- . 

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 a8 joint tenants 

Deer Mr. Calvert : with right of aurvlvorehlp. 

Ho quote 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+ 3.0 now before this 

department for final disposition, and 

while making our usual lnvestigatlon of 

the return, we find the decedent had a 

joint savings account with the right of 

survivorship with the Republic National 

Bank of Dallas standing In the name of 

the decedent and Varina McKinney, and 

to’which account Varlns McKinney had 

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 amount deposited by Varino 

McKlnney, . y . 

“Since this account still remained 

In the bank upon the date of death of 

Nellie Cloy&, Varlna McKlnney did 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, VernonCe Civil 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 may be surmaarieed as follows. 

Attorney Cieneral I 8 Opinion No. O-2850 held that where a deoedent 

had placed funds In a bank aocount In the name of the deoedoht 

or her daughter, upon which eltheP could draw oheokkr, that on’.. 

the decedent’s death, the amount remaining 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 amount to be eub)ot to lnhorltance taxes. In the course of the opinion, the writer stated 

that he was unable to find where any joint tenancy use created, 

and that the daughter had received no vested interest In the 

money at the time the decedent had deposited if. 

Our attention is directed to the recent Supreme Court deal- 

-X. 

funds by a single man and 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. and Mrs. 

and at the same time a signature card 

Davis , whioh stated that the oertlflaate 

was held by them as joint tenants with right of survivorship, upon 

Davis’ death, Mrs, Davis beaame the sole owner of the $~,OOO.OO. 

It is a 

orid at page t; 

eolfloally oalled to out l ttantlon that the oourt 

318’ 

II When the oontraot was made 

by L.‘LI iavle wlth East TeXasa I&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 ohanged by Davis or 

the deposit had been withdrawn before his 

death, or if Mrs. Davis had predeoeased 

her husband. Rut, when Davis died without 

the interest of Mrs. Davis havl 

“41 

been 

defeated, she became the owner 0 the 

full title to the depolrft 1 D O .‘I 

"All property wlthin the juPlsdictlon of this 

State,. o .whloh shall paaa. D .by deed, grant, 

sale or gift made 01” intended to take effect in 

possession or enjoyment after the death of the 

grantor or donor, shall, upon passing. . .be 

rrubjeot to a tax. e q ‘I 
Honorable 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: 

“Upon the death OS L. 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 we held that Unlted States Savings Bonds purchased by Mrs. Rhode and made 

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 when the bonds were 

purchased Mrs. Edds acquired a present 

vested though defeasible interest ln the 

bonds which ripened into full and abaolute 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 made by the Decedent In the case this office 

is now considering wa8 a2valld and enforceable contract for the 

benefft of a third party 0 The Edds __ 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. Some courts 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 and Banking 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 

from thlr 08~ beaawe 

joint o a vull ocount, g r 

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?ice held that where a joint tenamP had been created In 

crrtain stock upon the death of the joint tenukt who had caused 

the creation thereof’, there w&s a 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 many years that such 

tramfers ware taxable. It is well settled that great weight 

shwld be g&van to departmental eonstructlons of long standing, 

a& such oonrtrwtto?k~ will not be departed from unless clearly 

l mo neo u6 o 39 Tex..Sur. 235, Statutes, Sec. 126. Moreover, the 

J,,s@slature has met many times 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). 

3Two important ‘Texas oases o the B6ithea ca& and the Cahn 

ca88, have dealt with the taxabllltyd2-2FoLnsfers by deedTaM, 

sale 00 gift made or intended to take effect in posse.esion or 

enjoment after death D 

2 (Cont’d) “We will 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 we be 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 make no 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 W Pd 997 (CiV AP 

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

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

In the Bethea .case, Henry Henke and his wlfe executed a 

joint will an-t agreement which provided that the entire 

community estate should pass Into a trust in the event the husband died first. Mrs. Henke and her daughter were to receive 

specified annual payment8 from 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 community eatate. Upon the subsequent death of Mrs. 

Henke, It was held In the Bethea case that the right of the 

daughter to succeed to the-r’s community Interest was taxable a8 a transfer by Mrs. Henke made or intended to take effect 

in possession or enjoyment after death. 

We quote the following excerpt from page 1001 of the Bethea 

case : 

n And thus 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 ‘made or 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 became beneficially 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 when the 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 5n poswesion or 0nJoyiuent 

after the death of grantor or settler, 

particularly In caee6 of transfer of 

property in truat. It is not a queetlon of when the beneficial intereat 

la created, but the tax 18 imposed 

upon the right to receive 5n poesesalon 

or.enjoyment after the decrth of grantor 

or settlor q In consequence, a grmtor 

or aettlor may oreate 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 made contingent 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 made It 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 

was made or 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 Cohn case, 

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 came language 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.2d 929, 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, we think the basic planand 

purpose of the Legldlature wae to 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, 

beoauare It La not until. the death of the joint tenant that the 

eurvlvlng joint tenant aucceede to the property. 

However, we are of the opinlon,..ln friew of 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 became vested, 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: 

0pINmN cOMMIw!Es~ 

w. V. Oeppel?t, Chairman 

Arthur Sandlln 

Robert Scofield 

fpgr p; 

. . 

RBVINNND FOR ,!PRE ATlQRXEy GENERAL 

By: Houghton Brownlee, Jr.