Hen, Gee. H. Sheppard 

Comptroller of Public 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 of this office en the 

above-captioned matter under submitted facts whick we quote 

from your letter of March 10, 1948: 

“John H. Frost II died en December 15, 1945, 

. . . He died testate and appointed the Frost National Bank of San Antonio executor of his estate. 

“An inheritance tax report for his estate has 

been filed, and the value of all 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 of the 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 of them. Both 

J. H. Frost, SP., the father, and J. H. Frost, Jr., 

the brother, survive decedent. 

“Upon the date of death of John H. Frost II, the 

six insurance policies had a cash surrender value 

of $181,254.81, and we have included one-half of this 

value ($9Q,627.40) as a part of the estate of John H. 

Frost II. By this inclusion, the tax has been increased approximately $4,483,0@.. I 01s 

Further information regarding the nature of the 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 the 
Hon. 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 

on four of the Aetna policies reads, in part, as follows: 

“Until the death of Joseph H. Frost, Jr. and 

John Frost, II, sons of the 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 of the 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 of the provision relating to the 

death of the survivor. 

To recapitulate, J. H. Frost, Sr., who is still alive, took 

out policies of insurance payable to his two sons, John Frost II and 

J. H. Frost, Jr. In addition to being beneficiaries, the two sons became, by virtue of the assignments described above, the owners of 

the policies and entitled to various benefits thereunder, including 

the cash surrender value of the policies. One of the 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 of Article 7117 are as follows: 

“‘All ‘property within the jurisdiction of this State, 

real or personal, corporate or incorporate, and any 

interest therein, including property passing under a 

general power of appointment exercised by the decedent by will, including the proceeds of life insurance 

to the extent of the amount receivable by the executor 

or administrator as insurance under policies taken 

out by the decedent upon his own life, and to the extent of the excess over Forty Thousand Dollars ($40,- 

OO@.O,) of the 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 of whether such property is locatedlwitbin tr wltkout this State, which shall pass 
Hon. Geo. H. Sheppard, Page 3 (V-668) 

absolutely or in trust by will or by the laws of descent or distribution of this or any other State, or 

by deed, grant, sale, or gift made or intended to 

take effect in possession or enjoyment after the 

death of the grantor or donor, shall, upon passing 

to er for the use of any 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 of the Great Southern Life policy and the endorsements on the Aetna Life policies by their terms constituted 

Joseph Hardin Frost, Jr. and John Frost II, joint owners, with 

right of survivorship; 0 that “the contractual provisions for survivorship resulted in the policies being owned by Joseph Hardin 

Frost, Jr. and John Frost II as 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 of receiving an interest in a joint tenancy by the surviving 

joint tenant. 

Although Article 2580, V.C.S., abolished the doctrine 

of jus accrescendi in this State, it is settled that parties may, by 

contract, will, or deed of conveyance, create a common law joint 

tenancy, with its accompanying incident of survivorship. Chandler 

v. Kountze, 130 S.W. 2d 327. 

The first question, then, is whether ar not a common law 

joint tenancy has, in fact, been created in this case. 

“In a joint tenancy there are said by Blackstone to be 

four unities, to wit, unity of interest, unity of title, unity of time, 

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 

of possession exists in all forms of co-ownership.” Tiffany, Law 

of Real Property, § 418. The joint 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 of tenure and survivorship, while for purposes of 

alienation and forfeiture each has an undivided share only . / . 

The leading characteristic of joint tenancy is the fact that, on 

the death of one joint 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 of which he was originally seized 

of the whole.” Tiffany, Law of Real Property, 58418, 419. 
Hon. Geo. H. Sheppard, Page 4 (V-668) 

The law is well settled that a joint tenancy may exist in 

personal property. 11 Tex. Jur. 418. In the 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 on the doctrine of survivorship as the distinguishing 

incident of title by joint tenancy for the purpose of supporting 

their contention that these policies were held in joint tenancy. 

However, no mention is made of the fact that the destruction of 

any one of the aforenamed unities results in a ‘severance” of 

the joint tenancy. For example, if one of two joint tenants disposes of his interest, the other joint tenant and the grantee become tenants in common. Tiffany, Law of Real Property, g 425. 

In other words “by its very nature a joint 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 of these policies. The brief of the attorneys for the executor contains a copy of a letter dated April 14, 1948, from Mr. 

D. P. Cavanaugh, a member of the Legal Department of the 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 II and Joseph Frost, Jr., were 

both living we would not have allowed either of them 

to take any action with respect to these 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 of them as 

showing an intention to create a joint 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 of a joint tenancy. Another incident of 

such tenancy is that any one of the 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 in favor of the 

survivor, or even that there is a tenancy in common 

in fee simple with an executory limitation in favor of 

the survivor, might seem more in accord with the intention of the grantor l r testator .” 
.- 

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

Holding, as we do, that no joint tenancy existed in these 

policies, it is not necessary to decide whether or not the privilege 

of receiving the interest of a deceased joint tenant may be subject 

to tax by virtue of the provisions of Article 7117, V.C.S. Nor in 

the view we take of the language of that article is it necessary to 

decide the exact nature of the interest of John H. Frost11 in these 

policies. Article 7117 taxes “property . . . passing under a general power of appointment exercised by the decedent by will. . .‘I 

This provision is obviously inapplicable as is the provision regarding insurance “under policies taken out by the decedent upon 

his own life.” (Emphasis added) Nor did the “property , . . pass 

absomely or in trust by will or by the laws of descent 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 of the 

grantor or donor. . .” As to this provision, John Frost II was not 

the “grantor or donor “‘of his interest but was, in fact, one of two 

donees, who took his interest subject to the condition made by the 

original donor, by virtue of which condition his interest ceased at 

his death and passed to Joseph H. Frost, Jr, 

We are therefore of the opinion that the receipt of John 

H. Frost II’s interest in the six insurance policies was not accomplished by any of the methods of transfer enumerated in Article 

7117, V.C.S. If the Legislature so desires, this type of transfer 

could result in the imposition of inheritance taxes by the inclusion 

in Article 7117 of a provision similar to that found in Section 811(e) 

of the Federal Estate Tax Act, Ch. 3, Title 26, Internal Revenue 

Code, U.S.C.A. This provision of the Federal Act applies to and 

brings within the scope of the 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 of the decedent’s estate for purposes of administration. 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 of a decedent’s interest which is accomplished in the 

manner presented by the facts of this case escapes the provisions 

of our Inheritance Tax Law; and no tax is due the State by reason 

of the 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 of the other in the policies or 

his right to take as survivor, no inheritance tax is 
Hon. Geo. H. Sheppard, Page 6 (V-668) 

levied by Article 7117, V.C.S., on the survivor’s 

receipt of the deceased co-owner’s interest. 

Yours very truly 

ATTORNEYGENERALOF TEXAS 

pJy BL& (I?&!.& 

Mrs. M&rietta Creel 

Assistant 

MC/JCP