Hanstein v. Kelly

• Decision Date: 11 February 1942
• Docket Number: No. 6427.,6427.
• Citation: 24 A.2d 386,131 N.J.Eq. 132
• Parties: HANSTEIN v. KELLY, State Tax Com'r. In re HANSTEIN'S ESTATE.
• Court: New Jersey Supreme Court

24 A.2d 386

131 N.J.Eq. 132

HANSTEIN

v. KELLY, State Tax Com'r.In re HANSTEIN'S ESTATE.

No. 6427.

Prerogative Court of New Jersey.

Feb. 11, 1942.

Syllabus by the Court.

1. When the determination of the State Tax Commissioner is investigated on appeal, the Ordinary now reviews the proofs to ascertain the facts. Legitimate and logical inferences

are drawn from the facts deemed to be established and the evidence is weighed.

2. The essential elements necessary to prove an inter vivos gift or voluntary trust are identical.

3. The requisite elements of a gift inter vivos are: (1) a donative intent on the part of the donor; (2) an actual delivery of the subject matter of the gift; and (3) an absolute relinquishment by the donor of all ownership and dominion over the subject matter of the gift, at least to the extent practicable or possible, considering the nature of the thing given.

4. Evidence examined; held, that the evidence fails to establish adequately the alleged inter vivos gift or voluntary trust, and that the fund was properly incorporated as a part of the taxable estate passing under the will of the decedent.

Proceeding in the matter of the transfer inheritance tax assessment in the estate of Walter Hanstein, deceased. William D. Kelly, State Tax Commissioner, determined that decedent had not made a valid gift inter vivos of certain money found in safe deposit box nor created a voluntary trust in respect thereof, and that hence such funds were a part of the taxable estate passing under deceased's will and subject to inheritance taxes, and Henrietta R. Hanstein, executrix under the will of Walter Hanstein, deceased, appeals.

Assessment affirmed.

Thompson & Lloyd, of Atlantic City, for appellant.

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

JAYNE, Vice Ordinary.

This appeal is pursued by the executrix under the will of Walter Hanstein, deceased, to have re-examined and determined the legal propriety of the assessment of a transfer inheritance tax by the State Tax Commissioner upon certain currency in the amount of $31,876.91 said to have been in the safe deposit box of the decedent at the Equitable Trust Company of Atlantic City at the time of his death. R.S. 54:34-13, N.J.S.A. 54: 34-13.

In resisting the assessment, the executrix insists that in the spring of 1937 this accumulation of cash was donated by the decedent to her, his wife, in trust to be expended for the education of their son and two daughters, and that this fund should not have been incorporated as a part of the taxable estate passing under the decedent's will. This point was emphasized in the proofs submitted to the Commissioner. He concluded, however, that the evidence failed to establish either a valid gift or a voluntary trust inter vivos.

It is observed that the Commissioner does not propose that the alleged inter vivos transfer, if in fact made by the decedent, is taxable as one made in contemplation of death, or as one designed to take effect in possession or enjoyment at or after the death of the decedent. Therefore, the basic controversial question is whether the decedent during his life and on the stated occasion made a valid gift of this money to his children, or created a voluntary trust for their benefit in respect thereof. This, of course, is a factual inquiry, and its solution must necessarily be harvested from the record and proofs submitted to the Commissioner.

Where the determination of the tax commissioner is investigated on appeal, the Ordinary now reviews the proofs to ascertain the true and actual facts and circumstances. Legitimate and logical inferences are drawn from the facts deemed to be established and the evidence is duly weighed. Kellogg v. Martin, 130 N.J.Eq. 338, 22 A.2d 430.

In the consideration of the issues here presented, it may be assumed that the essential elements necessary to prove an inter vivos gift or a voluntary trust are identical. Zimmerman v. Nauhauser, 119 N.J.Eq. 424, 183 A. 820; Travers v. Reid, 119 N.J.Eq. 416, 182 A. 908; Bankers' Trust Co. v. Bank of Rockville, etc, 114 N.J.Eq. 391, 168 A. 733, 89 A.L.R. 697; Nicklas v. Parker, 69 N.J.Eq. 743, 61 A. 267, affirmed 71 N.J.Eq. 777, 71 A. 1135, 14 Ann.Cas. 921; In re Coyle's Estate, 154 A. 744, 9 N.J.Misc. 158.

