- .



### THE 

### ATTORNEY GENERAL

**Honorable**Robert S. Calvert Opinion No. WI&1348 Comptroller of Public Aoeounta Capitol Station Rel Taxability for inheritance Auetln, Texas tax purposes of eurvIvor~0 interest in eavings account held by survivor and a decedent a8joint tenants Deer Mr. Calvert : with right of aurvlvorehlp. Hoquote the following excerpt from your letter requesting an opinion of this office on the above captioned matter:

“The final inheritance tax report for the Estate of Nellie Cloyd, deceased, Dallas County, Texas+ 3.0nowbefore this department for final disposition, and while makingour usual lnvestigatlon of the return, we find the decedent had a joint savings account with the right of survivorship with the Republic National Bankof Dallas standing In the nameof the decedent andVarina McKinney, and to ’which account **Varlns** McKinneyhad deposited $479.25; balance o? the account at date of death was $5,027.66.

“This department has included this account for inheritance tax purpooee, less the amountdeposited by Varino McKlnney,

. y
.

“Since this account still remained In the bank upon the date of death of Nellie Cloy&, Varlna McKlnneydid not come into possession and enjoyment of this account until death. Therefore, under the provisions of Article 7117, this account is lneludfble for lnheritance tax purposes.” You state that the attorney for the estate has objected to the action of your department **in** including the account for lnhoritance tax purposesp and you have attached to your letter request- ;n&he opinion of this offfoe a Ietter setting forth his objoc-..

..

1 Artlole 7117, VernonCeCivil Statutes, PPeeently oarried as

Art. 14.01, 20A, Tax,-(lien., V.C,S., provides, in part, 

### an follouag Honorable Robert S. Calvert, Page 2 

### oRlnloaWo. WV-1348

The attorney’s position maybe surmaarieedas follows. Attorney CieneralI8 Opinion No. O-2850 held that 

### where a 

### deoedent had placed funds In a bank aocount In the nameof the deoedoht or her daughter, upon which eltheP could drawoheokkr,that on’

.. the decedent’s death, the amountremaining In the **bank** acoount passed to the daughter in possession and enjoyment **a8 a**  gift porn the mother, Intended to take effect after the mother’e death. **Thereiore,** the opinion held said amountto be **eub)ot to**  lnhorltance taxes. In the course of the opinion, the writer **stated** that he was unable to find where anyjoint tenancy use created, and that the daughter had received no vested interest In the moneyat the time the decedent had deposited if. Our attention is directed to the recent SupremeCourt deal- -X.
funds by a single manand in his name, EKeparate Issued and subsequently, 

### after his marriages the certificate wae changed to read “L. L. Davle or Mre. L, L. Davis”, ~81)signed by Mr. andMrs. and at the sametime a signature card Davis, whioh stated that the oertlflaate was held by themas joint tenants with right of survivorship, upon Davis’ death, Mrs, Davis beaamethe sole **owner**of the $~,OOO.OO. It is a **orid** at page t;

eolfloally oalled to out l ttantlon that the oourt 

### 318’ II Whenthe oontraot wasmade by L.‘LI iavle wlth East TeXasaI&e. Davlr was thereby vested with a prellentp though defeaaible, interest in the deposit. Her interest would have been defeated If the certificate had been ohangedby Davis or the deposit had been withdrawn 

### before his death, or if Mrs. Davis hadpredeoeased her husband. Rut,whenDavis died without the interest of Mrs. Davis havl

“41been defeated, she becamethe owner 0 the full title to the depolrft 1 DO

.‘I

"All property wlthin the juPlsdictlon of this State,. o .whloh shall paaa. D.by deed, grant, sale **or** gift made01”intended to take effect in possession or enjoyment after the death of the grantor 

