Untitled Texas Attorney General Opinion ( 1943 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Honorable George R. Sbeppatd
Comptroller of Publla Aooounte
Austin, Texas
A
Dear Sir:
o the trurter.
r the puxpo~s or’paying
0 of lnawenao. Xt a-bal-
d artier the payment of auob
aefioiariee. Doosdont retained tho right
trustee at any time.
You request the o~inlon of thfe Department in
answer to the following queetlona:
Honorable G6orge H. Sheppard, page 2
1. Are the inauranoe pSOOe6d8 on the llfs of the
deoedent subject to an lnherltanoe tax, less the statutory
exemption?
2. Are the seourltlss assigned to the trustee by
deoedent and his wife, out of the oommunlty property, sub-
ject to an inheritance tax on the full value or on only one
hair7
The Texae inheritenoe tax is a tax upon the right
to reoeive or aucoesd to the po88eesion or enjoymnt of prop-
erty transferred in suoh manner ae to oonetitute a traixefer
made or intended to take eifeot altar the death of the grant-
or or uonor. BY th6 8pOOifiO tOrIM Of the tIWt in8trUment
here involved, both,po88es8ion and enjoyment by the beneti-
Oiarie8 Of the oorpU8 Of th8 tlU8t artat wa8 pO8tponed Until
after the death of the donor (deoedeat). Under thl8 8trte
or faots we think that the law is 8ettled in.thir State that
the entire pX'C@Brty,both in8UE~OO pl'OOWd8 8ad 8OOLUit$88
plaoed in tTU8t, by the donor, eat to the inheritanoo
tax. B8thee t. Sheppard, 14s S.W. ) 997, error refused.
In that oaee the court 8aid:
I) . It 18 not a queatlon of when the beneflolal
in;ere8t 18 OreE&8d, iltt the.tax f8 tqnwed Upon
the right to T8W2JiV8in po88cl88ion or.enjoyiaent
after the &oath of grantor or rettldr. In ooa-
8equenoe, a grantor or 8ettLor nej.oreate an lr-
rerooablo tTti8tduring hi8 lifeth, 8tlll li h,e
porrtpone8the right or po8ae88lon or enjoyment
of the beasfloiary until sitar granbr*8 death,
the property Or any fntOTO8t therein 18 8UbjeOt
to the inherltanoe or 8uoos84~iontax at or after
hi8 death. Under our statute. where either *~o8806-
81~' or *enjoyment1 is made oontlmsnt won the
bath or grantor or sbttlor of ail or ~119u
the trust eatate. 8UOh tran8fer la taxable. . .*
mba81t3 Our8).
Prior to ths amendment of Art1016 711v, R.C.S.,
1925, themoe8d8 Of life i?lsUranOe pOliOiQ8 War8 8Ubjeot
to the Inheritance tax lmposod by that artiole. State t.
Jones, 290 Y.W., 244, rereraed on othsrgrounds, Joner v'.
Stato,~5 S.3. (24) 973. The statute, as amended, now taxes
*all property withln the jurisdiotlon of,thls State, . . .
lnoluding the proceeds of llre lnauranoe to.the extent of
the amount receivable by the executor or administrator 88,
Honorable Qeorge H. Sheppard, page 3
lnsuranoe under polioies taken out by the deoedent upon
his own life, and to the extent of the exoess over Forty
ThoulrsndCollars ($40,000) of the amount reoelvable by
all other benefloiarles as insurance under policies taken
out by the deoedent upon his own life.*
It Is olear that proceed8 of the lneuranoe poll-
.oies here involved were not reoeivablo by the exeoutor or
adminietrator, but that these amount8 ars amount8 r8aeiy-
abl8 by *other b6n8fioiari68.n Prior to the amendment of
the artlole the $40,000 exemption would not have been ln-
valved. The beneflclariee are now 8ntitl6d to take ad-
vantage oi it. Friar to the amendment of the artiole the
inheritano8 tax attaahed to all property Which rhall pa88
abaolutsly or in truet by will or by the law8 of deeoent
or distribution of this or any other State, or by deed,
grant, ale, or glft~made or Intended to take effbot in
possession or enjoyment after the death of the grantor or
donor, . . . n The 86~16language Is lnoluded In the
artiole at the*preeent time.
At the time of the exeoutlon of the trust ln-
strument the b8nefioiarl68 thereunder aoguired no Tight8
whatever to the oorpur of the trust 68tate. Suoh rightr,
under the terms of the trust instrument, oould never be,
end were not aoguired until the death of the d8oedeat.
At the t&w of hl8 deeth the property peesed--the right6
of poeeeesion and enjoyment materlall%ed. Those righta, at
the time of the exeoutlon of the truet Instrument, were
oontlngent upon the death of the deoedent. Hi8 death war
a oondltion preoedent to the Yeeting and the exeroise of
such righta. Upon hi8 death the rl$ht8 of possession and
enjoyment passed to the benefiola.rlesunder the trust ln-
etrument. Thi8 passing or right Of 8uo~6ss~0n, the stat-
ute taxerr.
It followe, from what we have said, that In thi8
case the prooeedr of the insuraaoe polio%ee whleh were
taken out by the decedent upon his own life are taxable in
acoordanoe with the statute. In other ~01-38, all or swh
prooeeds in 6x0686 of the sum of $40,000 are taxable. We
do oot have before us sufficient fasts to determine wheth-
er 'all or only a part of suck pollolee were taken out by
the deoedent upon hie own life. In the event that the86
,iIonorable
C8Org8 H. Sheppard, page 4
policies were paid for by community fuhde, then only half
of the pTOC88dS repX8s8ut prooeeds Of mlnaurano6 under
pollcl6e taken out by the d6U6dOnt upon his own life.*
Blackmon Y. Hansen, (Sup. Ct.), 169 S.W. (2d) 962.
Only the Interest of the d606d8nt pasres at hi8
death. Consequently, only the intereet of the deoedent in
the eecurltlee assigned to the trustee by the d606d6nt and
his wife, out of oommuulty property,paosed as a result of
his death. Jones Y. State,,5 S.W. (2d) 973; Blaokmon Y.
Hanssn, 169 S.W. (ad) 962., Slaoe only one half of 8uoh
86OUTiti68 were owned by th6 d@O8d@ilt,Only hi8 OllO-half
interest passed to the ben6fiOiaTl68 a8 a re8tit Of hi8
death, and, th6r6fOr6, only one half of the raluo Of 8ueh
seauriti8s becaJa6subj6ct to the lnh6rltculoetax.
Trusting that the above fully amwar your inn-
qulry, we are
YOU8 YOZ3’
tl’Ull,
AlTORWEYCl!Z%RALOFT3?3US