In re Atkins' Estate

• Decision Date: 14 February 1941
• Docket Number: No. 5452.,5452.
• Citation: 129 N.J.Eq. 186,18 A.2d 45
• Parties: In re ATKINS' ESTATE. CENTRAL HANOVER BANK & TRUST CO. et al. v. MARTIN, State Tax Com'r.
• Court: New Jersey Supreme Court

18 A.2d 45

129 N.J.Eq. 186

In re ATKINS' ESTATE.CENTRAL HANOVER BANK & TRUST CO. et al.

v. MARTIN, State Tax Com'r.

No. 5452.

Prerogative Court of New Jersey.

Feb. 14, 1941.

[Copyrighted material omitted.]

Syllabus by the Court.

1. Decedent made inter vivos contract (known as a "refund annuity contract") whereby he paid a lump sum (called "capital investment") to an insurance company and the company contracted to pay to him certain fixed monthly payments as long as he lived, and, if he should die before receiving payments aggregating an amount equal to the capital investment, to continue the monthly payments to his two sons until the total payments equalled the capital investment; with provision that he might at any time substitute any other persons in place of the sons. Decedent died without making any such change; the sons both survived him. Held:

a. Such contract comprised, inter alia, a contingent transfer made by the annuitant to his sons, through a third party, which transfer eventually vested.

b. Such transfer was intended by the transferor to take effect in possession or enjoyment, at or after his death.

c. Such transfer was made by the transferor in contemplation of his death.

d. Such contract is not an "insurance policy" within the meaning of the statute, and such transfer was not exempted from taxation under our statute; and transfer inheritance tax was properly levied thereon.

2. Decedent, owning intangible property and being domiciled in New Jersey, executed and delivered in the state of New York an irrevocable deed of trust conveying said property to a trustee domiciled in New York, in trust for the payment of the income to the grantor for his life and thereafter to his wife for life if she survived him, with contingent equitable remainder in the corpus to his sons if they survived, otherwise to the grantor's heirs and next of kin. The said trust property was valued at nearly $400,000 and comprised two-thirds of the grantor's assets. The physical evidences of the property were located in New York at and prior to the execution of the deed and continued so to be until the grantor's death. Grantor's wife predeceased him; the sons both survived him; he continued domiciled in New Jersey until and at his death. Held:

a. The transfers to the sons were made by the grantor in contemplation of his death.

b. They were also intended to take effect in possession or enjoyment at or after the grantor's death.

c. They were made by a domiciled resident of New Jersey, whether they be deemed to have been made at the time of the execution of the deed or at the time of grantor's death.

d. They are taxable under the provisions of the New Jersey transfer inheritance tax act, notwithstanding that the deed was executed and delivered in New York; that the physical evidences of the property were in New York at all times at, prior and subsequent to the making of the deed; that the deed was to be construed according to the law of New York, and that the validity, nature and effect of the deed was to be determined by the New York law e. Such taxation by New Jersey is valid and not in contravention of the constitution of this state nor of the constitution of the United States.

f. A transfer of intangible property or intangible interests in property may be validly and constitutionally taxed under the New Jersey statute, notwithstanding the property may have acquired a "business situs" in another state and notwithstanding the act effecting the transfer occurs in another state, provided only that at the time the act of transfer occurs the transferor is domiciled in New Jersey.

Proceeding in the matter of the transfer inheritance taxes in the estate of George W. E. Atkins, deceased. From transfer inheritance taxes levied by J. H. Thayer Martin, State Tax Commissioner, the Central Hanover Bank & Trust Company, executor, etc, and others appeal.

Tax affirmed.

Child, Riker, Marsh & Shipman, of Newark, for appellants.

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

BUCHANAN, Vice Ordinary.

This is an appeal from the transfer inheritance tax levied in the estate of George W. E. Atkins, deceased, who died testate, domiciled in this state, November 9, 1936. Tax was assessed against the transfer under his will of property valued at a little less than $200,000; also against the transfer of property passing under an inter vivos trust deed executed and delivered on May 16, 1929; and also against transfers made to decedent's two sons under certain "refund annuity" agreements between decedent and certain respective insurance companies.

