Case Name: Matter of the Estate of John E. Fay, Deceased
Court: New York Surrogate's Court
Jurisdiction: New York
Decision Date: 1898-12
Citations: 25 Misc. 468
Docket Number: 
Parties: Matter of the Estate of John E. Fay, Deceased.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 25
Pages: 468–469

Head Matter:
Matter of the Estate of John E. Fay, Deceased.
(Surrogate’s Court, New York County,
December, 1898.)
Transfer tax — Proceeds of the gratuity fund of the New York Produce Exchange are not taxable.
Proceeds, realized from the gratuity fund of the New York Produce Exchange and payable only to the beneficiaries of a deceased member, form no part of the assets of his estate, and are not taxable, as they do not pass by will or by statute, but under the contract.
Appeal from an order entered upon the report of an appraiser, appointed under the Transfer Tax Act.
I. B. Ripinsky, for district attorney.
William C. Davis, for respondent.

Opinion:
Arnold, S.
Testator was a member of the New York Produce Exchange and had been a subscriber to the gratuity fund of that body. The sum realized from this fund upon his death was excluded by the appraiser in ascertaining the value of the property transferred by the will of decedent liable to transfer tax. From the order entered upon his report the district attorney appealed. The amount received from the gratuity fund was not assets of the estate, for it belonged to the beneficiaries entitled thereto by virtue of the by-laws of the Produce Exchange relating to the manner of its distribution. It was not liable to the payment of creditors or legatees. It passed, not by virtue of the will of decedent, or of any administration of his estate, but by the contract of the deceased with the exchange. The distinction between the two classes' of policies — those payable to the insured or his personal representatives, and those payable to a specific beneficiary — is clearly recognized by the decisions. In the first class the contract is made for the benefit of the insured, and the proceeds pass to his personal representatives as part of his estate and as liable for the payment of his debts and legacies; while in the latter case the contract is made for the benefit of others, and the proceeds are transferred to them by the terms of the contract and not by virtue of the Statute of Distributions or the provisions of the will of the insured. Matter of Van Dermoor, 42 Hun, 326; Van Dermoor v. Van Dermoor, 80 id. 110; Matter of Knoedler, 68 id. 150; affirmed, 140 N. Y. 377. The Court of Appeals in the Matter of Sherman, 153 N. Y. 1-4, denominated the tax as being " upon the right of transfer by will." The decedent possessed no such right over the property in question, and had he died intestate the property would not have been distributed under the statute regulating intestate succession. The only power he had in relation thereto consisted in his ability to defeat its payment by permitting it to lapse on account of nonpayment of subscriptions. The order appealed from is affirmed.
Order affirmed.