: .
THE A
OFTEXAS
AUSTIN 11. TEXAS
September 27, 1949
Honorable Robert S. