NE NE 

E 

PRICE DANIEL 

ATTOHNEY GENERA,. 

Hon. Ciev. H. Sheppard 

,State Comptroller of Public Accounts 

Austin, Texas Opinion No. V-552 

Re: Whether estate in real 

Property conveyed by 

deed expressly providing conveyance shall 

take effect at death of 

grantor is subject to 

tax on grantor’s death. 

Dear Sir: 

You have sent us your complete file on the Estate of J.W. 

Everman and the brief of the attorneys representing the estate. 

.The file and brief apprise us of the following facts: 

On or about May 10, 1929, J. W. Everman executed a deed 

of conveyance of his homestead to his daughter, Marie Everman. 

This deed was in the form of a general warranty deed except that 

it contained the following protision: 

“This conveyance shall take effect at the death 

of the grantor herein, that is, this .cunveya~~cc shall 

be construed as a conveyance and a deed vesting an 

estate in praesenti to c cmmance in future upon the 

death oft the grantor ~ n 

This provision appears following the description of the 

property conveyed and immediately before the habcndum clause. 

The deed was properly signed and acknowledged. 

On or about May 10, 1929, J. W. Everman delivered the 

deed to Marie Evsrman, who placed it in a safe deposit box held 

in the nime of J. W. Everman and Marie Everman in a Dallas bank. 

The deed was not recordcd~ until afte+ the death of J. W. Everman. 

After the date of the conveyance, Marie Everman continued to live 

with her father in the homestead until~ his death. Sarah Duke, a 

lifelong friend of Miss Everman, l&d with them. During this period both Miss Duke and Miss Everman sxpend?d’considerabls sums 

of their gwn money on improving the property and on general upkeep, 
, 

Hon. Geo. Hi. Sheppard, Page 2 (V-552) 

although Mr. Everman paid the taxes. Miss Everman, her sister 

Mrs. Saville, and Miss Duke have stated that after delivery of the 

deed Mr. Everman tcPld everyone that the house belonged to his 

daughter Marie Everman. 

The attorneys for the Everman estate contend that no inheritance taxes are due on the property so conveyed, basing this 

contention on several propositions, the first being that the instrument dated May 10, 1929, should be construed as a deed of conveyance and not as a will. With this contention we agree, and consider 

that the instrument is so clearly operative as a deed of conveyance 

that we will not discuss this aspect of the problem in detail. For a 

discussion of the features which distinguish a valid conveyance of 

an estate of freehold or inheritance to commence in future from a 

testamentary instrument, see 14 Tex. Jur. pp. 755-759, p. 939, and 

particularly Turner Y. Montgomery, Tex. Comm. App. 293 S.W. 817; 

North v. North, 2 S.W. 2d 482; Texas Pac. Coal and Oil Go. v. Bruce, 

2-33 s . w . 535 . 

The second propobition is, in effect, that since the instrument is operative as a deed, in view of its nature and the facts of 

the case no inheritance tax is due the State of Texas under Article 

7117, V.C.S. 

The relevant provisions of Article 7117, V.C.S., are as follows: 

“‘All property within the jurisdiction of this State, 

real or personal, . D D and any interest therein, ~ D 0 

which shall pass absolutely or in trust by will or by 

the laws of descent and distribution. 1 0 or by deed, 

B,rant, sale, or gift made or intended to take efiect in 

possession or enjoyment after the death of the grantor 

or donor, shall, upon passmg . ~ . be SubJect to a tax 

. o . [timphasls added) 

The tax levied by the provisions of the above Article is a 

“special tax,” Lewis Y. O’Hair, 130 S.W. 2d 379, imposed upon the 

right to receive property or the right of succession as distinguished 

from the right of transfer. State v. Hogg. 123 Tex. 568, 70 S.W. 2d 

699, 12 S.W. 2d 593. 

If a tax is due in the instant case, it is by virtue of the 

phrase (underscored in the above quotation) which taxes the transfer of property “‘by deed . . , made or intended to take effect in pos- 

&ssion or enjoyment after the death of the grantor or donor. . .” 

The attorneys for the Everman Estate argue that *after delivery of the deed of conveyance by MP~ Everman to Marie Everman, 
Hon. Gee. H. Sheppard, Page 3 (V-552) 

. . . Marie was not only vested with the fee simple title and, owner - 

ship of the property, but she also had and continued to have, complete and physical possession of the property, with the full acquiescence of her father, from May 10, 1929, until her father’s death 

. , .; and that an inheritance tax is not due the State of Texas on 

said property, as nothing passed to Marie after the death of the 

granter. ” 

It is therefore necessary to ascertain the extent of the 

interest conveyed by the deed. As we have previously stated, the 

deed was in the form of a general warranty deed, and, except for 

the quoted provision relating to the time the conveyance was to 

take effect, would have transferred an the date of its execution 

and delivery a fee simple title and complete ownership of the homestead property to Miss Everman. However, the grantor specifically 

provided that “this conveyance shall take effect at the death of the 

grantor.” 

