Dreyer v. Comm'r of Internal Revenue (In re Estate of Dreyer)

• Decision Date: 31 May 1977
• Docket Number: Docket No. 9811—74.
• Parties: ESTATE OF SAMUEL A. DREYER, DECEASED, ROBERT A. DREYER AND EDWARD L. DREYER, EXECUTORS, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

68 T.C. 275

ESTATE OF SAMUEL A. DREYER, DECEASED, ROBERT A. DREYER AND EDWARD L. DREYER, EXECUTORS, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 9811—74.

United States Tax Court

Filed May 31, 1977.

Held: 1. Executors of a decedent's estate are entitled to renounce decedent's testate share of the estate of his deceased wife under law of New York prior to effective date of statutory provisions for renunciation of testate interests in New York even when the renunciation was made over 2 years after death of decedent's wife and probate of her will. Estate of Hoenig v. Commissioner, 66 T.C. 471 (1976), considered applicable on this issue despite factual differences and followed.

2. Prior to effective date of statutory provisions in New York as to renunciation of testate interest in estate, there was no requirement that renunciation be filed with Surrogate's Court.

3. The criterion of ‘reasonable time’ for renunciation under New York law prior to effective date of statutory provisions was based primarily on whether rights of others have been prejudiced by delay rather than length of time which has passed and, considering all facts here present, the renunciation here was within reasonable time under New York law. Harold D. Klipstein and Robert A. Dreyer (executor), for the petitioner.

Peter W. Mettler, for the respondent.

SCOTT, Judge:

Respondent determined a deficiency in estate tax in the amount of $8,603.58. The issue for decision is whether there should be included in the gross estate of decedent Samuel A. Dreyer the value of the residuary estate of his spouse who predeceased him. The resolution of this issue depends upon whether a document executed by the executors of the Estate of Samuel A. Dreyer renouncing that decedent's interest in the estate of Annette S. Dreyer is valid for the purpose of determining estate tax liabilities.

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Robert A. Dreyer and Edward L. Dreyer, the executors under the will of Samuel A. Dreyer (hereinafter referred to as decedent), resided in Short Hills, N.J., at the time of the filing of the petition in this case. The executors filed a United States estate tax return for decedent's estate with the Andover Service Center of the Internal Revenue Service at Andover, Mass., on March 3, 1972. Decedent died on December 6, 1970.

Decedent was born on November 19, 1889, and he and Annette Dreyer were married on June 1, 1915. Decedent and his wife had two sons, Robert, born in 1916, and Edward, born in 1918, who are the executors of the estate. In March 1966 decedent was admitted to the Northfield Manor Nursing Home, West Orange, N.J. At the time decedent was admitted to the nursing home his physical condition was such that his two sons handled most of his business affairs. His wife signed checks drawn on the joint account she had with decedent on the advice of her sons. Robert Dreyer is an attorney who was admitted to practice in the State of New York in 1940 and in the State of New Jersey in 1947. Edward Dreyer is the president and principal stockholder of a company engaged in the manufacture of cemented carbides, which company has a net worth of approximately $4 million. Decedent owned income-producing property in Pelham, N.Y., which was managed for him by his sons.

On March 7, 1968, Annette Dreyer died a resident of Westchester, N.Y., survived by decedent and their sons, Robert and Edward. On May 2, 1968, Annette Dreyer's will, dated January 9, 1963, was admitted to probate by decree of the Surrogate's Court, County of Westchester, State of New York, and letters testamentary were issued to Robert and Edward Dreyer, the executors named in her will. In connection with the probate of the will of Annette Dreyer, the Surrogate's Court, County of Westchester, on April 19, 1968, appointed a guardian ad litem for decedent. At that time decedent was incompetent and confined to a nursing home. He remained incompetent and at the nursing home at all times thereafter until his death. The first nine articles of Annette Dreyer's will provided for payment of her debts and for legacies for various named individuals. The tenth article of her will disposed of her residual estate as follows:

TENTH: All the rest, residue and remainder of my estate, both real and personal, and wheresoever the same may be situate, I give, devise and bequeath unto my husband, SAMUEL A. DREYER, absolutely. In the event that the said SAMUEL A. DREYER shall predecease me or die in a common accident with me, then and in such event, all the rest, residue and remainder of my estate, I give, devise and bequeath unto my sons, ROBERT AND EDWARD DREYER, share and share alike.

