Case Name: Matter of the Estate of John Daniell, Deceased
Court: New York Surrogate's Court
Jurisdiction: New York
Decision Date: 1903-03
Citations: 3 Mills Surr. 482
Docket Number: 
Parties: Matter of the Estate of John Daniell, Deceased.
Judges: 
Reporter: Mills' Surrogate's Reports
Volume: 3
Pages: 482–484

Head Matter:
Matter of the Estate of John Daniell, Deceased.
(Surrogate’s Court, New York County,
March, 1903.)
Transfeb Tax—Non-Taxability of a Testamentary Provision Intended, in Possible Substitution for an Annuity Created by the Testator in His Lifetime—Election.
Where a husband has, through a trustee, agreed to pay his wife* in release of all her rights against him or in his estate, a life annuity accompanied by the option to her of demanding of his estate upon Ms death, in substitution, such gross sum, calculated upon her expectancy of life from and after the date of his death, as will discharge prospective payments of annuity, Ms creation by will in his executors of a trust to continue the annuity in case she refuses a gross sum, is not—failing her exercise of her election—taxable to her as to the corpus, for the will has transferred nothing to her and she has received no benefit under it.
Semble, that the wife must exercise such an election immediately upon her husband’s death and is not, after having received the annuity for some time thereafter, entitled then to demand a gross sum. calculated as of the date of Ms death.
Appeal from an order- fixing the transfer tax.
Edward A. Blackmar, for executors; Edward H. Fallows, for State Comptroller.

Opinion:
Fitzgerald, S.
Appeal by the executors from an order fixing the transfer tax. The decedent died in March, 1902. On June 14, 1898, an agreement was entered into between the decedent, Albert Wilkins, trustee, and Anna W. Daniell, the wife of testator, by which the decedent agreed to pay to Wilkins $2,500 a year during the lifetime of decedent's wife, for her use and benefit. The agreement also provided that in case decedent's-wife survive him, the trustee Wilkins might (if the wife elected so to do) deipand payment from the estate of a gross sum in satisfaction of the payments thereafter to fall due under the agreement ; such sum to be ascertained by multiplying the amount of the annuity by the expectancy of life of the wife according to the- Northampton Tables, as of the date of the death of the decedent. The wife accepted the provisions of this agreement in lieu of all claims for support against the decedent and in lieu of dower and also in lieu of any claim to a distributive share of the decedent's estate. Former articles of agreement (presumably relating to the same subject-matter) made between the same parties in December, 1887, are cancelled and the covenants in this agreement substituted. The brief of the Comptroller states the decedent and his wife were separated, but I find no evidence in the record on this subject.
The will of decedent was executed in 1901. The tenth paragraph recites the agreement hereinbefore set forth, and authorize his executors, in case his wife shall not elect to receive a gross .sum in lieu of said annuity, to set apart the sum of $40,000, which he gave to his executors in trust, to invest and apply the income, so far as it will suffice, to the payment of said annuity; and to make up any deficiency from the principal. Upon the death of his wife, or upon the acceptance by her of a gross sum in lieu of said annuity, the trustees are directed to divide the balance between the two sons.
The appraiser not only refused to deduct the value of this annuity as a debt or obligation owing from the estate, but reported its value as a taxable transfer under the will to the wife. The order fixing the tax was entered accordingly, and from this finding the executors appeal.
Nothing was transferred to the testator's widow by the tenths paragraph of the will. That clause is a mere direction and authorization by thei testator to his executors as to the manner in which the obligation created by the agreement of June 14, 1898, should be provided for, in the event that the widow failed to exercise the election given thereunder. It is simply a direction of the testator as to the manner in which his estate shall be administered. It confers no benefit upon the widow. The election to take a gross sum has not been exercised. It is doubtful if it can now be exercised. The agreement provides that the gross sum to be paid shall be computed according to the expectancy of life of the widow at the death of the decedent. The decedent died in March, 1902; nearly a year has elapsed. Would a court of equity construe the agreement so that the wife might draw her annuity for an indefinite period and then receive a gross sum calculated as of the time of the decedent's death? It seems manifest that the agreement contemplated that the election should be exercised soon after the testator's death, and the method of ascertaining the gross amount was thus specifically defined.
The decision in the Gould case, 156 N. Y. 423 is readily distinguishable from the case at bar. There " The son consented to accept payment for his services under this provision of the will." p. 426. It is only where the " devise or bequest is accepted by the beneficiary that the transfer is made by the will, and the state by the statute in question makes a tax to impinge upon that performance." p. 428. " That Jay Gould attempted to transfer the property mentioned in the codicil to his son George hy will appears upon the face of the instrument. That the son .-agreed to accept the transfer of the property to him by that -method, appears from his testimony that he stated to his father that the provision for compensation was satisfactory and that he ¡had accepted the benefit of this provision is unquestioned. The result, therefore, is a transfer to him by will of the property therein described, and the statutory command that upon property thus transferred a tax should be imposed must be obeyed." See also Matter of Rogers, 71 App. Div. 461, aff'd 172 N. Y. 617; Matter of Miller, 77 App. Div. 473; s. c., 78 N. Y. Supp. 930.
1 conclude, therefore, that the appeal must be sustained; that so much of the tax levied against the widow as is based upon the annuity under the agreement must he stricken out and its value deducted from the taxable estate as a debt or obligation.
Appeal sustained.