At common law. “an estate in remainder expectant on the 

death of the grantor may not be created. Now, by a remedial statute, am estate in land may be created by deed to commence in future.” 

14 Tex. Jur. 883, This statute is carried as Article 1296, V.C.S., and 

reads as follows: 

“An estate or freehold or inheritance may be made 

to cemmence in future, by deed or conveyance, in like 

manner as by will.” 

The authorities are to the effect that, strictly speaking, the 

“statute. . . has reference to estates in expectancy other than estates 

in reversion and remainder.” Glen,v. Halt et al, 229 S.W. 684, 687 

and author ities,-cited therein. %y virtue .of its previsions “a *ted 

may be se-& aan that-~ttrmrmxys the land as ~from the time of tke 

death of tbc-(FmtPr; and unless an express reservation is made, or 

an express condition is declared, that the land may be otherwise 

disposed of by the grantor, the instrument is construed as being 

operative in praesenti in the sense that it iS irrevocable.” 14 Tex. 

Jur. 875. “The estate so crtated may be vested in the grantee either 

absolutely or upon a contingency, and the grantor’s death may be designated as the time when the estate is to fall into possession. When 

the time designated by the grantor has arrived and the contingency 

(if any) has happened, a complete title, in the sense of a right to present enjoyment of the estate, becomes vested in the grantee. Notwithstanding, however, that the enjoyment of full title and possession 

by the grantee is thus deferred, unless the right to make other disposition of the property has been reserved by the grantor, the grantee 

is held to have a present vested interest.” 14 Tex. Jur. 883. 

In the light of these authorities the language employed in the 

deed could not be freer from ambiguity nar mere specific. By its 

I 
Hon. Gee. H. Sheppard, Page 4 (V-552) 

terms h&it Everman trek a presently vested interest in an estate in fee simple which was 

deatk l f the grantor. * 

“to cemmcncc in future upen the 

We are of the opinion that the legal effect 

of the interest l r estate conveyed by this deed cannot be varied 

by evidence outside its terms. . +fcCfrmick and gay, Tef~s L;w 

of Evidence, g 739, and authorrtres cited theram. There re t e 

information submitted which bears en what various parties thou ht 

had been conveyed cannot be considered; ner dars the fact t &s 

Everman. continued to live with her father and had, in that sense, 

‘possession s,$td enjoyment” of the preptrty affect the extent of 

her legal interest. Moreover, we do not see that the pessessien 

and enjoyment of the property which Miss Everman had after the 

deed was executed was particularly different from that which she 

had previously enjoyed as daughter af the house. Xf an estate in 

fee simple to commence in future upan the death \rf the granter is 

within the provisions o$ Article 7117, an inheritance tax is due the 

State of Texas on this property. 

The Texas statute is net limited to gifts “intended to take 

effect at death” (such statutes apparently only include gifts pessessed by the donor at the time of his death, 49 A.L.R. g65), but 

extends to transfers ‘“made er intended to take effect in pesscssion or enjo yment a t l r after death.” In states having similar 

provisions the “courts have consistently taken the view that reservation by the transferor of the beneficial interest during his 

life in property transferred inter vives operates to render the 

transfer one intended te take effect in possession l r enjoyment 

at death witbin the meaning of applicable estate or inheritance 

tax statutes.” 159 A.L.R. 244, and authbrities cited therein. The 

courts have variously phrased’but uniformly annouwced that the 

“very purpose ef L provision in an inheritance tax law imposing 

a tax on transfers intended ,to takes eftect in possession•r enjayment at or after death is to establish a bar to frequent attempts 

to transmit estates to beneficiaries, unimpaired by the payment 

of inheritance taxes, by means of trusts or canveyances whereby the grantor reserves the beneficial enjoyment of the property 

during his life. ” 49 A.L.X* 901. In mast of the cases we have examined the grantor has expressly reserved P life estate, l r has 

created a trust reserving life income ta the settler, l r b,as made 

an absolute conveyance ts the grantee but by separate agreement 

secured payment from the grantee in an l m,ount preximrtin 

t 

the 

income which might be anticipated to accrue during his life lone. 

However, even if there is a technical difference between these 

cases and the conveyance here used, certain it is that Miss Everman came into complete legal title and the accompanying lsgal 

right to possession and enjoyment of the property only at the death 

of the grantor. Pt is the privilege of the receipt of such rights at, 

death which the statute specifically makes subject to tax; and the 

courts will look through devices of the conveyancer ,where there 
. . 