### or donor, shall, uponpassing.

. .be rrubjeot to a tax. e q ‘IHonorable Robert S. Calvert, **Page 3**  Opinion **No.** W-1348

i The attorney for the estate takes the position that since

Oplnlon No, O-289 did **not** find the existence of a joint tenancy 

### or a verted.lnterest, Its result should not be reached in the instaxit ease. .We**disagree.** At,page 931 of the opinion in the Davis case the court said:

“Uponthe death OSL. L. Davis, Mrs. Davis became the owner of the $6000 on deposit with East Texas a8 her, separate property. The contract **made** by 

### Davla with Rast Texas was a valid and enforceable aontract for the benef.lt of a 

### third party, Edds v. Mitchell 143 Tex. **307,:.** 184 S.Y.2d **823, ,828,**  14 A.L.R. **470. In**  that case weheld that Unlted States Savings Bonds **purchased**by Mrs. Rhode andmade **payable** to herself and **on** her death to Mm. Zdds, were, on the death of Mrs. Rhode, the property of Mrs. &ids. Our concluelon was predicated on a holding that the oontraot made**by** Mrs. **Rhode**with the United States Qoverment was **for** the benefit of Mrs. Edds and that whenthe bonds were purchased Mrs. Edds acquired a present vested though defeasible interest ln the bonds which ripened into full and **abao** lute title upon Mrs. Rhode’s death. That case and this case are not to be di,stlngulehed because the former Involved bonds and this lnvolvus a savings and loan certlf lcate

.” The contract madeby the Decedent In the case this office is nowconsidering wa8a2valld and enforceable contract **for** the **benefft** of a third party 0 TheEdds case cannot be distinguished

__ 2 In **Adam8**

v. Jones, 258 S.W.2d 401 (Clv.App. 19!33), the court said at page 403:

. . ‘The grounds u on which courts have sustained

such agreements P joint tenancies with rights of survlvorshlp~ have varied. Somecourts have Felied upon the law o? gifts, others upon the law of contracts and trusts. See **7** Am.;Jur., Sets. **426- 436,**  9 C,J.S,, Banks andBanking II**286,** p. 595, and the very able opinion in Reach v. Holland, 172 OP. 396, **142**P.2d 990, 149 A.L,R, **866,** Annotations same volume, p0 879. (Continue)4

t Hononablo Robert 8. Calvert, Page 4 Opinloa No. HH-1348

fromthlr 08~ beaawe joint oavullgr

ocount, from this case boceuee **and** this case @?o%ves It Involved bonds and this case Involves a The Davis ca8e csnnot **be** distinguished It In-Q a 6avln&# and loan certlflcate a joint bank account. At the tlae the **ac-**

. _ .. ._- - count was openea, the **mrvlvo~** acqulrea a vesteao tnougn 06reaalble Intorest, In the account which rUened Into full and absolute title upon the Deoedent’s death. Death was the taxable event; and at thlo time, the Inheritance tax was levied upan the plcedent’s Interest In the Jo%& account. In **Attorney** i3enera11s Opinion No. O-2589, written In 1940, thie of?iceheld that where a joint tenamP had been created In crrtain stock upon the death of the joint tenukt whohad caused the creation **thereof ’** **,** there w&sa taxab3.e.transfer **for** inheritance tax **purposes**d hls one-half Interest to the survlvlng joint tenant under the **provlaion** of what was **then**Art1010 7117, taxing trans?ers by “gift made or intended to take effeot in possessi~on’ or an,jcyment after the death of the. **, .donor** **”**

**.** Evon prlor to the date of this opinion, you have Informed us that it had been the consistent departmental construction for manyyears that such tramfers ware taxable. It is well settled that great weight **shwld** be g&vanto departmental eonstructlons of long standing, a& such oonrtrwtto?k~ will not be departed from unless clearly lmoneou6o 39 Tex..Sur. 235, Statutes, Sec. 126. Moreover, the J,,s@slature has met manytimes sl~ee the departmental construe* tlon wae plrced on t&i statutory psorlslon In question; and the &q&lslature is presumed to have aafiulesced In such construction. IsbeLl v. Oulf Unlon 013.Co., 127 Tex. 6, 209 S,W.2d 762 (1948). 3Twoimportant ‘Texas oaseso the B6itheaca& and the Cahn ca88, have dealt with the taxabllltyd2-2FoLnsfers by deedTaM, sale 00 gift madeor intended to take effect in posse.esion or enjoment after death D
2 (Cont’d) “Wewill not indulge iA a prolonged discussion

of the academic. The agreament having validity must be enforced 1,rrespeotive **of** the reasons sustaining It 0

