Simonson's Estate, In re

• Decision Date: 28 June 1960
• Parties: In re ESTATE of Nels SIMONSON, Deceased. STATE of Wisconsin, Appellant, v. Frank HOBBS et al., as Adm'rs de bonis non, et al., Respondents.
• Court: Wisconsin Supreme Court

Page 134

104 N.W.2d 134

11 Wis.2d 84

In re ESTATE of Nels SIMONSON, Deceased.

STATE of Wisconsin, Appellant, v. Frank HOBBS et al., as Adm'rs de bonis non, et al., Respondents.

Supreme Court of Wisconsin.

June 28, 1960.

Rehearing Denied Oct. 4, 1960.

John W. Reynolds, Atty. Gen., Harold H. Persons, E. Weston Wood, Asst. Attys. Gen., Richard E. Williams, Inherintance Tax Counsel, Madison, for appellant.

E. Nelton, Balsam Lake, For respondents.

Churchill, Duback & Churchill, Milwaukee, amicus curiae.

FAIRCHILD, Justice.

The parties evidently agree that any differences between the bank accounts and bonds are immaterial upon this appeal and that they were alike in that, while decedent and his wife were living, either had power, without the consent of the other, to withdraw the deposits, or collect the bonds, and that after the death of either the survivor could do so.

Respondents, the administrators and the widow, contend that the inheritance tax to be imposed with respect to the property involved on this appeal is to be determined solely by applying sec. 72.01(6), Stats., entitled 'Joint Interests,' and the county court so decided. The State contends that when decedent deposited the funds in the joint names of himself and his wife, a transfer occurred which was intended to take effect in possession or enjoyment at his death, and that such transfer was taxable under sec. 72.01(3)(b); that sec. 72.01(6) does not restrict the application of sec. 72.01(3); and that, in any event, the creation of the joint interests within two years prior to decedent's death constituted transfers in contemplation of death, taxable under sec. 72.01(3)(a).

Sec. 72.01(6), Stats., provides:

'Whenever any property, real or personal, is held in the joint names of two or more persons, or as tenants by the entirety, or is deposited in banks or other institutions or depositaries in the joint names of two or more persons and payable to either or the survivor, upon the death of one of such persons the right of the surviving tenant by the entirety, joint tenant or joint tenants, person or persons, to the immediate ownership or possession and enjoyment of such property shall be deemed a transfer of one-half or other proper fraction thereof taxable under the provisions of this chapter in the same manner as though the property to which such transfer relates belonged to the tenants by the entirety, joint tenants or joint depositors as tenants in common, and had been bequeathed or devised to the surviving tenant by the entirety, joint tenant or joint tenants, person or persons, by such deceased tenant by the entirety, joint tenant or joint depositor, by will.'

Sec. 72.01(3)(b), Stats., provides:

'When a transfer is of property, made without an adequate and full consideration in money or money's worth by a resident or by a nonresident when such nonresident's property is within this state, or within its jurisdiction, by deed, grant, bargain, sale or gift, intended to take effect in possession or enjoyment at or after the death of the grantor, vendor or donor, including any transfer where the transferor has retained for his life or for any period not ending before his death: 1 the possession or enjoyment of, or the right to the income, or to economic benefit from, the property, or 2 the right, either alone or in conjunction with any person, to alter, amend, revoke or terminate such transfer, or to designate the beneficiary who shall possess or enjoy the property, or the income, or economic benefit therefrom.'

1. Whether sec. 72.01(3)(b), Stats., can apply to deposit in joint names. We shall first consider the question whether subd. (3)(b) is applicable to a deposit of the money of decedent in a bank in the joint names of decedent and another, payable to either or the survivor, with the intention that each should have the right to withdraw at will before or after the death of the other.

Nothing in subd. (6) suggests that its operation on bank deposits in joint names is to be affected in any way by the original ownership of the deposited funds. Subd. (6) quite clearly provides for a tax upon the event of survivorship, and specifies that survivorship shall be deemed a taxable transfer of one-half, or other proper fraction of the amount on deposit. A claim by the survivor that he supplied all the funds on deposit in joint names has been held to be immaterial; a taxable transfer of one-half or other proper fraction is deemed to have occurred at the death of the one dying first, even if that one never deposited any of his own funds in the account. Estate of Hounsell, 1948, 252 Wis. 138, 31 N.W.2d 203; Estate of Atkinson, 1952, 261 Wis. 481, 53 N.W.2d 185, 54 N.W.2d 52. Upon like reasoning, a claim by the state that the survivor supplied none of the funds is immaterial, and under subd. (6) a taxable transfer of one-half is deemed to have occurred.

The state points out, however, that no words in sec. 72.01(6), Stats., say that subd. (3)(b) does not apply to a deposit of decedent's funds in the joint names of himself and another. We conclude that subd. (6) does exclude the operation of subd. (3)(b) in this situation.

The inheritance tax law, as enacted by Ch. 44, Laws of 1903, did not expressly impose a tax with respect to property held by a decedent in joint tenancy with others. It did contain language, the forerunner of subd. (3)(b), imposing a tax upon a transfer intended to take effect in possession or enjoyment at or after the death of grantor. It was then at least doubtful whether the law imposed any tax with respect to property held by a decedent in joint tenancy.

In theory, each joint tenant acquired all his rights in and to the property (including the right to possession and enjoyment) upon the creation of the joint tenancy; the death of the joint tenant who died first terminated his own rights, but did not confer a new right upon the survivor. See analysis in In re Tilley's Estate, 1915, 166 App.Div. 240, 151 N.Y.S. 79; 215 N.Y. 702, 109 N.E. 1094. As put by one court, at the death of one cotenant, the survivor 'is merely relieved thereby from the further interference of the contenant.' Estate of Gurnsey, 1918, 177 Cal. 211, 170 P. 402, 404. Under the 1903 enactment, there could be no tax with respect to property held by a decedent in joint tenancy unless the transfers involved in its creation could be said to be transfers intended to take effect in possession or enjoyment at or after the death of the grantor.

In 1917, the attorney general asserted that the 'pecuniary benefit which results to [the survivor] by the death of a joint tenant is not subject to the Inheritance Tax Law.' He stated that the tax commission had placed that construction upon the law and referred to legislation then pending to change the result. VI Op.Atty.Gen. 379.

The legislation referred to was Ch. 322, Laws of 1917, which created sec. 72.01(6), Stats., in its present form. While the attorney general did not consider the problem of bank deposits in joint names, it is significant that subd. (6) dealt with such deposits in exactly the same manner as with joint tenancies in real estate and other property. This specific provision for taxation with respect to bank deposits upon the event of survivorship as if a transfer of a fraction then occurred is inconsistent with the theory that a deposit of money of decedent in the joint names of himself and another had previously been and continued after enactment of subd. (6) to be taxable as a transfer to take effect in possession or enjoyment at or after...