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### THE ATTORNEY GENERAL
OF TEXAS BAA wd

Mr. Robert S. Calvert OPINIONNO. 

### W-273 Comptroller of Pub110Accounts Capitol Station Re: Further Interpretation Austin, Texas of a question of inherltanoe tax to be assessed against the estate of R.O. C. Dear Mr. Calvert: Brumley

R. 0. C. Brumley purchased numerous government bonds with Community funds. All of the bonds

### were payable to R.O.C. Brumley or his wife, Fannie E. Brumley, and were so registered. After Mr. Brumley's death,his till was admitted to probate. Under the terms of the will his entire one-half interest in the community estate was expresslydevised to his two daughters. The surviving
co-ownerwife has furnished the Comptrollerwith a disclaimer in which she states that she did not participate in the purchase of the bonds or advise as to whom they should be payable; that the bonds were considered by the co-owners as belonging to each individually in undivided one-half community interests subjectto testamentarydlsposition, and that she refuses to accept any interest or ownership In the undivided one-half interest owned by the decedent at the time of his death on the ground that the decedent'sone-half interestpassed to the decedent's daughtersunder his will.

You request the propermethod of computing the inheritancetaxes levied bs Article 7117. Vernon's Civil

_ Statutes,under these facts.

The pertinent treasury regulation (it Is latlon and not a statutebut is valid for the purpose reads as follows:

"If either coowner dies withouthaving presented and surrenderedthe bond for payment or authorized reissue, the surviving coownerwill be recognizedas the sole and ',.absolute

owner of the bond and payment or reissuewill be made only to such survivor, as thou the bonds were registered in his name al%e." (Rnphasis supplied).,_^.

Hon. Robert S. Calve& Page 2 OpinionNo. WW-273

The phrases "will be appearing in this regulation recognized"and "as though" are significant. We think thismeans nothingmore than for the purpose of making payment of the bonds by the Federal Government, the survlvor will be recognized as the owner as thoughthe bonds'were registered in the nsme of the survivoralone, Congress and the officials

### of the Federal Treasurywere aware that an intolerable situationwould be presented In the payment of the bondsunless someuniform standardbe evolved by which the'Federa1 Government couldmake payment without being involved in the aotual determinationof the title and ownership of the bonds and the settlementof conflicting claims which would inevitablyarise. Apt words were chosen such as "will be recognized"and "as though" without any attempt to comniit.the'Treasury Department to the actual determlnatlon of title and ownership of the bonds. Under the regulation,, the Treasury Department could pay with impunitywithout determining actual title and ownership and without being lnvolved in the settlementof conflictingclaims. This, we think was all that was attempted to be accomplished by the regulation. We do not interpret this regulation as an attempt upon the part of Congress or the TreasuryDepartment to create,modify, or divestproperty rights. We shall not attribute to Congress or the Treasury Department,as applied to the problemhere considered,an unwarranted invasion of the power of the State to determine for itself property enc,ompassed

within our communityproperty law.

We think the Supreme Court of the State of Louisiana, which, like Texas, is a communityproperty State, has clearly stated the purpose of the regulation of the Treasury Department pertaining to payment to the survivingco-owner in the case of Slaterv..Culpepper, 22 La. 962, 64 So. 2d 334, 37 A.L.R. 2d 1216 in this language:

.Manifestly,these regulations,as has bien previously said by this court, were designed solely to facilitatethe Government by providing a simplemethod fop the payment of savingsbonds, so that it would not be subjectedto the inconvenienceand delays attendant to the settlementof conflicting or disputed claims."
There is nothing beforeus to suggest that it was the Intention of R.O.C. Brumley, by gift or otherwise, by the use of the co-paymentprovision, tomake a transfer of one-half of the community estate to the estate of Fannie E. Brumley, the survivingwife. Indeed,we think the opposite is true.-

. . .

Hon. Robert S. Calvert Page 

### 3 OpinionNo. 

### W-273

Under'the communityproperty law of this State the husband Is the manager of,the estate and is privileged to invest the community funds, independent of the consent of the wife',so long as he aots In good faith In protecting her Interest. We must conoede that the oommunity funds could not have beenmore safely Invested than in this case.



