Glover's Estate, In re

• Decision Date: 04 May 1962
• Docket Number: No. 4155,4155
• Court: Hawaii Supreme Court
• Parties: In the Matter of the ESTATE of James W. GLOVER, Deceased.

Page 361

371 P.2d 361

45 Haw. 569

In the Matter of the ESTATE of James W. GLOVER, Deceased.

No. 4155.

Supreme Court of Hawai'i.

May 4, 1962.

SYLLABUS BY THE COURT

A widow's dower in personalty is apportioned out of her husband's estate after the payment of the federal estate tax and without allowance or benefit to the widow for ahy reduction in the tax resulting from the marital deduction given by the Internal Revenue Code.

Dwight M. Rush, Honolulu, (Henshaw, Conroy & Hamilton, Honolulu, of counsel), for Barbara Cox Glover.

Charles A. Gregory and J. Russell Cades, Honolulu, (Smith, Wild, Beebe & Cades, Honolulu, of counsel), for Hawaiian Trust Co., Limited, Executor of Estate of James W. Glover, deceased.

Before TSUKIYAMA, C. J., and CASSIDY, WIRTZ, LEWIS, and MIZUHA, JJ.

CASSIDY, Justice.

This is an original submission under R.L.H. 1955, § 227-1, on the agreed facts summarized hereunder. The controversy submitted is between the widow of the decedent James W. Glover and the executor of his estate with the primary question in difference being whether the widow's dower interest in personalty of the estate is to be determined before or after the deduction of the federal estate tax.

The decedent executed a will on April 5, 1951, and later in the same year executed a codicil thereto. Subsequently he married Barbara Cox. He died in 1957 without having made any testamentary provision for her. She survived him. The decedent was also survived by two children from a previous marriage. The children are the principal beneficiaries under decedent's will. The will with the codicil has been admitted to probate in proceedings now pending in the First Circuit Court. Although not required to do so under the applicable statute ¹ the widow filed an election to take dower in decedent's estate.

Decedent left an estate consisting of personal property appraised at $2,028,639.34 and real property appraised at $802,068.00. It is alleged in the agreed statement of facts that the widow's dower interest in the personalty of the estate will qualify for the marital deduction allowable for federal estate tax purposes but that the amount of the deduction cannot be ascertained and the final determination of the tax cannot be made until it is decided whether the dower interest is to be admeasured before or after deducting the federal estate tax. ²

A widow's dower allowance is provided for and controlled by R.L.H. 1955, § 319-1, reading in pertinent part as follows:

'Dower. Every woman shall be endowed of one-third part of all the lands owned by her husband at any time during marriage, in fee simple, or in freehold, unless she is lawfully barred thereof. She shall also be entitled, by way of dower, to an absolute property in the one-third part of all his remaining property owned by him at the date of his death, after the payment of all his just debts. * * *'

The federal estate tax is imposed by the provisions of § 2001 of the Int.Rev.Code of 1954 (Title 26 U.S.C. § 2001) reading:

'A tax computed in accordance with the following table is hereby imposed on the transfer of the taxable estate, determined as provided in section 2051, of every decedent, citizen or resident of the United States dying after the date of enactment of this title.'

By § 2034 of the Code it is provided:

'The value of the gross estate shall include the value of all property (except real property situated outside of the United States) to the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower or curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy.'

Section 2056 ³ of the Code reads in pertinent part:

'(a) Allowance of marital deduction.

'For purposes of the tax imposed by section 2001, the value of the taxable estate shall, except as limited by subsections (b), (c), and (d), be determined by deducting from the value of the gross estate an amount equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse, but only to the extent that such interest is included in determining the value of the gross estate.

'(b) Limitation in the case of life estate or other terminable interest.

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* * * '(4) Valuation of interest passing to surviving spouse.

'In determining for purposes of subsection (a) the value of any interest in property passing to the surviving spouse for which a deduction is allowed by this section----

'(A) there shall be taken into account the effect which the tax imposed by section 2001, or any estate, succession, legacy, or inheritance tax, has on the net value to the surviving spouse of such interest; * * *.'

We are not directly concerned with the widow's dower in decedent's real property. In this jurisdiction dower in real property is a life estate only. Valentin v. Brunette, 26 Haw. 417, 421. As such, it cannot qualify under the Code for the marital deduction. Section 2056(b)(1). The Code also provides that the aggregate of the marital deductions shall not exceed 50 percent of the value of the adjusted gross estate. Section 2056(c)(1).

