New York Law Review

Tag: inheritance tax

  • In re Slosson’s Estate, 216 N.Y. 79 (1915): Elective Inheritance Rights Under Power of Appointment

    In re Slosson’s Estate, 216 N.Y. 79 (1915)

    When a will grants a power of appointment and the donee partially exercises that power, beneficiaries who would have taken in default of appointment can elect to take under the original will for the portion they would have received in default, even if the donee validly appointed a portion of the estate to others.

    Summary

    This case addresses whether children can elect to take under the original grantor’s will when their mother (the donee of a power of appointment) partially exercises that power, diverting some of the trust estate to other beneficiaries. The court held that the children could elect to take under the original will for the portion they would have received in default of appointment, despite the mother’s partial exercise of the power. This is consistent with the principle that a valid, partial exercise of a power of appointment does not preclude beneficiaries from taking the remaining portion under the original grant.

    Facts

    Peter Naylor’s will created a trust for Josephine Slosson, granting her the power to dispose of the trust estate via her will. The will stipulated that if Josephine did not exercise this power, the trust estate would pass to those who would have received it had Josephine died intestate and owning the property. Josephine’s will disposed of about two-thirds of the trust estate to her children (who would have taken in default) and about one-third to others. The children elected to take the two-thirds share under Naylor’s will, not their mother’s.

    Procedural History

    The Surrogate’s Court held that Josephine’s will was a valid disposition of the trust estate due to the diversion of one-third to other beneficiaries and thus the children’s shares were subject to a transfer tax. The Appellate Division affirmed this conclusion. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether the valid disposition by Josephine of a portion of the trust estate to individuals who could only receive it through such disposition negates the right of her children to elect to take the remaining portion of the trust estate under the original will of Naylor?

    Holding

    No, because the valid exercise of a power of appointment as to a part of a trust estate, coupled with either an ineffectual attempt or a failure to exercise it as to the remaining part, does not prevent those entitled from receiving their shares under the original will, as diminished by the exercise of the power.

    Court’s Reasoning

    The court relied on the principle established in Matter of Ripley, 192 N.Y. 536, which held that a valid exercise of a power of appointment regarding a portion of a trust estate, coupled with a failure to exercise it for the balance, does not preclude those entitled from taking their shares under the grantor’s will. The court stated that “It is immaterial whether there is a neglect or failure to exercise the power as to the balance of the trust estate, or an attempt to exercise it ineffectual because of the refusal of the donees to accept the disposition. In either of such cases, there is a failure of disposition under the appointment and the original will effects the transfer of the part of the trust estate undisposed of.” The court also referenced Matter of Lansing, 182 N.Y. 238, clarifying that beneficiaries are not forced to take under the power of appointment if they would have taken in default. Here, the children could elect to take under Naylor’s will for the two-thirds they would have received in default, irrespective of Josephine’s partial appointment to others. The order of the Appellate Division was reversed, and the case was remitted to the Surrogate’s Court to modify its order by deducting the value of the children’s shares from the taxable estate.

  • In re Romaine’s Estate, 127 N.Y. 80 (1891): Taxation of Non-Resident Intestate’s Property

    In re Romaine’s Estate, 127 N.Y. 80 (1891)

    A state can tax the succession of personal property owned by a non-resident intestate when the property is invested or habitually kept within the state, receiving the protection of its laws.

    Summary

    This case addresses whether New York can tax the inheritance of personal property within the state belonging to a non-resident intestate. The Court of Appeals held that it could, clarifying the scope of New York’s Collateral Inheritance Act. Worthington Romaine, a non-resident, had investments and bank deposits in New York. Upon his death, the state sought to tax the transfer of this property. The court reasoned that because the property was physically located and protected within New York, it was subject to its inheritance tax, regardless of the owner’s residency. This decision established a practical basis for taxing non-residents’ property within the state’s jurisdiction.

    Facts

    Worthington Romaine, a non-resident of New York, invested money in a bond and mortgage within New York and maintained deposits in New York savings banks.

    Romaine died intestate (without a will).

    The state of New York sought to impose an inheritance tax on the personal property of Romaine located within the state, which was passing to collateral relatives.

    Procedural History

    The lower courts upheld the imposition of the inheritance tax.

    The case was appealed to the New York Court of Appeals.

    Issue(s)

    Whether the succession of personal property of a non-resident intestate, invested or habitually kept within New York, is subject to taxation under the Collateral Inheritance Act.

    Holding

    Yes, because the property is located within New York, receives the protection of its laws, and therefore, contributes to the expense of the government.

    Court’s Reasoning

    The court reasoned that the 1887 amendment to the Collateral Inheritance Act extended its reach to the property of non-resident decedents located within the state. The court distinguished this situation from property temporarily brought into the state by a traveler. The court stated that when a non-resident’s money is invested or habitually kept in New York, the statute applies both in letter and spirit. Such property receives the protection of New York laws and has every advantage from the government. The court emphasized the state’s power to tax property within its borders, stating, “A nation within whose territory any personal property is actually situated has as entire dominion over it while therein, in point of sovereignty and jurisdiction, as it has over immovable property situated there.” The court further noted that the legal fiction of mobilia sequuntur personam (movable property follows the person) does not apply in a well-adjusted system of taxation. The court noted earlier cases had held that the act applied only to estates of resident decedents, but the amendment changed that. The court also cited provisions of the act that made administrators liable for taxes and restricted the transfer of stock by foreign executors. Ultimately, the court held that the Act extended to property of non-resident intestates, because “all administrators” were liable for taxes and corporations could only transfer stock standing upon their books in the name of a non-resident decedent at their own risk until taxes were paid.