Hen, Gee. H. Sheppard Comptroller ofPublic Accounts Austin, Texas Opinion No. V-668
Re: Whether inheritance tax due on receipt of decedent’s interest in certain life iasurante policies.
Dear Sir:
You have requested the opinion ofthis office en the above-captioned matter under submitted facts whick we quote from your letter ofMarch 10, 1948:

“John H. Frost IIdied en December 15, 1945,

. . .He died testate and appointed the Frost National Bank ofSan Antonio executor ofhis estate.

**“ An**  inheritance tax report for his estate has been filed, and the value ofall assets reperted by the executor has been agreed upen between the executor and this department; but there is a controversy between the executor and this department as to the inclusion ofthe c,ash value of six insurance pelicies taken out by decedent’s father upan his own life and assigned in 1937 to the decedent and his brother jointly, or the survivor ofthem. Both J. H. Frost, SP., the father, **and J.**  H. Frost, Jr., the brother, survive decedent. “Upon the date ofdeath ofJohn H. Frost II, the six insurance policies had a cash surrender value of $181,254.81, and we have included one-half ofthis value ($9Q,627.40) as a part ofthe estate ofJohn H. Frost II. By this inclusion, the tax has been increased approximately $4,483,0@.. I01s
Further information regarding the nature ofthe decedent’s interest in the policies is given in the accompanying letter ef t~he attorney for the executor, which letter contains copies of the assignment of the Great Southern Life Insurance policy (in the amount of $50,000), the +equests for change of life owner on five Aetna Life Insurance policies (in the total amount of $4OO,- 000), and the endorsements on the five policies showing theHon. Geo. H. Sheppard, Page 2 (V-668)

change of Life Owner. The Great Southern Life policy was assigned to “Joseph Hardin Frost, Jr., and John Frost, II, share and share alike or survivor,

. .‘I. , and the Life Owner designation onfour ofthe Aetna policies reads, in part, as follows:

“Until the death ofJoseph H. Frost, Jr. and John Frost, II, sons ofthe insured, said sons, jointly, or the survivor shall be the life owner. “After the death of the survivor of said sons the executors or administrators of such survivor shall be the life owner.”
The life owner designation ofthe fifth policy, No. N-,797,- 783 omitted the words, “or survivor *following “jointly.” The attorney’s letter states that “the discrepancy between the request for change and the endorsement made on the policy was apparently due to an error in transcribing from the request to the endorsement and that the request for change Andy the intention of J. H. Frost, Sr. as shown in that request.

. .was controlling.* We concur in this conclusion, particularly in view ofthe provision relating to the death ofthe survivor.

To recapitulate, J. H. Frost, Sr., who is still alive, took out policies of insurance payable to his two sons, John Frost IIand J. H. Frost, Jr. Inaddition tobeing beneficiaries, the two sons became, by virtue ofthe assignments described above, the owners of the policies and entitled to various benefits thereunder, including the cash surrender value ofthe policies. One ofthe s’ons, John Frost II, has now died; and the question is whether the receipt of his interest in these policies by the surviving son is subject to the Inheritance Tax levied by Article 7117, V.C.S.

The pertinent provisions ofArticle 7117 are as follows:

“‘All ‘property within thejurisdiction ofthis State, real or personal, corporate or incorporate, and any interest therein, including property passing under a general power ofappointment exercised by the decedent by will, including the proceeds of life insurance to the extent ofthe amount receivable by the executor or administrator as insurance under policies taken out by the decedent upon his own life, and to the extent ofthe excess over Forty Thousand Dollars ($40,- OO@.O,) ofthe amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life, whether belonging to inhabitants cf this State or to persons who are not inhabitants. 

## rssardltss ofwhether such property is locatedlwitbin 

## tr wltkout this State, which shall passHon. Geo. H. Sheppard, Page 3 (V-668)

absolutely or in trust by will or bythe laws ofdescent or distribution ofthis or any other State, or by deed, grant, sale, or gift made or intended to take effect in possession or enjoyment after the death ofthe grantor or donor, shall, upon passing to er for the use ofany

### person, corporation, or association, be subject to a tax for the benefit of the State’s General Revenue Fund, in accordance with the fallowing classification;

. . .”
The attorneys for the executor take the position that

“the assignment ofthe Great Southern Life policy and the endorsements on the Aetna Life policies bytheir terms constituted Joseph Hardin Frost, Jr. and John Frost II,joint owners, with right of survivorship; 0that “the contractual provisions for survivorship resulted in the policies being owned by Joseph Hardin Frost, Jr. and John Frost IIas joint tenants, with right of survivorship.

. . ‘with all the rights of such tenants in common law, including the right of survivorship;‘” and that the provisions of Article 7117, above quoted, do not impose a tax upon the privilege ofreceiving an interest in ajoint tenancy by the surviving joint tenant.

Although Article 2580, V.C.S., abolished the doctrine ofjus accrescendi in this State, itis settled that parties may, by contract, will, or deed ofconveyance, create a common lawjoint tenancy, with its accompanying incident of survivorship. Chandler
v. Kountze, 130S.W. **2d** 327.

The first question, then, is whether ar not a common law joint tenancy has, infact, been created inthis case.

“In ajoint tenancy there are said by Blackstone to be four unities, towit, unity of interest, unity oftitle, unity oftime, and unity of possession, or, in other words, joint tenants have one and the same interest accruing by one and the same conveyance, commencing at one and the same time, and held by one and the same undivided possession. Of these unities, only the unity ofpossession exists in all forms of co-ownership.” Tiffany, Law of Real Property, § 418. Thejoint tenants have together but one estate which each joint tenant awns conjointly with the other cotenant. “Each joint tenant is regarded as the tenant of the whole for purposes oftenure and survivorship, while for purposes of alienation and forfeiture each has an undivided share only

. /

. The leading characteristic ofjoint tenancy is the fact that, on the death of onejoint tenant, the other joint tenant or tenants who may survive him, if it is an estate of inheritance, have the whole estate.