### 962,64Reverting to the case of Slaterv.Culpepper,22La.

So. 2d 

### 334,37A.L.R. 26 1216,we quote further from it as follows:

"The stipulationof counsel does recite that Mrs. Ryrnrn acted for herself In handling the purchase; but it states also that she acted for her husband and the community of acquets and gains. More than likely shewas servingprimarily as the community'srepresentative,partlcularly since its fundswere beingused and the husband, or the head master of the community,
was at the time physically lncapaoltatedto act. Nevertheless,assuming that Mrs. Rynum could end did act individuallywith respect~~' '~. to her community one-half interest in the funds invested,we fail to find anything toevidence
a clear and definite intention on her part to donateher portion of the investment to the husband in prospect of death--an essential for our concludingas plaintiffswould have us do. The bonds themselves do not suggest that intention,they having been registered and issued on the described co-ownership form. Neither does it appear that a donationmortis causa Is contemplatedby the appropriate Treasury Department regulationswhich formed a part of the contract to purchase. True, they do state that on the death of the co-owner the bonds will be paid to the survivor or to his estate. On the other hand they also provide that if the co-ownersdie in a common disaster, and It cannot be determinedwho died first, the bonds will be consideredas belonging to both estates.". .. . ,

Hon. Robert S. Calvert Page 4 OpinionNo.

### WW-273

The Supreme Court of Louisiana in an earlier case than the Slater case, Winsbergv. Winsberg, (1952) 220 La. 

### 398,56 Sn 

### 730had this to say:

"'Federal Government is neither concernedwith nor interested in the appllcation and enforcement of State laws respecting successionor inheritance of property. Indeed, it seemsmanifest that the regulations of the Treasury Department for the payment of savin s bonds (reliedon by defendant in this case7, were designed solely to facilitatethe Government,by providing a simplemethod for the liquidationof these obligations, so that It would not be subjected to the inconvenienceand delays attendant to the settlementof aonflictlngor disputed claims. There was not, in our opinion, any intention to interferewith the enforcement of the laws of descent and distributionof the various States. Therefore, forasmuch as the payment on death clause contained in such bondsmust be consideredas a valid appendage to our laws respecting the forms or dispositionsmortis causa, it appears logical to apply all provisionspertaining to testamentarydispositions,except those dealingwith forms, in determiningrights and liabilitiesunder such a devise.' The court further said: ,"Bere in seekingauthority for a constructionof a Federal regulation or a reasonable fmplication therefrom, loose constructioncould come to mean the right of the Federal Government to do in its regulations whatever was not forbiddenby the United States Constitution,provided the act was deemed to be for the general good, If such a theory of constitutionalconstructionwere to prevail and the original notion of the Constitutionas a grant of power, under which everythingnot grantedwas withheld, were to be replaced by the rule that everythingnot withheldwas granted, the Federal Government would be admittedly supreme and the reserved rights of the Stateswould speedilybecome only a formula of words.8"Hon. Robert S. Calvert Page 5 OpinionNo. WW-273

The Supreme Court of Iowa In the case of Slnift v.~Sinift, 229 Iowa 256; 293 N.W. 841 stated'thatmd not question'theauthority of Congress to enact legislation authorizingthe ?.ssuanoe of bondsdetermining the right of ownership as it might see fit but that the regulation did not have that effect. The Court held, as did the Supreme Court of Louisiana, that the regulation In questionwas merely to expedite the work of the Department in connectionwith payment or the transfer or exohange of co-ownershipbonds.

the OhioIn the case of Forakerv. Koohs (1931)180 N.E. 743,

Court of Appeals was ooncernedwith these facts. A husband and wife purohasedwith their joint funds a United States Savings Bond which was registered In their name in the alternative as co-owners, and retained by the husband in his bank safetydeposit box. After the wife's death, the husband had the bonds reissued as a coupon bond In his name alone. The court said that under state law, in the absence of a definite contract for survivorshipthe presumption arising from the purchase of the bondwas that the interest of the joint ownerswas equal without survivorship,and that the bond belonged equally to the estate of the wife and the estate of the husoand who died subsequently. In this opinion the court said:

,t

. . .'It is true that, for the purpose of registrationand transferring,the rules of the United States Treasury recognize the survivoras the proper party to whom transfer of the bond shouldbe made. That rule is for the convenience of the United States government In the transaction of its business, and does not and cannot confer title in the Liberty bond, or create a contract of survivorship in the bond in the state of Ohio, where a contract of survivorshipis not presumed.'"

In Texas,Jus accrescendihas been abolished, and -- survivorshiprightsmu3 be expressly created, Chandlervs. Kountee, 130 S.W. (2) 327, (Tex.Civ. App., error ref. 1939). Pt may be that in non-communityproperty States (and a majority of the States fall In that category) the Treasury regulation justifies the rule that the survivingco-owner is the sole owner of the bonds. Whether that rule be sound or unsound as applied In the non-communityproperty States we need have no concern. But In our State where the community property rule prevails, we think it is unsound and unfair and should not be followed., .~. .