” If webe in error in our decision that joint bank ocoountr with rights of survlvorshlp would be sustained in this State u$on the law of contracts, it could makeno difference in the tax result since regardless of whether such agreements **are** enforced under a legal theory of the law of contracts , or the law of trusts, or the law of **gifts,** the tranafer remains one intended to take effect after doa+&and Is thereeiore taxable. 3 Bsthea v, She a .d 143 S WPd 997 (CiVAP

**V.** Qalve,

.~,, 1 fp$g Tex.*&&, Sl 3,W.&i.

Honorable Robert S. Calvert, Page 5 Opinion ‘No. WW-1348

In the Bethea .case, HenryHenkeandhis wlfe executed a joint will an-t agreement which provided that the entire communityestate should **pass** Into a trust in the event the husband died first. Mrs. Henkeand her daughter **were**to receive specified annual payment8from the trust during Mrs. Her&e’s lifetime, and the payments to the daughter were to be increased and continued **for** eight years after the mother!:e;death, At the end of euch period, the corpus 

### of the trust was to be dlstrlbuted to the daughter, If she was then living, If not, at that time the property was to be held in trust **for** an additel five year8 and then delivered to the daughter’s children. husband died flr8t and an inheritance tax was paid on his onehalf of the communityeatate. Uponthe subsequent death of Mrs. Henke, It was held In the Bethea case that the right of the daughter to succeed to the-r’s communityInterest was taxable a8 a transfer by Mrs. Henkemadeor intended to take effect in possession or enjoyment after death. **We**quote the following excerpt from page 1001 of the Bethea case: n Andthus the trust Instrument

by lb’ok terms brings the instant case squarely within the statute, which does

‘( not impose the tax on the transfer **Of**

the property, nor on the passing of the property from the grantor, nor on the right to become beneflclally interested in the property, but imposes the tax upon the passing of the property or Interest therein when ‘madeor intended to take effect in poaseeslon or enjoy-

. ment after the death of the grantor’

. . . .”

In line with this reasoning, we conclude that the fact that the surviving joint tenant becamebeneficially interested in the property in question prior to the death of the decedent makes no difference a8 to the question of taxability; rather, the lnherltance tax became due upon the receipt by the surviving joint tenant **of** the Decedent’s interest **In** said property. **We**quote further from pages 1002 and 1003 of ‘the Bethea cat40 : I, Under the Fedeiral.EstBtk.Tax Law,’&‘prlmary question to determine is whenthe decedent or grantor parted with all property rights. Under our State.Inheritance or Succession Tax Statute, the primary question is whether

‘:.!Honorable Robert 8. Calvert, Page 6 Opinion No. W-1348

the transfer was **made or**  Intended to take effect 5nposwesion or 0nJoyiuent after the death of grantor or settler, particularly In caee6 of transfer of property in truat. It is not a queetlon of whenthe beneficial intereat la created, but the tax 18 imposed upon the right to receive 5n poesesalon or.enjoyment after the decrthof grantor or settlor q In consequence, a grmtor or aettlor mayoreate an lrrevooable trueti during his llfetlme, still If he postpones the right of posreaslon or enjoyment of the beneficiary until after grantor’s death, the property 

### or any Interest therein 1s subject to the Inheritance or succes6ion tax at 

### or after his death. Under our statute, where either lpoeeeeeIont 

### or
‘OnJoyment’ la madecontingent upon the death of grantor **or** eettlor of all or any part of the trurt ertate, ‘I’ such transfer 10 taxable.

