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PRICE DANIEL ATTOHNEY GENERA,.

Hon. Ciev. H. Sheppard ,State Comptroller ofPublic Accounts Austin, Texas Opinion No. V-552
Re: Whether estate inreal 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 ofthe 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 ofhis homestead to his daughter, Marie Everman. This deed was in the form ofa general warranty deed except that it contained the following protision:

“This conveyance shall take effect atthe death ofthe grantor herein, that is, this .cunveya~~cc shall be construed as a conveyance and adeed vesting an estate inpraesenti to ccmmance infuture upon the death oftthe 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 ina safe deposit box held inthe nime ofJ. W. Everman and Marie Everman inaDallas bank. The deed was not recordcd~ until afte+ the death ofJ. 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 ofMiss 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 tcPldeveryone 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 awill. 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 ofthe problem in detail. For a discussion ofthe features which distinguish a valid conveyance of an estate offreehold or inheritance to commence infuture from a testamentary instrument, see 14Tex. Jur. pp. 755-759, p. 939, and particularly Turner Y. Montgomery, Tex. Comm. App. 293 S.W. 817; North v. North, 2S.W. 2d 482; Texas Pac. Coal and Oil Go. v. Bruce, 2-33s w 535

. . . The second propobition is, in effect, that since the instrument is operative as a deed, inview of its nature and the facts of the case no inheritance tax is due the State ofTexas under Article 7117, V.C.S.

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

“‘All property within thejurisdiction of this State, real or personal,

. DDand any interest therein, ~D0 which shall pass absolutely or in trust by will or by the laws ofdescent and distribution. 10or by deed, B,rant, sale, or gift made or intended to take efiect in possession or enjoyment after the death ofthe grantor or donor, shall, upon passmg
. ~.be SubJect toa tax

. o
. [timphasls added)
The tax levied by the provisions ofthe above Article is a

“special tax,” Lewis Y. O’Hair, 130S.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. 123Tex. 568, 70 S.W. 2d **699, 12**  S.W. 2d 593.

Ifatax is due in the instant case, it is by virtue ofthe phrase (underscored in the above quotation) which taxes the transfer of property “‘bydeed

. . ,made or intended to take effect in pos- &ssion or enjoyment after the death ofthe grantor or donor.

. .”

The attorneys for the Everman Estate argue that *after delivery ofthe 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 ofher 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. ”

Itis therefore necessary to ascertain the extent ofthe interest conveyed by the deed. As we have previously stated, the deed was inthe form ofa 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 ofits execution and delivery a fee simple title and complete ownership ofthe homestead property toMiss Everman. However, the grantor specifically provided that “this conveyance shall take effect atthe death ofthe grantor.”
At common law. “an estate in remainder expectant onthe death of the grantor may not be **created.** Now, by a remedial stat**ute,** am**estate** in land may be created by deed to commence infuture.” 14Tex. 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 infuture, 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 inreversion and remainder.” Glen,v. Halt et al, 229 S.W. 684, 687 and authorities,-cited therein. %y virtue .ofits 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 ofby the grantor, the instrument is construed as being operative in praesenti inthe sense that it iS irrevocable.” 14Tex. 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 tofall into possession. When the time designated by the grantor has arrived and the contingency (if any) has happened, a complete title, inthe sense ofa right to present enjoyment of the estate, becomes vested inthe grantee. Notwithstanding, however, that the enjoyment offull title and possession by the grantee is thus deferred, unless the right tomake other disposition of the property has been reserved by the grantor, the grantee is held tohave a present vested interest.” 14Tex. Jur. 883.

Inthe light ofthese authorities the language employed in the deed could not be freer from ambiguity nar mere specific. By its IHon. Gee. H. Sheppard, Page 4 (V-552)

terms h&it Everman trek apresently **vested** interest inan estate infee simple which was deatk l

fthe grantor. * “to cemmcncc infuture upen the We are of the opinion that the legal effect of the interest lr estate **conveyed** by this **deed** cannot be varied by evidence outside its terms.

