Court Opinion

ID: 9693517
Source: CourtListenerOpinion
Date Created: 2023-08-25 16:47:15.813292+00
Date Added: 2024-06-11T18:19:47.935100
License: Public Domain

Adams, J.
(for reversal in part). I concur with Justice Bushnell in his opinion that United States government savings bonds registered in the name of the deceased and another as co-owners should not he included in the assets of the deceased’s estate for the purpose of determining the Michigan inheritance tax, hut I cannot agree that bonds registered in the name of the deceased and payable on death to another should he treated in the same manner.
The applicable portion of the Michigan statute reads:
“Sec. 1. * * * A tax * * * is hereby imposed upon the transfer of any property * * * in the following cases: * * *
“Third, When the transfer is of property made * * * by * * * grant * * * intended to take *464effect, in possession or enjoyment at or after such death”
of the grantor. CL 1948, § 205.201, as amended (Stat Ann 1950 Rev § 7.561).
United States treasury department regulations covering savings bonds define the rights of bondholders and provide, in part:
“Sec. 315.4 * * *
“(2) Two persons; co-ownership form. In the names of 2 (but not more than 2) persons in the alternative as co-owners, for example:
“John A. Jones or Mrs. Ella S. Jones.
“No other form of registration establishing co-ownership is authorized.
“(3) Two persons; beneficiary form. In the name of 1 (but not more than 1) person, payable on death to 1 (but not more than 1) other person, for example:
“John A. Jones, payable on death to Miss Mary E. Jones. ‘Payable on death to’ may be abbreviated as ‘p.o.d.’ The first person named is hereinafter referred to as the owner or registered owner, and the second person named as the beneficiary or designated beneficiary.”
“Sec. 315.21(a) Method of interest payments. Interest due on a current income bond will be paid on each interest payment date by check drawn to the order of the person or persons in whose name the bond is inscribed, in the same form as their names appear in the inscription on the bond, except that in the case of a bond registered in the form ‘A, paA7able on death to B,’ the check will be drawn to the order of A alone until the Bureau of the Public Debt, Division of Loans and Currency, 536 South Clark street, Chicago 5, Illinois, receives notice of A’s death, from which date the payment of interest will be suspended until such time as the bond is presented for payment or reissue. Interest so withheld will be paid to the person found to be entitled to the bond.”
*465“Sec. 315.45 * * *
“(a) Payment during the lives of both co-owners. During the lives of both co-owners the bond will be paid to either co-owner upon his separate request without requiring the signature of the other co-owner.”
“Sec. 315.46 * * *
“(a) Payment to the registered owner [p.o.d. bond]. The bond will be paid to the registered owner during his lifetime upon his properly executed request as though no beneficiary had been named in the registration.”
A savings bond registered in the name of one person, payable on death to another, will be reissued
■“upon the duly certified request of the registered owner together with the duly certified consent of the designated beneficiary, to eliminate such beneficiary, or to substitute another person as beneficiary, or to name another person as co-owner.” Sec. 315.46(b)(2).
It is significant that these regulations distinguish •as between “owner” and “beneficiary.” In the case of co-owners, each has equal rights in relation to payment of interest and principal. In contrast, the income from “p.o.d.” bonds is payable only to the owner during his lifetime. When due, the proceeds of the bond are likewise paid exclusively to the owner, if alive.
Under such circumstances, the interest of the beneficiary in the bond is, in the first instance, inchoate. He has neither enjoyment nor possession until the death of the owner. There is no gift inter vivos because he takes nothing during the lifetime of the owner. While the consent of the beneficiary must be obtained to effectuate reissue prior to the date of payment, that requirement ceases to exist when the bond becomes due and the proceeds are paid to *466the owner. Such limited control by the beneficiary is not an adequate criterion in a determination of ownership.
The assignment or grant of the bond to the beneficiary does not become effective in any real sense-until the death of the owner. Such a transfer falls-within the statutory definition and is taxable under our inheritance tax statute.
“ ‘The test is always whether the property comes into possession and enjoyment of the transferee upon the death of the transferor. If the death of the transferor makes no difference in the rights of the parties there is no tax.’ Gleason & Otis on Inheritance Taxation (4th ed), p 876.” People, ex rel. Attorney General, v. Welch’s Estate, 235 Mich 555, 566.
The judgment of the circuit court is affirmed as to the determination of tax on the bonds held in co-ownership and should be reversed as to the determination of tax on the “payable on death” bonds. No-costs.
Bijtzel, Sharpe, and Boyhes, JJ., concurred with Adams, J.