’ .
Honorable Robert S. Calvert Opinion No. C-290
Comptroller of Public Accounts
Austin, Texas Re:~ Whether Interest of
remalnderman whose
life expectanay’la
less than that of
the life tenant is
subject to lnheri-
Dear Mr. Calvert: tance tax.
We quote the following excerpt from your letter re-
guesting the opinion of this offloe on the above captioned
matter: .
.“Thomae E. Whatleg idled testate
a resident of Ellle County, Texas,
on Jtiuary 17, 1964, and under his
last will and testziment,the dece-
dent devised a 1iSe estate In his
entire estate to hi8 surviving wife,
Mary Whatley, with remainder to
Alice Earrieon, Ruth Dover, Lura
Bates, Mre.,Lquls Dover and Me8
Ethel Whatley, all 8iSter.9of the
deoeased, in equal parts.
“This department when making
distribution of the estate for
Inheritance tak purpose6 did not
calculate any remainder Interest.
for Mrs. Alice Harrison because
she was 81 Jrearaof,age and older
than @f&3.Mary Whatby, the SUP
viving spouse who was 75. ”
You request that ,we advise you ae to whether this
distribution la a correct one.
Mrs. Alice Harrieon falls within the provisions of
Article 14.04, Taxation-General, Vernon’s Civil Statutes,
which reads, in part, a8 follows:
-1387-
Honorable Robert S. Calvert, Page 2 (Opinion No. C-290 )
*If passing to or for the use
of a brother or sister, or a direct
lineal descendant of a brother or
sister, of the decedent, the tax
shall be three per cent on any value
in excess of Ten Thousand Dollars and
not exceeding Twenty-five Thousand;
four per cent on any value in excess
of Twenty-five Thousand Dollars, and
not ezceedlng Fifty Thousand Dollara;
. . .
Thereafter the rates increase in stated value brackets reachinS
a maximum of ten per cent on any value in excess of One Million
Dollars,
You have orally advised us ~that since, according to
Actuaries Combined Rxperlence Tables, Mrs. HarrIson will not
survive the llfe.beneflclary, you have ignored her interest
for inheritance tax purposes. This results in distributing
the estate for Inheritance tax pUY?pOSeSto four sisters, rather
than five, with a resulting 1088 of one of the Ten--Thousand
Dollar exemptions and an increase In Inheritance taxes. 'This
you have done on the theory that If she predeceased the life
tenant she would never receive any remainder interest.
The will In question speclPloally devises and bequeath8
to the survivingwife all of the decedent's property of every
kind and nature "for her to enjoy the rents.and revenue8 thers-
from so long as she lives, . . . That Is to say that my said
wife, Mary Whatley, is given a life estate or 8n'eatate for
life In all real,and personal p,ropertywhich I may own or be
Interested in at the time of,my death, to be used and enjoyed
by her so long a8 she shall life pic.Jr and ather death,
the fee simple title therein shal pass to and vest in fee
simple lnmy sisters share and share alike, or to be divided
equally among them, . . ."
Under the provlslons of this will, the decedent's
sisters, even though they may die before they come into poeses-
eion of the estate8 devised and bequeathed to them, have~re-
ceived, under the law,,ves~tedremainders. The leading Texas
case of Caplee v. Ward, 107 Tex. 341, 179 S;U. 856, 857-858
(1915) has given the following definition of vested remainders.
"A remainder is vested where there
18 a person in being who would have an
Immediate right to the possession upon
the termination of the intermediate
estate. hit is sn mediate right of
-13aa-
Honorable Robert S. Calvert, Page 3 (Opinion No. C- 290 )
present enjoyment, or a present
right of future enjoyment, a fixed
Interest, with only the right of
possession postponed untll'the end-
ing of a particular estate. 4 Kent,
202; Bufford v. Holliman, 10 Tex.
560, 60 Am. Dec. 223. TO use a
common Illustration of the books,
where there Is a grant of an'eetate
to A. for life, and, after his deat~h,
to B. In fee, the remainder is a
vested one, since the grant creates
a present fixed interest, with the
right of future enjoyment in B."