There is no dispute as to the tax on the testamentary transfers, nor as to amounts or computation as to the other transfers; the only questions in issue are (1) the taxability of the transfers under the trust deed, and (2) the taxability of the transfers under the refund annuity agreements.

The Refund Annuity Transfers First as to the transfers under the refund annuity agreements. There were six of these agreements, or "policies," with two insurance companies, all essentially alike, purchased in the period between July, 1932, and October, 1935. The decedent paid a lump sum, called the "capital investment," to the insurance company and received in consideration thereof an agreement where-under the company bound itself to pay to the annuitant certain fixed, equal, monthly payments during his life, and if the annuitant should die before receiving monthly payments aggregating the amount of the "capital investment," to continue the monthly payments after his death until the total of said payments equalled the amount paid in; the payments (if any) subsequent to Mr. Atkins' death were to be made to his two sons, as beneficiaries designated by Mr. Atkins; and the right was reserved to Mr. Atkins to change the said beneficiaries during his life.

It seems clear that the transfers to the two sons, under these contracts, are gifts inter vivos "made in contemplation of the death of the donor"; and they are also gifts "intended to take effect in possession or enjoyment at or after such death." Under our statute they are therefore taxable in either of those aspects.

That these are, in substance and effect, transfers by the decedent, although the actual payments to the sons are to be made by the insurance company, is obvious. The payments (if any) to be made to the sons constitute repayment by the company of the equivalent of so much of the capital sum invested by decedent as has not previously been repaid to the decedent himself. That which is to be paid by the company to the sons is in substance and effect simply that which the decedent has paid to the company and directed the company to pay to the sons. If otherwise taxable, these transfers are not saved from taxability because made through the medium of a third party. In re Gemmell's Estate, 123 N.J.Eq. 315, and cases cited at page 321, 197 A. 428.

By the express terms of the contracts the sons take nothing thereunder until the death of the annuitant grantor; that which comes to them comes only at and after his death. It is a supererogation to say that these gifts were intended by decedent to take effect in possession or enjoyment at or after his death. He intended that which he expressly provided.

It is equally clear that these (contingent) gifts to the sons were made by the donor in contemplation of his death. It may be conceded that he had no apprehension of death other than as an event certain to occur at some time in the indefinite future. A transfer is taxable under that clause, however, if made in and because of such contemplation of death as that which leads to testamentary disposition,—if made with the intent and purpose that it be in lieu of testamentary disposition. Schweinler v. Martin, 117 N.J.Eq. 67, 175 A. 71, affirmed, 180 A. 774, 13 N.J. Misc. 722; In re Hartford's Estate, 122 N.J.Eq. 489, 194 A. 800; Nicholas v. Martin, 128 N.J.Eq. 344, 15 A.2d 235.

That these transfers to the sons in the instant case were made in lieu of testamentary disposition is indisputable; they are specifically, expressly and solely, provisions as to the post mortem disposition of a part of the assets of his estate,—the value, at his death, of the unpaid instalments under the contracts.

Appellants contend that these transfers are not taxable because the primary purpose and motive of the decedent in taking out these contracts was to make provision for himself for life, not to provide a distribution of his property after his death.

If this contention were sound it would of course be of no practical benefit to appellants, for it still would remain true that the gifts would be taxable as being intended to take effect in possession or enjoyment at or after death. However it is not sound, and hence not efficacious to preclude taxability of the gifts as made in contemplation of death.

As pointed out, and held, in Nicholas v. Martin, supra, it is not a requisite of taxability on this ground, that the transferor's primary object and purpose in making a transfer which is in fact made and intended as in lieu of a testamentary disposition, should have been to make provision for the post mortem distribution of his estate (or a part thereof); it is sufficient if he in fact, regardless of what may have been his primary object in so doing, makes a transfer which is in fact made and intended as in lieu of a testamentary disposition.

Moreover, in the instant case, this contention of appellants is unsound, because we are here concerned not with the provision for repayment from the company to the annuitant during his life, but simply with that part of the transaction which provides for the contingent, eventual post mortem payment to the sons. It is only this latter transfer which has been taxed. If the contract had not contained this provision, but had instead provided that any portion of the capital investment which had not been...