The requisite elements of a gift inter vivos are: First, a donative intent on the part of the donor; second, an actual delivery of the subject matter of the gift; and, third, an absolute relinquishment by the donor of all ownership and dominion over the subject matter of the gift, at least to the extent practicable or possible, considering the nature of the thing given. Taylor v. Coriell, 66 N.J.Eq. 262, 57 A. 810; Swayze v. Huntington, 82 N.J.Eq. 127, 133, 87 A. 106; affirmed 83 N J.Eq. 335, 91 A. 1071; Besson v. Stevens, 94 N.J.Eq. 549, 556, 120 A. 640; Stevenson v. Earl, 65 N.J.Eq. 721, 55 A. 1091, 103 Am.St.Rep. 790, 1 Ann.Cas. 49; Nicklas v. Parker, supra; Connors v. Murphy, 100 N.J.Eq. 280, 134 A. 681, 53 A.L.R. 1115; Page v. Afflerbach, 102 N.J.Eq. 390, 140 A. 792, affirmed 104 N.J.Eq. 489, 146 A. 916; Reeves v. Reeves, 102 N.J.Eq. 436, 141 A. 175; Kirkpatrick v. Kirkpatrick, 106 N.J.Eq. 391, 151 A. 48; First Nat'l Bank of Lyndhurst v. Rutherford Trust Co., 109 N.J.Eq. 265, 157 A. 142; Salmon v. Pittenger, 122 N.J.Eq. 165, 193 A. 843.

Similarly, a voluntary trust, as distinguished from one supported by a consideration, is inherently a gift, and it must be fully declared to render it effective as such. Austin v. Young, 90 N.J.Eq. 47, 106 A. 395; Cessna v. Adams, 93 N.J.Eq. 276, 115 A. 802.

To prove satisfactorily the existence of each of the essential elements of a gift inter vivos, the evidence should be clear, cogent and convincing. Cessna v. Adams, supra; Stines v. Carton, 98 N.J.Eq. 415, at page 419, 420, 129 A. 251; Reeves v. Weber, 111 N.J.Eq. 454, 162 A. 566.

Turning, now, to the proofs in the record embracing the reports, appraisal, affidavits and depositions upon which the Commissioner based his conclusion, it is evident that Walter Hanstein, a resident of Atlantic County, died testate on January 16, 1940, at the age of forty-six years, leaving him surviving his widow, who is the executrix nominated in his will and the appellant here, one son, Walter Hanstein, Jr., then sixteen years of age, and two daughters, Ruth, fourteen, and Bertha, eleven. Unaware of the alleged transfer of the cash and of its alleged presence in the safe deposit box of the decedent, the Commissioner initially valued the net estate of the decedent for the purpose of taxation at $41,556.31, and the taxes so assessed were fully paid. On March 18, 1941, the proctors representing the executrix informed the Commissioner by letter that the return theretofore submitted by the executrix lacked reference to the gift or trust in respect of the cash, whereupon, in view of this tardy disclosure and other circumstances, the Commissioner referred the matter to a special investigator before whom testimony in greater detail was adduced.

A thoughtful consideration of all of the evidence introduced by and on behalf of the appellant reveals that in some significant particulars it is irreconcilably divergent, and in others positively contradictory. Strangely, the two envelopes containing this substantial amount of cash seem to have been unobserved by the district supervisor in the preparation of his inventory of the contents of the safe deposit box. Oddly, the executrix ignored this fund in the verified return originally presented to the Commissioner, although in schedule "C" she was obliged to state specifically all transfers of any property made at any time by the decedent in trust by deed or agreement. Still later, she deposed that in the deposit box at the Equitable Trust Company at the time of the decedent's death, there was an envelope bearing the endorsement to which reference will be presently made, containing $11,876.91 in cash. She states that this fund in cash was given by the decedent to her in trust in the year 1931, and that the fund has been continuously thereafter held by her either in the form of cash or government bonds. No mention whatever of the additional $20,000 is made by her in this affidavit.

Her testimony introduced at a later date, succinctly stated, tends to divulge that in 1931 Mr. Hanstein became somewhat apprehensive of the financial stability of the building and loan associations in which he had invested and he thereupon withdrew these investments, utilizing the money to purchase government bonds of the par value of $30,000. At that time he remarked "We are not going to play with this money and make more on it necessarily. This is for the children's education." In adverting to this event, the appellant in her testimony said "Now it would be stating it too strongly to say he established a trust, I suppose, with those words, because it was a conversation." The appellant then acknowledges that she is not certain where the bonds were then lodged for safe-keeping but assuredly they were not in her possession. Parenthetically, it may be noted that she...