Remaindermen having vested interests sre regarded as
having absolute ownership of their shares, which may be
alienated or taken and sold under execution. &he0 v. hte8,
267 S.Y. 709 (Comn.App. 1924); 22 Tex.Jur.2d.6%, Estates,.
Sec. 6; Caples v. Ward, supra.
Article 14.08, Taxation-General, Vernon's Civil
Statutes, reads as follows:
"If the property passing as afore-
said shall be divided Into two or.-.
more estates, a8 an estate for years.
or for life and a remainder, the tax
shall be levied on each estate or
Interest separately, acoordlng to
the value of the same at the death
of the decedent. The value of estates
for years, estates~for life, remainders
and annuities, shall be determlned by
the 'Actuaries Combined Experience
Tables,' at four per cent compound
interes,t.
"
It Is to be noted that:thenstatute above quoted
specifically requires a determination of the value of
remainder Interests according to the Actqrles Combined
zglence Tables. Such tables contain'the 'followingdirec-
:
"To find the value 0f.a life estate
muitiply the value of the beneflolal
interest by 4% and this product by the
factor (present value of $1.00) for the
given age of the life tentit; the result
Is the value of the life estate. Subtxact
-1389-
Honorable Robert S. Calvert, Page 4 (Opinion No. C- 290 )
the value of the life estate (as
ascertained above) from the bene-
flclal interest, and the amount
left will be the value of the re-
mainder estate."
The general rule is that the transfer of llfe'estates
and of ordinary vested remainders Is subject to'inh<ance
tax at the time of the decedent'8 death. 28 Am.Jur. 166,
Inheritance, Eatate anilGift T&xes, Sec. 221, and authorltles
'cited therein.
We understand that you recognize the appllcablllty
of this general rule but have made an exception for the
reasons previously stated. However, In view of the fact
that'the Texas COUri58 have held that a vested remainder may
be alienated, Estes v. Estes au ra we cannot say that the
sister.in question has not r&Zi+& something of~.valuewhich
should be ascertained according to the statutory directive.
Our conclusion 18 in line with the weight of authority.
We quote the following excerpt from 28 Am.Jur. 166, Inherltsnoe,
Estate and Gift Taxes, Sec. 368:
"WlGn a will creates separate
Interests or estate8 In the prop-
erty disposed of, such a8 a limita-
tlotiover after a 1lSe estate or
other precedent interest, the'sep-
arate values of each of the succes-
sive interests must be ascertained
for purpose8 of a succe8slon.tax.
The~value of a life estate is com-
puted by the use of tables prepared
by actuaries for ascertaining the
expectancy of life for purposes of
life insurance, and the value of the
remainder Is the value of the prop-
erty as a whole over and above the
value of the life interest.
In some states it Is held that if'
the life tenant is of feeble or
unsound health, the mortality tables
should be disregarded, but It Is
generally held that even If the
life tenant dies before the value
of his Interest has been determined,
It Is to be valued according to the
mortality tableS,.and not according
to the facts whlch.have actually
occurred. . . ."
-1390-
Honorable Robert S. Calvert, Page 5 (Opinion No. C- 290 )
You are therefore advised that in making distribution
for Inheritance tax purposes you should calculate the remainder
Interest of Mrs. Alice Harrison pursuant to the provisions of
Article 14.08, Taxation-General, Vernon's Civil Statutes.
SUMMARY
The vested Interest of a remalnderman
Whose life expectancy Is less than that of
the life tenant Is subject $0 Inheritance
tax.
Yours very truly,
WAGGONER CARR
Attorney General of Texas
APPROVED:
OPINION COMMITTEE,
W. 0. Shultz, Chairman
Paul Phy
Robert Smith
Jim Broadhurst
Gordon.Houser
APPROVEDFORTHEATTORNEYGENEFUiL
By: Stanton Stone
-1391-