.+fcCfrmick and gay, Tef~s L;w ofEvidence, g739, **and** authorrtres **cited** theram. There re t e information submitted which bears enwhat various parties thou ht &s had been conveyed cannot be considered; ner 

### dars the fact t Everman. continued to live with her father and **had,** in that sense,

‘possession s,$tdenjoyment” ofthe preptrty affect the extent of her legal interest. Moreover, we do not see that the pessessien **and** enjoyment ofthe property which **Miss** Everman **had** after the **deed** was executed was particularly different from that which she had previously enjoyed as daughter afthe house. Xfan estate in fee simple to commence infuture upan the death \rfthe granter is within the provisions o$Article 7117, an inheritance tax is due the State ofTexas on this property.

The Texas statute is net limited to gifts “intended to take effect at death” (such statutes apparently only include gifts pes**sessed** by the donor at the time ofhis death, 49 A.L.R. g65), but extends to transfers ‘“made er intended to take effect in pesscssion or enjoyment atlr after death.” Instates 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 inpossession lr enjoyment at death witbin the meaning of applicable estate or inheritance tax statutes.” 159A.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 ,totakeseftect inpossession•r enjayment at or after death is to establish abar to frequent attempts to transmit estates tobeneficiaries, unimpaired by the payment of inheritance taxes, by means oftrusts or canveyances whereby the grantor reserves the beneficial enjoyment ofthe property during his life. ” **49** A.L.X* 901. Inmast of the cases we have examined the grantor has **expressly reserved**  **P**life estate, lr has created atrust reserving life income ta the settler, lr b,asmade 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 ifthere is atechnical 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. Ptis 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 ofthe 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 inholding this property taxable we are in line with the interpretation given Article 7117by the Texas Court of Civil Appeals inBethea v. Sheppard, 143S.W. 2d 997, writ refused. In that case the question of taxability turned onwhether 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 ofwhen the beneficial interest is created, but the tax is imposed upon the right to receive inpossession or enjoyment after the death of grantor or settler. Inconsequence, a grantor or settlor may create an irrevocable trust during his lifetime, still ifhe 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 ofall or any part of the trust estate, such transfer is tarable.

. .”
We come now toa 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~eof the delivery ofthe deed ofconveyance executed by J. W. Everman to Marie Everman, was vested with afee 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 amuch greater interest inthe 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 inthe property, thenHon. Geo. H. Sheppard, Page 6 (V-552)

the tax due the State ef Texas by the estate, lr by the recipient ofthe property, at J. W. Everman’s death, could be only that amount assessed against the interest reserved by J. W. Everman inthe ekcy af conveyance,
. . .I’
The argument is alse made that this measure rdtaxabil4 ity must result inview rf the fact that Miss Everman’s interest 

### was avested lne prior to the death ofthe grantor since the tax is on the “right to receive as distinpuished from the right Uf transfer.” InReish v. Corn., 106Pa. 521 the deccQent had 8xea cuted a deed 

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m his property to his brother who saw aIran& conditioned on paying the income from such property tothe pantor for life. A tax was imposed on the full value d the pr@p* erty, and itwas 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 aprevia sion covering transfers intended to take effect atdeath that was, in effect, the exact previsien found inArticle 7117. The Caurt said:
“The vice ofthe argument.

. . is inassuming that inorder to charge an estate, transferred by deed., with an inheritance tax, the grantor must, at tht time ofhis death, have same title lr 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 ofany 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 infee simple, which came into possession and enjoyment It Mr. Everman’s death, should be valued as an estate infee simple. We de not mean to say that the amounts expended by Miss Duke abd Miss Everman have nobearing on the amount 

### l fthe 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 infee simple to take effect infuturo upon the death ofthe grantor, said estate is subject to inheritance tax under Article 7117, V.C.S., as property passing by deed totake effect in possession or enjoyment after the death ofthe grantor; ad the value of the interest received is the value of the estate infee alimple rather than the value ofthe grantor’s **retained** interest.

Yours 

### very truly
ATTORNEYGENERALOFTEXAS

MC/JCP Mrs. Marietta Creel Assistant

APPROVED:

%f TORNEYGENERAL