The marital deduction was written into the Internal Revenue Code in 1948 in order to equalize, as nearly as possible, estate and gift tax liability between community property states and common law states. Senate Rep. No. 1013, 80th Cong., 2d Sess. (1948), 1948 U.S. Code Cong. Serv. Vol. 2, pp. 1188-1191; S.Misc.Rep. II, 80th Cong., 2d Sess. (1948), No. 1055, p. 5.

The principal contention made on behalf of the widow in this case is summarized in the opening brief, as follows:

'The marital deduction arose as a device to equalize estate taxes in common law jurisdictions with community property jurisdictions. If the widow's dower is compelled to bear the burden of estate taxes, the purpose of the marital deduction is defeated. There is a public policy rooted in the statutes and common law of Hawaii for the protection of dower from death taxes. In the absence of statute specifically to the contrary, the marital deduction must inure to the benefit of the widow. Since the widow's dower generates no tax, it cannot equitably be called upon to bear any burden of the tax.'

Since the incorporation of the marital deduction into the federal law in 1948 approximately a dozen courts have had occasion to directly pass on the issue presented in this case. There is a definite split in the results reached. In numbers, the authorities seem to be almost evenly divided. To a very limited extent this difference in results may be laid to differences in the applicable state statutory provisions governing election against the will or defining the allowance to a widow for whom the husband makes no testamentary disposition. However, the real clash in the conflicting holdings is found in the difference in the attitudes taken by the respective courts on the part the marital deduction provisions of the federal law play in controlling the widow's distributive share under state law.

In support of the widow's position that dower in personalty should be distributed to her free of any impact of the federal estate tax or at least without deduction for the portion of the tax in respect to which the estate receives the benefit of the marital deduction, are cited: In re Peters' Will, Sur., 204 Misc. 333, 88 N.Y.S.2d 142 (aff'd, 275 App.Div. 950, 89 N.Y.S.2d 651); In re Vitale's Will, Sur., 118 N.Y.S.2d 773; Lincoln Bank & Trust Co. v. Huber, Ky., 240 S.W.2d 89; In re Rosenfeld's Estate, 376 Pa. 42, 101 A.2d 684; Pitts v. Hamrick, 4 Cir., 228 F.2d 486; Case v. Roebling, 42 N.J.Super. 545, 127 A.2d 409; In re Burnett's Estate, 50 N.J.Super. 482, 142 A.2d 695. To these should be added the more recent decisions of Hammond v. Wheeler, Mo., 347 S.W.2d 884, and In re Barnhart's Estate, 102 N.H. 519, 162 A.2d 168.

The decision in each of the cited cases is controlled or to a great extent influenced by the concern of the court rendering it to give effect to the intent of Congress in enacting the marital deduction to place estates in common law jurisdictions on a parity for tax purposes with estates in jurisdictions having community property law. This basic theme of the authorities supporting the widow's position is expressed in In re Rosenfeld's Estate, supra, 101 A.2d at p. 685, as follows:

'The marital deduction provision in the United States Revenue Act of 1948, Section 812(e), Internal Revenue Code, 26 U.S.C.A. § 812(e), was passed to equalize the federal estate tax between residents of common law states and residents of community property states. * * *

'The marital deduction statute endeavors to accomplish taxwise in common law states what is provided by the civil law in the community property states. * * *

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'* * * It would be grossly inequitable to permit exceptant [one of the testator's children] to share in the marital deduction exemption provided specifically and solely for the surviving spouse. To do so would defeat the intent of the federal statute. It follows that no portion of the federal estate tax is chargeable to the widow.'

One of the earliest cases if not the first case on the treatment of the federal estate tax in determining a widow's statutory share decided after adoption of the marital deduction is In re Peters' Will, supra, in which, 88 N.Y.S.2d at p. 147, it is stated:

'All of the foregoing cases were decided before the enactment of the U. S. Revenue Act of 1948. Section 812(e), Internal Revenue Code, 26 U.S.C.A. § 812(e), which has introduced a new legal concept referred to as a 'marital deduction' cannot be overlooked in this connection. Its purpose is to allow a surviving spouse to take a certain portion of the estate free of Federal estate taxes. * * *

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'I believe that the marital deduction now allowed by Section 812(e) Internal Revenue Code is substantially in the same category as the charitable deduction allowed by Section 812(d) of the Code,...