§ 230

Where Beneficiary Dies before Appraisal.

538. Method of Ascertaining Value of Life Estates Generally.

In determining whether the will violated the Act of 1860, we must take the amount of the testator's estate as of the date of his death and compute the then present value of the life estates, and of the fund ultimately to go to the university.

In making this computation, it is proper to compute the value and amount of the life interests under tables based upon the probabilities of life, rather than on the lives as they were actually extended. Matter of Durand, 194 N. Y. 477.

539. Valuation of Life Estate Where Life Tenant Dies Prior to Appraisal.

It has occasionally happened that where an estate is given for life with remainder over, that the life tenant has only survived the decedent a short time, and died prior to the institution of transfer tax proceedings upon the decedent's estate, and the question was raised as to the manner of ascertaining the value of the life estate. In the Matter of Jones, 28 Misc. Rep. 356, 59 N. Y. S. 983, it was held that where the collateral inheritance tax is governed by chapter 713, Laws 1887, it is erroneous to appraise a life estate given by the testator to his widow who died before the appraisal, upon the basis of its actual duration, as the entire property or estate by which the life estate is supported or of which it was a part is required by the statute to be valued, and by the standards of mortality and value which were employed at the time by the Superintendent of Insurance.

540. Id.; Where Life Tenant Exceeds Her Expectancy of Life. The value of a life estate must be determined by the State Superintendent of Insurance, even though the

Where Beneficiary Exceeds Expectancy.

§ 230

actual duration of such life estate is known at the time of the appraisal, and exceeds the life tenant's expectancy of life as shown by the mortality tables.

In the Matter of Heller, N. Y. Law Journal, November 11, 1903, the decedent died in 1887, leaving a will giving his residuary estate amounting to about $240,000 to his executors in trust, to pay the income thereof to his wife for life, providing she accepted this provision in lieu of dower, and upon her death the residuary estate was to be divided among certain collateral relatives. His wife accepted the provision of the will, and transfer tax proceedings were not instituted until after the death of the widow, July 1, 1902. The appraiser in determining the value of the life estate aggregated the income on the fund at 5 per cent. per annum for fourteen years, eleven months and twenty-seven days, the actual duration of the life estate, and deducted this sum from the amount of the fund and distributed the balance among the collateral relatives.

At the time of the testator's death the widow was sixty-two years old, and her expectancy of life as shown by the mortality tables was 8.35+ years, and the Comptroller appealed to the surrogate, the second ground of appeal being that the appraiser erred in his method of ascertaining the value of the taxable property of this estate. The surrogate sustained this ground of the appeal and directed the appraiser to ascertain the value of the taxable interests as of the date of the death of the decedent by the rule method and standard of mortality employed by the State Superintendent of Insurance.

§ 230

Where Act of Beneficiary Terminates Estate.

541. Id.; Where Life Estate Can Be Divested by the Act or Omission of the Legatee or Devisee.

By the will of George R. Finch, late of Warren county, deceased, he gave his wife an annuity of $25,000, to be paid to her during her life or until she remarried. Owing to litigation involving the probate of decedent's will and the settlement of his estate, transfer tax proceedings were delayed until nearly three years had elapsed since the decedent's death, and in the meantime the decedent's widow had remarried. It appears that the executors had paid the widow the amount of her annuity from the date of decedent's death until her remarriage, amounting to $37,500. The appraiser in determining the taxable transfer under decedent's will did not take into consideration either the widow's annuity or the amount actually paid on account thereof, but after setting apart certain legacies bequeathed to four persons named in the will, he divided the remainder between the two residuary legatees who were entitled to the residuary estate upon the death or remarriage of the widow. The residuary legatees appealed from the taxing order upon several grounds, the principal one being that the appraiser failed to take into consideration and assess the tax upon the annuity devised and bequeathed to the widow of the testator, claiming that although the widow had remarried and thus terminated the annuity before the transfer tax proceedings were had, yet the appraiser should have ascertained the value of her life estate pursuant to the provision of section 230, which says that "Where an estate for life or for years can be divested by the act or omission of the legatee or devisee it shall be taxed as if there were no possibility of such divesting; " and the present value of the re

Rate of Interest in Computations.

§ 230

mainders so remaining after taking out the full life estate of the widow is the value of the remainder passing to them subject to a transfer tax under the decedent's will. The district attorney of Warren county, acting surrogate, filed a decision sustaining the contention of the residuary legatees, that the annuity of $25,000 to decedent's widow, which he found to be of the value of $342,901, should have been ascertained by the appraiser and the tax thereon assessed against the widow, without reference to the fact that the annuity had terminated upon her remarriage, and that such sum should be deducted from the residuary estate before the tax upon the remainders were determined. 542. Id.; Rate of Interest Must Be 5 Per Cent. Per Annum.

Where the decedent's interest in a trust estate which was to continue for the life of her brother, was earning a net annual income of nearly 7 per cent., and she directed that all her interest in such trust estate should be applied in the payment of certain annuities and life estates created by her will, the value of the decedent's interest in the trust estate, for transfer tax purposes, should have been ascertained upon a basis of 5 per cent. interest as prescribed by section 230 of the Tax Law. Matter of Potter, N. J. Law Journal, April 16, 1909 — Surrogate Cohalan.

543. Valuation of Remainder Interests Subject to Life Annuity Where Annuitant Exceeds His Expectation of Life.

Where the decedent died in 1889, giving his wife an annuity of $5,500 per year, with remainder to certain collateral relatives, and providing that if the income of his estate was insufficient to pay the annuity that the balance necessary to make up the annuity was to be

§ 230

Where Annuitant Exceeds Expectancy.

taken from the principal of the estate, and it appeared that it was necessary to resort to the principal to make up the annuity, it was held in proceedings instituted upon the decedent's estate in 1895, that the annuity to the widow was not taxable and that the rights of the remaindermen were not presently ascertainable. The widow died in November, 1900, and a proceeding was thereafter commenced to determine the value of the remainder interests, and by the report of the appraiser the life annuity of the widow was computed in accordance with her expectancy of life as shown by the Superintendent of Insurance, and such sum deducted from the trust fund and the balance was taxed. The surrogate held that this manner of procedure was erroneous because, while the widow, who was sixty-nine years of age at the time of her husband's death, at which time her chance of life was less than six years, yet she had actually survived him nearly twelve years, and that the value of her annuity must be computed upon the actual time she enjoyed it. The court said: "If the widow had lived long enough the estate would have been entirely consumed by her annuity, and a ruling which would require a tax to be imposed against the residuary legatees, even if they had never been entitled to any sum whatever, should be avoided." Matter of Hall, 36 Misc. Rep. 618, 73 N. Y. S. 1124.

The practice lately has been, however, in all instances, to have the value of the life estate and remainder interests computed by the Superintendent of Insurance as provided by the statute, regardless of the fact that the actual duration of the life estates or the vesting of the contingent interests in possession might show such computations to be erroneous in that particular case.