. . The survivor takes no new title by survivorship, but holds under the deed by virtue ofwhich he was originally seized ofthe whole.” Tiffany, Law ofReal Property, 58418, 419.Hon. Geo. H. Sheppard, Page 4 (V-668)

The law is well settled that ajoint tenancy may exist in personal property. 11 Tex. Jur. 418. Inthe brief submitted by the attorneys for the executor the various characteristics of a joint tenancy are discussed in some detail, and much emphasis is placed onthe doctrine of survivorship as the distinguishing incident oftitle byjoint tenancy for the purpose of supporting their contention that these policies were held injoint tenancy. However, no mention is made of the fact that the destruction of any one ofthe aforenamed unities results in a ‘severance” of thejoint tenancy. For example, if one of twojoint tenants disposes ofhis interest, the other joint tenant and the grantee become tenants in common. Tiffany, Law of Real Property, g425. Inother words “by its very nature ajoint tenancy is always revocable by conveyance at the option of either joint tenant.” Gleason and Otis, Inheritance Taxatian. We think that the assignment of the Great Southern Life policy, the requests for change, and the endorsements on the Aetna policies deny this option to the cotenants ofthese policies. The brief ofthe attorneys for the executor contains a copy ofa letter dated April 14, 1948, from Mr. D. P. Cavanaugh, amember ofthe Legal Department ofthe Aetna Life Insurance Company, to Mr. E. A. Sibley, Trust Officer of the Frost National Bank. We quote the following excerpt from this letter:
“While John Frost IIand Joseph Frost, Jr., were both living we would not have allowed either ofthem to take any action with respect tothese policies except by their joint action.”
This result is in line with Tiffany’s criticism of regarding a gift to two or more persons and the survivor or survivors ofthem as showing an intention to create ajoint tenancy. The following quotation is taken from Tiffany on Real Property, § 425:

”

. . .But whether the mere fact that the donor indicates an intention that the survivor or survivors shall take should be given such an effect appears to be opento question. The right of survimrship is merely one incident ofajoint tenancy. Another incident of such tenancy is that any one ofthe tenants can destroy it, with the incidental right of survivorship, by a conveyance to a third persan, and when one makes a gift to two or more with the right of survivorship, it appears to be a reasonable canclusion that he has in mind an indestructible right of survivorship. The view that there is in such a case a tenancy in common for life with a contingent remainder infavor ofthe survivor, or even that there is a tenancy in common infee simple with an executory limitation infavor of the survivor, might seem more in accord with the intention ofthe grantor lr testator

.”.-

Hon. Gee. H. Sheppard, Page 5 (V-668)

Holding, as we do, that nojoint tenancy existed in these policies, it is not necessary to decide whether or not the privilege of receiving the interest ofa deceased joint tenant may be subject to tax byvirtue ofthe provisions ofArticle 7117, V.C.S. Nor in the view we take ofthe language ofthat article is itnecessary to decide the exact nature ofthe interest of John H. Frost11 in these policies. Article 7117 taxes “property

. . .passing under a general power ofappointment exercised by the decedent by will.

. .‘I This provision is obviously inapplicable as is the provision regarding insurance “under policies taken outby the decedent upon his own life.” (Emphasis added) Nor did the “property , . .pass absomely or in trust by will or by the laws ofdescent and distribution, , .‘I The only provision, left is that which makes subject to tax transfers “by deed, grant, sale or gift made or intended to take effect in possession or enjoyment after the death ofthe grantor or donor.

. .” As to this provision, John Frost IIwas not the “grantor or donor “‘of his interest butwas, infact, one of two donees, who took his interest subject to the condition made by the original donor, by virtue ofwhich condition his interest ceased at his death and passed to Joseph H. Frost, Jr,

We are therefore ofthe opinion that the receipt ofJohn H. Frost II’s interest in the six insurance policies was not accomplished by any of the methods oftransfer enumerated inArticle 7117, V.C.S. If the Legislature so desires, this type oftransfer could result in the imposition of inheritance taxes by the inclusion inArticle 7117 ofa provision similar to that found inSection 811(e) ofthe Federal Estate Tax Act, Ch. 3, Title 26, Internal Revenue Code, U.S.C.A. This provision ofthe Federal Act applies to and brings within the scope ofthe Act all classes of property whether real or personal in case the survivor takes the entire interest therein by right of survivorship, and no interest therein forms a part ofthe decedent’s estate for purposes ofadministration. Reg. 105, Sec. 81.22; Paul, Federal Estate and Gift Taxation, Vol. 1. § 8.04, However, until some such provision is embodied in our law, the receipt ofa decedent’s interest which is accomplished in the manner presented by the facts ofthis case escapes the provisions of our Inheritance Tax Law; and no tax is due the State by reason ofthe provisions of Ch. 5, Title 122, V.C.S.
SUMMARY
Where a third party makes a valid gift of insurance policies on his own life to two persons *or survivor ,”neither co-owner having the right acting alone to affect the interest ofthe other in the policies or his right to take as survivor, no inheritance tax isHon. Geo. H. Sheppard, Page 6 (V-668)

levied byArticle 7117, V.C.S., on the survivor’s receipt ofthe deceased co-owner’s interest.

Yours very truly
ATTORNEYGENERALOF TEXAS 

# pJy BL& (I?&!.&
**Mrs.** M&rietta Creel Assistant
MC/JCP