Court Opinion

ID: 4485163
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:13.165688+00
Date Added: 2024-06-11T14:54:05.872612
License: Public Domain

Whitaker, J., concurring: While I concur in the result reached in this case, I do not agree with the Court’s method of achieving that result. This is a relatively simple case, and it should be decided on that basis. It is not a satisfactory vehicle for an effort to synthesize all the case law in this area (on the assumption, which is open to question, that such can be done or should be attempted). The majority’s opinion will, I fear, carry us into an arena of "certitude” with which we, in the context of a different vehicle, might well find ourselves in disagreement. The trust agreement between decedent and the trustees was entered into on July 26, 1977. It provides, in pertinent part: 1. Trust property. The Grantor, the initiator of a policy of insurance on his life issued by the Columbian Mutual Life Insurance Company, and known as policy #10010395, desiring to establish an insurance trust during the lifetimes of his wife, Eleanore, and of his children, Hiroko and Akira, with power in the Trustees upon the death of the Grantor to purchase assets from his estate, hereby assigns to the Trustees all his right, title, and interest in and to such policy of insurance, to be held by them in trust, and to receive the proceeds of such policy of insurance as and when they become due and payable and are paid, for the purposes and on the conditions set forth in this agreement. The Grantor reserves the right to add to this trust from time to time additional policies of insurance on his life which, when delivered to the Trustees, shall be held by them in every respect subject to the terms of this agreement. On the same date, one of the trustees signed the application for the specified insurance policy as applicant and owner, while the decedent signed as the proposed insured. The trust was unfunded, and it appears to have been the parties’ contemplation that it was to be funded only out of policy proceeds paid upon the decedent’s death. When the policy was ready for issuance on September 8, 1977, the decedent furnished the trustee with a check in the amount of the initial premium, with language on the check specifying such use. Accordingly, the check was simply endorsed to the insurance company. I am forced to believe that the recital in the trust agreement reflects the intentions of the parties and the facts existing on July 26, 1977. Clearly the decedent was the initiator of the insurance. Before the trust was created, he evidently had arranged with the insurance company or its agents for the policy and had obtained the policy number. Under these circumstances, I conclude that the decedent had also arranged for the insurance application and for its execution by the trustee. It is necessary to infer that he had also agreed to furnish funds for payment of the initial premium. No other source of payment was available. Thus, each step of the instant plan — the trust formation, the insurance application and policy issuance, and the premium payment — was part of an integrated transaction arranged and regulated by the decedent.1 How else could the draftsman of the trust agreement have had access to the policy number of the policy to be issued thereafter? The facts here thus are clearly within the principles of Bel v. United States, 452 F.2d 683 (5th Cir. 1971), where the scope of the word "transfer” in section 2035 was given a broad interpretation consistent with the purpose of that section to bring "testamentary” dispositions made during the life of decedent into the estate. The Fifth Circuit in Bel endorsed the Supreme Court’s language in Chase National Bank v. United States, 278 U.S. 327, 337 (1929), that— "the word 'transfer’ * * * cannot be taken in such a restricted sense as to refer only to the passing of particular items of property directly from the decedent to the transferee. It must, we think, at least include the transfer of property procured through expenditures by the decedent with the purpose, effected at his death, of having it pass to another. * * *” [Bel v. United States, 452 F.2d at 691.] Bel went on to hold that a policy purchased by the decendent, who executed the insurance application and paid all of the premiums, "transferred” the policy to his children even thought they were owners of the policy ab initio. It based this conclusion on the rationale that there is no practical difference between purchasing a policy in one’s own name and then transferring it, and purchasing the policy in someone else’s name. Bel v. United States, supra at 692. It is the teaching of Bel that the fact that the trustee at all times was the owner of that policy is irrelevant under these circumstances. Thus, this is not a situation where, as in Hope v. United States, 691 F.2d 786, 789 (5th Cir. 1982), the decedent "only gave cash, in trust, to her children.” In the instant case, decedent initiated the policy, arranged for its issuance to the trustee, in the process assigning his interest to the trustee, and thereafter paid the initial premium. The majority opinion takes great pains to discuss all of the major cases decided under section 2035 and to conclude that the "agency” theory of Hope and Detroit Bank is applicable. This discussion is not in point, is unnecessary, and thus is also subject to misinterpretation and undue expansion. It is unnecessary because, as discussed, decedent in substance made an outright transfer of the policy as recited in the trust agreement. Therefore, there is no need to isolate for discussion the significance of payment of the premiums by the decedent or whether or not the trustee’s actions were as agent of decedent. There was but a single transaction, initiated and concluded by the decedent. We should not attempt to decide this case on other grounds. The majority places undue emphasis upon the final aspect of decedent’s plan — the payment of premiums. The other aspects of the decedent’s preconceived plan were in my opinion, of equal, if not greater, importance. Our decision in this case should encompass with equal emphasis all three steps of this transaction which when viewed together demonstrate a transfer of a policy of insurance by decedent within the meaning of section 2035 — without the intervention of a hypothetical agency. Fay, Goffe, Wiles, Parker, and Clapp, JJ., agree with this concurring opinion.   The majority notes that the insurance policy application provided that insurance was not to be in effect until the premium was paid. (Majority opinion at 60.) It erroneously concludes, however, that "payment of the premium created the ownership rights in the trustees.” That no insurance was actually in effect until payment of the premium is irrelevant to the question before us, which is whether an interest in the policy was transferred by decedent within 3 years of his death. Moreover, payment of the premium on Sept. 8,1977, was merely the fruition of the parties’ plan apparently conceived before and for all practical purposes executed on July 26,1977. The payment therefore is appropriately viewed as relating back to the transactions that occurred on and probably prior to July 26,1977, and the policy thereby had "life” on that earlier date for purposes of the instant discussion. That is the substance of the transaction.