In re Estate of Shaw v. Hamilton

• Decision Date: 01 November 1943
• Docket Number: No. 38588.,38588.
• Citation: 175 S.W.2d 588
• Parties: IN RE ESTATE OF ALICE R. SHAW, Deceased, State of Missouri, v. CHARLES R. HAMILTON, Executor and Trustee under the Will of ALICE R. SHAW, Deceased, Appellant.
• Court: Missouri Supreme Court

175 S.W.2d 588

IN RE ESTATE OF ALICE R. SHAW, Deceased, State of Missouri, v. CHARLES R. HAMILTON, Executor and Trustee under the Will of ALICE R. SHAW, Deceased, Appellant.

No. 38588.

Supreme Court of Missouri.

Division Two, November 1, 1943.

Rehearing Denied, December 6, 1943.

Appeal from Circuit Court of the City of St. Louis. — Hon. Robert L. Aronson, Judge.

AFFIRMED.

H.A. Hamilton and Robert A. Hamilton for appellant.

(1) The estates created by the ninth paragraph or subdivision of the will of Alice R. Shaw, deceased, are conditional and must be assessed for inheritance tax in the manner provided by Section 597, R.S. 1939. R.S. 1939, sec. 597; In re Kinsella's Estate, 239 S.W. 818; In re Bernays' Estate, 126 S.W. (2d) 209. (2) The contingencies and conditions mentioned in the will, and only such contingencies and conditions, are to be considered in assessing inheritance taxes. In re Kinsella's Estate, 239 S.W. 818; In re Bernays' Estate, 126 S.W. (2d) 209.

Roy McKittrick, Attorney General, and John S. Phillips, Assistant Attorney General, for respondent.

(1) The remainder is taxable under Section 597, R.S. 1939. Sec. 597, R.S. 1939. (2) Contingent remainders of the highest possible contingency rule are taxable to that person which under the provisions of the instrument will yield the highest possible tax to the State. In the Matter of Parker, 226 N.Y. 260; People v. Upson, 338 Ill. 145; Matter of Zorowski, 213 N.Y. l.c. 116.

WESTHUES, C.

The controversy in this case concerns the proper method of computing inheritance taxes upon a portion of the estate of Alice R. Shaw, deceased. The probate court of the city of St. Louis sustained the contention of the state and the parties interested appealed to the circuit court where the action of the probate court was sustained. An appeal was taken to this court.

The facts are not in dispute. Alice R. Shaw died testate leaving property valued at about $900,000.00. The testatrix by her will created a trust estate wherein Charles R. Hamilton was made trustee and Edgar J. Rozier, a nephew of the testatrix, was the life beneficiary. The will then provided as follows:

"After the death of my said nephew, Edgar J. Rozier, the trust shall cease and determine, and the trustee shall pay over and deliver the entire trust fund in his possession, in equal shares, to my nieces, Maude Rozier Harrison and Zoe Rozier Leuer, and my nephews, Francis J. Rozier and Henry L. Rozier.

"If any of said last four mentioned persons die before the said Edgar J. Rozier, then the share of the person or persons so dying shall be distributed to the heirs-at-law of such person or persons as determined by the laws of the State of Missouri, then in force."

The parties to this suit agreed that this clause created a contingent remainder in the four persons named. These four remaindermen were brothers and sisters of Edgar J. Rozier, the life beneficiary. Each of the four remaindermen had children living at the time of the trial. The value of the remainder in the trust estate was appraised at $154,551.56. The appraiser assessed a tax under the provisions of the fifth and sixth clauses of section 573, Mo. Rev. St. Ann. (1939) as follows: 5% on the first $20,000.00, 10% on the next $20,000.00, 15% on $40,000.00 and 20% on the balance of $74,551.56, or a total tax of $23,910.31. The state in thus taxing the fund contended that it was done in compliance with section 597, Mo. Rev. St. Ann. (1939), which reads in part as follows:

"When the property is transferred in trust or otherwise, and the rights, interest or estates of the transferees are wholly dependable upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which, on the happening of any of the said contingencies or conditions, would be possible under the provisions of this article, and such tax so imposed shall be due and payable forthwith by the executor, administrator, or trustee out of the property transferred:"

The state contended that there was a possibility that when the life tenant died the trustee might find only one person to whom the trust fund could be paid under the terms of the will and that therefore the fund must be taxed as a single unit or entity.

Appellant contends that the fund should be divided into four separate units or entities as though four separate estates had been created. Appellant would assess the tax as follows: The interest of Maude R. Harrison, $38,637.89, a tax of 5% on the first $20,000.00 and 10% on the balance of $18,637.89. And so with each of the other three remaindermen, resulting in a total tax of $11,455.16, or $12,455.15 less than the amount of tax assessed by the state. It will be noticed that appellant would determine the rate of tax by the same method as the state, that is, the highest rate permissible under section 573, supra, and that portion of section 597 as copied above. The only dispute then resolves itself into the question of whether the tax is to be assessed against the fund as a single entity or whether the fund shall be divided into four separate entities and then taxed.

Appellant in a reply brief insists that this case should be treated the same as if the trust property consisted of four separate and distinct tracts of land and the testatrix had created four separate and distinct trusts, giving the fruits of the four tracts to one beneficiary for life and each separate tract to a specific remainderman. What the result would be in such a case we need not decide. The fact remains that the testatrix in this case created one trust for the benefit of a life tenant and directed the trustee that after the termination of the trust he distribute the entire estate, share and share alike, to the four named remaindermen or their heirs. If we consider then the most remote contingency that may occur, that is, that there may be one lone heir of the four brothers and sisters named, then the trustee would be bound under the terms of the will to pay the entire trust estate to this one individual. Since the statute compels us to consider the most remote contingency that may occur we must assume for the purpose of the...