From the time decedent entered the nursing home his life expectancy was short and it would have been expected that he would predecease his wife. At the time of his wife's death, decedent owned assets of a value in excess of $150,000. Shortly after the death of Annette Dreyer, Robert Dreyer consulted an attorney whom he had known since 1946 when he became an associate in that lawyer's law firm. Robert Dreyer considered that attorney an authority in the area of will drafting, estate planning, and estate administration, and that attorney had advised both Robert and Edward Dreyer concerning their own individual estate plans and was familiar with their financial circumstances. This attorney advised Robert and Edward Dreyer to apply to the Supreme Court, Westchester County, to have Edward Dreyer appointed committee for decedent's property.

Decedent had been a resident of Westchester County, N.Y., for more than 50 years and continued to be a resident of that county until his death. On May 28, 1968, Edward Dreyer verified a petition for his appointment as decedent's committee. The petition was supported by the affidavits of a medical doctor who practiced as a psychiatrist in White Plains, N.Y., and a medical doctor who was an internist in Short Hills, N.J. The petition alleged that decedent, by reason of mental illness, was incompetent to manage himself and his affairs, described his assets, and requested that, because of decedent's mental and physical condition, service on him be dispensed with. Robert Dreyer joined in the petition and his consent to the granting of the petition was annexed to the petition. The affidavits of the psychiatrist and the internist in effect stated that decedent was virtually unable to move, could not respond to questions, could not read or communicate, could not care for his own physical needs, and was totally incompetent to care for his property or manage his affairs. The affidavits further stated that there was no hope that his condition would improve.

In the proceeding for appointment of Edward Dreyer as decedent's committee, a guardian ad litem was appointed by the court to protect decedent's interests. This guardian ad litem sought access to decedent's medical records at the Northfield Manor Nursing Home, but the nursing home would not release the information to him without the authorization of decedent. Shortly before the trial with respect to the petition, Robert Dreyer made arrangements to procure the release of the information by agreeing to personally indemnify the nursing home against liability resulting from the disclosure. The incompetency proceeding was tried by a jury on June 11, 1968, in White Plains, N.Y. Robert and Edward Dreyer testified in the proceeding and a doctor who had examined decedent in the nursing home also testified. The guardian ad litem appointed by the court did not oppose the application. The jury found that decedent was incompetent to manage himself incompetent to manage himself cerebral arteriosclerosis and the court granted Edward Dreyer's petition and appointed him committee of decedent.

The order appointing Edward Dreyer, filed June 12, 1968, required the committee to pay out of the incompetent's funds $750 for the services of the guardian ad litem and $1,540 for other legal services and disbursements in the proceeding, and required Edward Dreyer to post a bond in the sum of $131,000.

On May 28, 1968, the lawyer who handled the proceeding to have Edward Dreyer appointed committee for decedent sent Robert Dreyer a copy of an opinion of the Supreme Court, Westchester County, with respect to permission being sought by children of an incompetent to make inter vivos gifts to themselves from the incompetent's estate for the purpose of avoiding unnecessary estate or inheritance taxes. The lawyer attached a note to the opinion stating that after Edward Dreyer had been appointed committee consideration could be given to whether the opinion could be applied in decedent's case. Robert and Edward Dreyer discussed with this lawyer the advisability of pursuing an application in the Supreme Court, Westchester County, by Edward as committee of decedent for leave to renounce decedent's interest in his wife's estate.

From the time of the death of Annette Dreyer until decedent's death, decedent was being supported by his two sons, Edward and Robert. They paid all his medical and other bills with their own funds. A number of times following the death of Annette Dreyer, Robert Dreyer discussed with his lawyer the legal and nonlegal considerations involved in an application by the committee for leave to renounce decedent's interest in his wife's estate. Both Robert and Edward Dreyer and the lawyer had copies of decedent's will and knew the provisions of that will. While neither Robert Dreyer nor the lawyer knew of a case in New York dealing directly with the question of renunciation of a testamentary bequest by the committee of an incompetent, they were of the opinion, because of the holding in the case the lawyer had sent to Robert Dreyer with respect to the making of gifts by an incompetent, that proof in the form of testimony would be required to establish that ample provision had been made for the...