In re Harris' Estate
| Citation | 179 Minn. 450,229 N.W. 781 |
| Decision Date | 07 March 1930 |
| Docket Number | No. 27681.,27681. |
| Parties | In re HARRIS' ESTATE. |
| Court | Supreme Court of Minnesota (US) |
Henry N. Benson, Atty. Gen., and John F. Bonner, Asst. Atty. Gen., for petitioner.
George L. Barnard, of Willmar, for Harris' Estate.
Certiorari to review an order of the probate court adjudging that no inheritance tax be imposed upon a fund in the hands of the administrator of the estate of Harry H. Harris, deceased.
Harris, a resident of this state, was a soldier in the late war. He died while in the service in November, 1918. He held a war risk insurance policy for $10,000, in which his mother was designated as the beneficiary. The insurance was payable in 240 monthly installments. The mother, as beneficiary, received monthly payments up to the time of her death in August, 1928. There survived the mother three daughters, sisters of Harris. These sisters were then the next of kin and sole heirs of Harris and of his mother. After the death of the mother, an administrator of the estate of Harris was appointed and there was paid over to him the then value of the unpaid installments under the insurance policy, amounting to $6,249. This sum, less some items of expense, the probate court awarded, in equal shares, to the three sisters of Harris, and denied the application of the state to impose any inheritance tax thereon.
The federal law governing war risk insurance, so far as specially applicable to the question now presented, is found in chapter 10, title 38, U. S. C. (38 USCA c. 10).
Section 511 of that chapter and title provides that the insurance, on death of the insured, shall be payable only to a spouse, child, grandchild, parent, brother, sister, uncle, aunt, nephew, niece, brother-in-law, or sister-in-law of the insured, or to any or all of them.
Section 454 provides that insurance payable under the act shall not be subject to the claims of creditors of any person to whom an award thereunder is made, and shall be exempt from all taxation. It is made subject to claims of the United States against the insured arising under the insurance and compensation laws.
Section 512 provides that, if the beneficiary designated in the policy survives the insured but dies before receiving all the installments payable thereunder, then there shall be paid to the estate of such beneficiary the present value of the remaining unpaid monthly installments.
It may be noted that the next preceding clause of this section provides that, if no beneficiary within the permitted class is designated by the insured in his lifetime or by will, or, if the designated beneficiary does not survive the insured, then there shall be paid to the estate of the insured the present value of the remaining unpaid monthly installments. It may also be noted that these insurance policies provide that, in case the insured becomes totally disabled, then the policy matures and the monthly payments are to be paid to the insured during the time he is so disabled.
The precise question presented is whether, upon the death of the beneficiary and the payment of the then value of the remaining unpaid installments to the estate of the insured or to the estate of the beneficiary, the state is entitled to an inheritance tax upon the distributive shares going to the next of kin within the class to which the insurance money must be paid. On this question, the authorities are in conflict. Some courts hold that the fund becomes the property of the estate of the deceased soldier and is to be treated as any other asset of the estate. In re Estate of Singer, 192 Wis. 524, 213 N. W. 479; Funk v. Luithle (N. D.) 226 N. W. 595. The New York courts, before exemption was provided by statute of that state, held that such funds were subject to the state inheritance tax and that the exemption from taxation provided by section 454 of the federal law (38 USCA), supra, applied only while the money was in the hands of the United States. In re Schaeffer's Estate, 130 Misc. Rep. 436, 224 N. Y. S. 305, and cases there cited. It was also there held that, the inheritance tax not being a property tax, the exemption did not apply.
The inheritance tax, while not a property tax, is nevertheless taxation and a tax, and is governed by many of the rules applied to property taxes. Farmers' Loan & Trust Co. v. Minnesota, 280 U. S. 204, 50 S. Ct. 98, 74 L. Ed. ___. In the case of Plummer v. Coler, 178 U. S. 115, 20 S. Ct. 829, 44 L. Ed. 998, a state inheritance tax was imposed upon United States bonds bequeathed by will. The law under which the bonds were issued exempted the bonds from taxation in any form by or under state authority. It was there held that the exemption of the bonds from taxation by the federal law did not prevent the state from taxing the privilege of receiving property under the state statute regulating the descent of the property of decedents by will or by statute. These conditions may be noted in reference to that case: That it was a transfer by will, and the decision applies strictly only to transfers by will or by descent under the intestate statutes. The property transferred must come by will or by statute of descent from the decedent. Our Inheritance Tax Law provides for taxing the transfer of property passing by will or by the intestate laws of this state from any person dying possessed of the property. There is the further provision, not here material, for imposing the tax upon gifts or grants made in contemplation of death. It is apparent, of course, that, if the property transferred was not the property of the decedent and did not pass from him by will or intestate law, or by gift or grant in contemplation of death, there is nothing on which to impose the tax. It seems to us that neither the deceased soldier, nor the beneficiary in the insurance policy, had any property right or title to the monthly installments payable under the policy after the death of the insured and beneficiary. The insured had the right to designate a primary beneficiary in his lifetime or by will. He had designated such beneficiary in his lifetime, and made no will. Our attention has not been called to any law giving the beneficiary power to dispose of future installments by will or otherwise. Upon her death the unpaid installments vested, not in her heirs under the law of descent of this state, but in the next of kin of the insured coming within the class to...
To continue reading
Request your trial