Hon. Geo. H. Sheppard, Page 5 (V-552) 

is an actual shifting of economic benefit. Saltonstall Y. Saltonstall, 

276 U.S. 260, 72 L. ed., 565, 48 Sup. Ct. Rep;, Moreover, we 

think that in holding this property taxable we are in line with the 

interpretation given Article 7117 by the Texas Court of Civil Appeals in Bethea v. Sheppard, 143 S.W. 2d 997, writ refused. In 

that case the question of taxability turned on whether certain properties embraced wit@ a trust estate were transfers intended to 

take effect in posses&ion and enfoyment at the death of the settlor. 

The Court said: 

“It is not a question of when the beneficial interest is created, but the tax is imposed upon the 

right to receive in possession or enjoyment after 

the death of grantor or settler. In consequence, a 

grantor or settlor may create an irrevocable trust 

during his lifetime, still if he postpones the right 

of possession or enjoyment of the beneficiary until 

after grantor’s death, the property or any interest 

therein is subject to the inheritance or succession 

tax at or after his death. Under our statute, where 

either ‘possession’ or ‘enjoyment’ is made contingent upon the death of grantor or settlor of all or 

any part of the trust estate, such transfer is tarable. . .” 

We come now to a consideration of the third proposition 

proposed by the attorneys for the Everman Estate. We quote from 

the submitted brief: 

“The 5. W. Everman Estate contends that if 

Marie Everman, at the tim~e of the delivery of the 

deed of conveyance executed by J. W. Everman to 

Marie Everman, was vested with a fee simple title 

to the property subject to a contingency or life estate in J. W. Everman, as contended by the examiner, then Marie Everman was vested with a much 

greater interest in the property than J. W. Everman, 

since Marie Everman heretofore possessed the title 

and ownership, together with the then enjbyment and 

possession of the property, and J. W. Everman had 

only a contingent interest or a life estate; which 

property had been maintained, repaired and kept 

improved by Marie Everman and Sara Duke, with 

the result that the alleged contingent interest or 

life estate reserved by J. W. Everman amounted 

to a very small interest in the property. 

“Since Marie Everman had by far the greater 

of the two estates or interests in the property, then 
Hon. Geo. H. Sheppard, Page 6 (V-552) 

the tax due the State ef Texas by the estate, l r by 

the recipient of the property, at J. W. Everman’s 

death, could be only that amount assessed against 

the interest reserved by J. W. Everman in the ekcy 

af conveyance, . . .I’ 

The argument is alse made that this measure rd taxabil4 

ity must result in view rf the fact that Miss Everman’s interest 

was a vested l ne prior to the death of the grantor since the tax 

is on the “right to receive as distinpuished from the right Uf 

transfer.” In Reish v. Corn., 106 Pa. 521 the deccQent had 8xea 

cuted a deed l m his property to his brother who saw a Iran& 

conditioned on paying the income from such property to the 

pantor for life. A tax was imposed on the full value d the pr@p* 

erty, and it was contended that this was error since the decedent 

was not seised and possessed of the property cevered by tha deed 

within the meaning of the applicable act, which crntainal a previa 

sion covering transfers intended to take effect at death that was, 

in effect, t he exact previsien found in Article 7117. The Caurt 

said: 

“The vice of the argument. . . is in assuming 

that in order to charge an estate, transferred by 

deed., with an inheritance tax, the grantor must, at 

tht time of his death, have same title l r estate remaining, and that such title a+ estate only as the 

granter actually owns, at death, is subject to the 

tax. A very lobered and ing+ous argument is 

made to show that @eccdenJ/ did net die seised 

or possessed of any estate, excepting the bend an& 

the right it secured; that these only shauld have 

been appraised. . . The letter as well as the spirit, 

and meaning of the act, however, is clear, When an 

estate is transferred by deed. ~ . intended, however, 

to take effect in enjoyment at the death of the grantor, 

it is the value of the lands se transferred which is 

liable to the duty, not the value sf the interest er 

part remaining.” 

We are in accord with the views as above expressed and 

hold that in computing the inheritan~ce taxes due the SLttc this cs~- 

tate in fee simple, which came into possession and enjoyment It 

Mr. Everman’s death, should be valued as an estate in fee simple. 

We de not mean to say that the amounts expended by Miss Duke abd 

Miss Everman have no bearing on the amount l f the ta% which will 

ultimately be paid; This question was net specifically pradenttd, 

and we therefore have not considered it. 
Hon. Geo. H, Sheppard, Page 7 (V-552) 

SUMMARY 

Where deed conveyed an estate in fee simple to 

take effect in futuro upon the death of the grantor, said 

estate is subject to inheritance tax under Article 7117, 

V.C.S., as property passing by deed to take effect in 

possession or enjoyment after the death of the grantor; 

ad the value of the interest received is the value of the 

estate in fee alimple rather than the value of the grantor’s 

retained interest. 

Yours very truly 

ATTORNEYGENERALOFTEXAS 

MC/JCP 

Mrs. Marietta Creel 

Assistant 

APPROVED: 

%f 

TORNEYGENERAL