Honorable Robert S. Calvert Opinion NO. c-361
Comptrollerof Public Accounts
Capitol Station Re: Method of computing
Austin, Texas inheritancetaxes
where husband wills
to third parties his
community one-half
interest in govern-
ment bonds payable
Dear Mr. Calvert: to himself or his wife.
You have advised us of the following facts in connection
with the above captionedmatter. The decedent in question
died testate leaving a will which contained,among others,
the following provision:
11
. * .A11 other personal property
which I may own at the time of my
death, Includingbut not limited to my
community one-half interest in all
communityUnited States Government
Bonds, howsoever they may be inscribed,
I bequeath to my beloved children,
Allen Bates, Doris Mae Cotton, and
Betty Sevllla, share and share alike."
The attorney for the estate takes the position that the
decedent's community one-half interest in the governmentbonds
should be distributedfor inheritancetax purposes to the
three children named in the will rather than to the surviving
wife. We do not agree in view of the decision In Free v.
Bland, 369 U.S. 663 (1962).
In the Free case, government bonds were purchased with
community fusand issued to "Mr. or Mrs." Free who were
residents of Texas. Mrs. Free had a son by a previous
marriage. At Mrs. Free's death, the husband claimed exclusive
ownership of the bonds; and the son, who was the principal
beneficiaryunder his mother's will, claimed an interest in
the bonds by virtue of the Texas community property laws.
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Honorable Robert S. Calvert, Page 2 Opinion No. (C-361:):
The Court of Civil Appeals' affirmed the trial courtls
award of full title to the surviving spouse but reversed the
trial court's award of reimbursementfollowing the holding
in Smith v. Ricks, 159 Tex, 280, 318 S.W,2d 439 (1958),in
which unconditionaleffect was given to the survivorship
provisionsof the Federal regulationsgovernin.@~savings bonds..2
The Texas Supreme Court in the Free case, acting under the-
authority of Hilley v. Hilley, mex. 569, 342 S.W.2d 565
C~,~~;II~,W;~I;; was decided while writ of error waspending in
and which overruled the Ricks case, reversed
the Court of &.vil Appeals and reinstatebt-hejudgment, of the
trial court in a er curiam opinion. Bland v. Free, 162 Tex.
72, 344 S,W.2d 43$7X9-
In overruling the Ricks case, the Texas Supreme Court
made the following stats in the Hilley case at page 570:
"It is clear that the Federal
regulationsdo not override our local
laws in matters of purely private
ownershipwhere the interests of the
United Statea are not involved. Bank
of America National Trust & 'Savings
AssIn v. Parnell, 352 U,S. 29, 77
S.Ct. 119, 1 L.Ed.2d 93." \
When the Free case reached the Supreme Court of the United
States,it'mcted this propositionfor the reason that the
survivorshipprovision is a federal law which must prevail
over state law under the Supremacy Clause of the Constitution
of the United States. Article VI, Clause 2.
Thus, a decision of the Texas Supreme Court which gave
effect to the provisionsof a will which devised the deceased
co-owner'sone-half community interest in governmentbonds to
a t,hirdparty was overruled;and ,full title to such interest
was awarded to the surviving co-owner.
L/337 S,W.2d 805 (1960)
?/The Treasury regulationsprovide that the co-owner of
United States savings bonds issued in the 'or" form
who survives the other co-owner "will be recognized as
the sole and absolute owner" of the bond (31 C.F.R,,
Sec. 315.61), and that "no judicial determir#tlonwill
be recognizedwhich would defeat or impair i&e rights
of survivorshipconveyed by these regulations."
(Id.
- Sec. 315.20).
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Honorable Robert S. Calvert, Page 3 Opinion No. (c- 361)
Since the Free case has settled the question of property
rights as to boxof the 'or" type, necessarily the distrl-
bution of the decedent's one-half community interest In such
bonds must be in accordancewith the property rights as they
existed at the decedent'sdeath. It is at this time that
the inheritancetax accrued under the provision:of-~Ar.ti,~~8:
14.01, Title 122A, Vernon's Civil Statutes, taxing transfers
by "deed, grant, sale or gift made or intended to take effect
in possession or enjoyment after the death of the grantor or
donor. . D ,' Atty.Gen.Ops.Nos. o-6691; C-12. Once the tax
has accrued, it is immaterialwhether the surviving spouse
sees fit to give away the Interests to which she succeeded at
the date of her husband's death.
SUMMARY
----em-
A provision in a will purporting
to transfer to third parties the
decedent's community one-half Interest
In government bonds issued to himself
or his wife is ineffective. At the
decedent's death, the surviving spouse
became the absolute owner of the
deceased husband's one-half interest
in the bonds; and the value thereof
should be distributed to her for
Inheritancetax purposes.
Yours very truly,
WAGGONER CARR
Attorney General of Texas
By:
MMcGP:dl
APPROVKD:
OPINION COMMITTEE
W. V. Geppert, Chairman
Gordon Rouser
Ralph Rash
Kerns Taylor
W. 0. Schultz
APPROVED FOR THE ATTORNKY GKNFRAL
By: Stanton Stone
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