. . .”

.

. . Thus agaln,‘the court madeIt clear that the primary gueatlon under our lnherltanoe tax statutes Is not **When** the decedent parted with property rights, but rather lo -her the transfer wasmadeor intended to take effect In poBsesrlon 

### or enjoyment after the death of the grantor or eettlor. The aourt rtated that If the poasesslon or enjoyment of the propert or any interest therein Is postponed to the beneflclary until L frantor’a death, the property Is subject to an Mheritanoo tax a his death. In the Cohncase, again expressrylpapprove at page 872, **the Supreme**  Court oldlng of the Bethea case.
**on May** **9, 1962** t in Robert 8. Calvert, Co Independent Executor pamea upon by the c&w ficlary of a will 81)a result of the election of the owner of euch **property** to accept under the.wlll ~1~to be regarded as having passed by the will for the purpose 

### of computing the lnherltance taxea Imposed by Article 7117, Tex. Rev. Civ. Stat. 1925, an amended, Acts 1945, 49th Leg., p. 148, ch. 98. The last cited statute was repealed in 1959, but It8 provlalons in oubetantlally the camelanguage were reenacted as Article 14.01, V.A.T.S., Tax.- Oen. The court held that the property received by the beneficiary of the will as a result of the election of the ouner did not paw by will wlthln the meaning.of Artlole 14.01.

... .

liotiorabli, Robert S. Calvert, Page 7 Opinion No. WW-1348

We quote the II

. . . following excerpt from page 363 of the oplhion:

as pointed out in Magnolia Petroleum Company v. Walker, 125 Tex. 430, 83 S.W.2d929, it Is proper to consider the history of the subject matter ‘In arriving at the purpose and intent of the law.

“Hlatorlcally, death dutlea ‘In all countrlee rest in the eeeence upon the principle that death Is the generating source from which the particular taxing power takes Its being, and **+ It iB the power to transmit, or the. tranemiealon from the dead to the living, on which euch taxee are more immediately rested.’ See Knowlton v. Moore, 178 U.S. 41, 20 S. Ct. 747, 44 L.Bd. 969. **From**a reading of our lnherltanoe tax statutes, wethink the basic planand purpose of the Legldlature waeto levy the tax upon the privilege of aucceedlng to proportp belonging to a decedeht at the tlme **of** his death.

. . .‘I We thlnk our holding on this question 10 caneietent with the basic plan and purpose of the LegiBl8ture to levy a tax upon the privilege of succeeding to property belonging to a deoedent, beoauareIt Lanot until. the death of the joint tenant that the eurvlvlng joint tenant aucceede to the property. However, we are of the opinlon,..ln friewof the presumption that the bharee or lntetiesta of joint tenant0 are equal, Attorney Qeneralle Opinion NO. o-2589, suptia, and in view of the contract crea$lng the joint tenancy, that at the time of It8 creation, each co-tenant becamevested, subject to defeaeance, with a one-half Intereat ln the bank account; and that therefore only one-half of sold account paered to the eurvlvor at the Decedent’8 death. The Inheritance taxes should be computed accordingly.
**$UHHARY i**  The decedent ‘8 one-half interest in:,A..

bank 8CCOud whfch the decedent and another held as joint tenants with right of survlvorship 1s eubject to an Inheritance tax when. . .

Honorable Robert S, Calvert, Page 8 Opinion No. Wit-1348

received by the survivor death. at the deoedent’e Youre~..very truly, \cILL WILSON Attorney General **of** Texas

A8018tMt MlrlCOP/jP APPROVED: 0pINmNcOMMIw!Es~ w. V. Oeppel?t, Chairman Arthur Sandlln Robert Scofield fpgr p;

. . **RBVINNND**

**FOR ,!PRE** 

**ATlQRXEy**

**GENERAL By:**  HoughtonBrownlee, Jr.