Singer's Estate, In re

• Decision Date: 24 January 1975
• Citation: 363 N.Y.S.2d 746,80 Misc.2d 1006
• Parties: In re ESTATE of Abraham SINGER, Deceased. Petition of Robert SINGER, as Executor of the Estate of Abraham Singer, Deceased, to Apportion and Direct Payment of Estate Taxes. Surrogate's Court, Nassau County
• Court: New York Surrogate Court

Page 746

363 N.Y.S.2d 746

80 Misc.2d 1006

In re ESTATE of Abraham SINGER, Deceased Petition of Robert SINGER, as Executor of the Estate of Abraham Singer, Deceased, to Apportion and Direct Payment of Estate Taxes.

Surrogate's Court, Nassau County.

Jan. 24, 1975.

Roe & Kramer, New York City, for petitioner.

Edmund M. McCarthy, New York City, and Froehlich & Mahony, Mineola, for respondent Fae Lillian Singer.

Dominick M. Minerva, Valley Stream, guardian ad litem.

Fritz, O'Brien & Farrell, Mineola, for Phoenix Mutual Life Ins. Co.

JOHN D. BENNETT, Surrogate.

The executor, who filed a Federal estate tax return reporting a tax of $24,184.59 on account of which he has paid $17,000 and deposited $5,193.29 on account of the New York estate tax, seeks an order pursuant to EPTL 2--1.8 directing the widow, the sole legatee under decedent's will and principal beneficiary of his nontestamentary assets and the Phoenix Mutual Life Insurance Company, a Connecticut corporation which is holding the proceeds of a life insurance policy payable to decedent's infant son under an income contract made by the decedent, to pay to petitioner the taxes which petitioner has allocated to their respective interests.

Decedent died a resident of Nassau County on July 20, 1971, survived by his widow, Fae, an infant son Theodore, and two adult children of a prior marriage, Robert and Susan. Testator gave his entire estate to his widow, naming Robert as executor. The will does not contain any tax exoneration clause.

The copy of the Federal estate tax return as filed by petitioner reports a gross estate of $453,352, consisting of the following: real property in New Jersey, $4,995; cash, $2,579; life insurance on decedent's life payable to designated beneficiaries, $206,671; jointly held property payable to the widow, $28,843; miscellaneous property $210,264 (all of which consists of cemetery land purchase certificates and accruals with the exception of $5,275 due from a broker).

All of the insurance policies, with the exception of three, are payable to decedent's widow. Two of the three aggregating $23,671 are payable to decedent's adult children Robert and Susan equally. The third policy of $75,000 is payable to his infant son Theodore as primary beneficiary under the provisions of an income contract made by decedent with the company, whereby the income from the proceeds is payable to the infant's mother Fae on behalf of her son until he attains age 21, at which time he will be entitled to receive the annual interest directly and withdraw up to $25,000 from principal. Upon attaining age 25 he will be entitled to withdraw an additional $25,000 and upon his attaining age 30 he will be entitled to withdraw the balance of $25,000. Under the terms of the supplementary contract no withdrawals from principal can be made nor can there be any commutation of instalments or the exercise of any other option except as provided by the insured. The beneficiary cannot anticipate nor alienate any of the benefits payable to him which are exempt from the claims of the beneficiary's creditors as provided by law. The income contract expressly states that it was executed in Connecticut and subject to the laws of Connecticut though the policy was issued in connection with a group policy executed in New York.

Decedent's widow filed on answer to the petition contending that the tax is excessive because of the excessive valuations reported by the petitioner; that since she is the sole legatee under the will, there are sufficient funds in the executor's hands to pay the tax allocated to her interest in the estate without requiring her to pay any sums to the petitioner.

In his report, the guardian ad litem appointed by the court to protect the interests of the infant contends that under the Connecticut General Statutes, § 38--161, the proceeds of the policy are exempt from claims of creditors of the beneficiary and under the doctrine of comity this court lacks jurisdiction to compel the insurance company to contribute to the payment of the taxes resulting from the inclusion of the proceeds of the policy in decedent's taxable estate.

The insurance company has filed an answer and cross-petition conceding that the proceeds of the policy held by it under the income contract are properly includable in the decedent's gross estate for Federal and New York tax purposes; that there are no provisions for payment of estate taxes in either the policy or the supplementary income agreement; that it is a stakeholder and if payment is directed, that the court fix the amount to be paid and upon payment to petitioner, the mother of the infant be directed to return the income certificate to it for endorsement to reflect the payment and the resultant reduction of subsequent principal and income payments and that it be discharged from all further liability to the parties to this proceeding.

Subsequent to the filing of the briefs by the parties, the executor filed with the court a photocopy of the report of the Federal estate examination dated December 2, 1974, which indicates that the valuation of the cemetery land purchase certificates and accruals were increased in value by $173,370.50, claims decreased, of which more will be said further, by $35,671.30, resulting in an assessment of a deficiency of $26,015.21, making Federal estate tax liability $50,199.80 and also resulting in an increase in the New York estate tax.

At the outset it should be noted that this court is powerless to question the valuation or assessment made by the Internal Revenue Service for estate tax purposes (Matter of Mayer, 46 Misc.2d 537, 540, 260 N.Y.S.2d 88, 92; Matter of Lipshie, 30 Misc.2d 306, 311, 213 N.Y.S.2d 280, 284).

Section 2002 of the Internal Revenue Code makes the executor personally liable for the payment of the Federal estate tax by stating '(That) the tax imposed by this chapter shall be paid by the executor.'

Congress, in the case of insurance payable to a beneficiary includable in the gross estate, empowered the executor to recover the estate tax attributable to such insurance (IRC § 2206). A similar tax apportionment provision is provided for in IRC § 2207 for taxes generated by a power of appointment (Matter of King, 22 N.Y.2d 456, 293 N.Y.S.2d 273, 239 N.E.2d 875).

In Matter of King, supra, the court in discussing apportionment of taxes said:

'Generally speaking, apportionment of taxes among the beneficiaries of an estate, or among persons receiving property which is included within an estate for tax purposes, is a matter of State law (Matter of Zahn, 300 N.Y. 1, 10, 87 N.E.2d 558, 561). There are, however, two exceptions to this general rule. The apportionment of taxes attributable to nonexempt insurance proceeds and property subject to a power of appointment is governed by Federal law (Riggs v. Del Drago, 317 U.S. 95, 63 S.Ct. 109, 87 L.Ed. 106; National State Bank of Newark v. Nadeau, 57 N.J.Super. 53, 153 A.2d 854; Kintzinger v. Millin, 254 Iowa 173, 117 N.W.2d 68; Scoles, Apportionment of Federal Estate Taxes and Conflict of Laws, 55 Col.L.Rev. 261, 286).' (Emphasis supplied.)

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