership agreement was modified due to the withdrawal of Edward C. Carpenter from active participation in the business, leaving the partners and their interests as Edward E. Carpenter, 80%, and Robert L. Carpenter, 20%. Then on November 9, 1944, the partnership agreement was again modified so as to provide that, in the event of the death of Edward E. Carpenter, Robert L. Carpenter should have the right to purchase all his interest in the partnership business for $12,000 provided that the estate of Edward E. Carpenter should participate in the profits from the business, after his death, until it should have received a total of $18,000 from such profits. There were subsequent modifications of the partnership agreement resulting, finally, in the two partners, Edward E. Carpenter and Robert L. Carpenter, each having an equal share in the partnership business. The net profits from the business had averaged $96,396.44 per year for the last five years of the life of Edward E. Carpenter.

For several years prior to his death, Mr. Carpenter had been purchasing United States Savings bonds, in which he and his wife were named joint owners. The total value of these bonds was $36,317.50. In addition, Mrs. Carpenter had, in the same period, purchased a number of bonds, either in her own name solely or jointly with her mother, Mrs. Susan Virginia Waltner. The total value of such bonds was $25,259.75.

Mr. Carpenter had insurance on his life of the total value of $64,312.96 of which $5,000 was payable to Mrs. Carpenter's mother, Mrs. Waltner, $1,000 was payable to his son, Robert L. Carpenter, and the balance was payable to his estate.

The annuity contract (hereinbefore mentioned) had a value (based upon The Penn Mutual's valuation thereof) of $129,685.50 at the time of Mr. Carpenter's death. Of course it did not pass under the will, but was nevertheless taxable under the federal statutes, as hereinafter mentioned. The value of the annuity was apportioned between Mrs. Carpenter, as primary beneficiary, and the two sons of Mr. Carpenter, as contingent remaindermen, so that $6,725.01 of the value was regarded as the value of the contingent remainder interest and the balance, the sum of $122,960.49, was regarded as the value of the interest going to Mrs. Carpenter. These figures were based upon valuations made by The Penn Mutual Life Insurance Company as the difference between a straight annuity to Mrs. Carpenter for the rest of her life and an annuity for her life and 'for twenty years certain.' Upon the basis of the revised valuations established by an audit of the federal estate tax return the gross estate was $308,271.58, the deductions were $90,860.55 and the 'adjusted net estate' subject to tax was $217,411.03. The total federal estate tax paid on the entire taxable estate was $38,500.54. The portion of the estate tax represented by the annuity was 56.556% of the...