Ron. Robert S. Calvert Page 

### 6 OpinionNo. W-273

~Ifwe felt that the Courts of our Statehad committ&d UE to the survivortake all rule as to these bonds, we would feel Impelled to follow,but su6h is not the case. This a&l18 for some e%pleiiation of’the cases which have been ooneidered to have’some bearingupon this question. There are only three su&i oaseswhi&%e ah&l1 &Liaouss briefly tHe$ Are Edd8.v. I(fltcb611, 

### 143Tex. 

### 307,184 S.W. 

### 823, 156A.L.R. 

### 470'McF~hllll~, 253 S.W. 2d 9.53(Writ refused n; reversible 

### error);and H&lain v. Holder, 279 S.W. 26 

### 105 (Writ refused,N.R.E.)

.

The Edds’case Involvedprimarily a construction of the will ofm. Rohde which gave to his wife, Julia E. Rhode, e life estate in his share of the community e6tete with power of sale ana authority to use the proceeds without accountabilitytherefor, with the remainder at her death to his heirs at law. After 0. D. Rhode’s death, Julia E. Rhode, his survivingwife aoquired five United States Savings bonds by the use of proceeds from the sale of reel estate beldnglng to the communityEstate. She thereafter died with these bonds In her possession. The bondswere made payable to Julia E. Rohde and upon her death to Reta B. Edds. Unlike the bonds Involvedhere they weremade payable to a aesignetea benefloieryupon the death of Mrs. Rohde. The oontroversy as to these bonds was betweenMrs. Edds end the administrator of the estate of 0. D. Rohae and involved only a one-halfundivided interest therein. It was agreed that there was no controversyas to the other one-half of said bond.?

sinaethey were purchased from the proceeds of the sale of a portion of the community estate of 0. D. Rohde and his wife, Julia E. Rohde.

The Supreme Court did not decide this case upon the theory that the TreasuryRegulationshad the effect of making R&e B. Edds the sole owner of the one-half community, but upon the theory that a valid .oontracthad beenmade by the registered owner and the Ciovernment for the benefit in part of a third party, the designated beneficiary who acquired a vestea Interest though It was defeasible at the time the contract was made. There Is no beneficiary involved es to the bondshere involved, as Is true in the Edds aase. Moreover the law es to third party contra=is not Involved In the bonds with which we are here ooncerned.

The McFarland case does not actually Involve coownershippayment of bonds by the husband and wife es Is the casehere. Moreover, If this aase should be oonstrued_..,-. -

Hon. Robert S. Calvert Page~7 OpinionNo. 

### WW-273

es confirming the right of the survivorhusband or wife to take full'titleand ownershi~p, upon the death of either, of Government Savings bonds purchasedwith community funds, then it is in principal In conflictwith the case of McCleinv~Holder,~~ S.W. 2d 105 bv the Court of Civil Appeals at Galveston (Writrefused,n.r.e.). It Is true that government bondswere not involved in the McClaln case, but the bonds involvedwere ao-paymentbonds e-theory of the survivoracquiring full title and ownershipwas involved. The Court rejected the right of the survivorto take full title and ownership of the bonds; and since there was no will Involved, ordered a partltltlon of the bonds according to the laws of descent and distribution as contended by those who opposed the complete ownership In the survivor. Where there is a conflict between decisions of two Courts of CivilAppeals which has not been resolved by the Supreme Court,we are at liberty to choose between the two decisions; and we prefer to follow the McClaln v. Holder case In preference to McFarlandv. Phillips as being in accordwith our concept of community property laws of this state and basedupon better reason and justice.

It Is apparent from whet we have Bela that It Is our opinion that the one-half community lntere'st in the United States Savings bonds purchased with community funds of Fannie E..Brumley and R.O.C. Brumley,husband and wife, payable to them as co-owners,passed upon the death of R. 0. C. Brumley to his two daughters,by his will, and that they owe the inheritance tax on said one-half interest. The survivingwife, Fannie E. Brumley, owes no tax.

To the extent that this opinionmay be in conflict with prior opinions of this office they are expressly over

### ruled.

S U M M,A R,Y

Upon the death of eitherhusband or wife, the community one-half interest of the deceased spouse in United States Savings Bonds, which are payable to husband and wife as co-owners. passes to the deviseesnamed in the will and not to the surviving spouse.Hon. Robert S. Calvert Page 

### 8 OpinionNo. 

### W-273

To the extent that this opinionmay be In conflictwith prior opinions of this office they are expressly overruled.

Yours very truly

WILL WILSON

:y$p;;<+
LPL/fb A&Unt

APPROVED:

OPINION COMMITTEE George P. Blackburn, Chairman
Joseph G. Rollins

J. Milton Richardson

B. H. Tlmmins, Jr. Houghton Brownlee, Jr.

REVIEWED FOR THE ATTORNEY GENERAL
By: James N. Ludlum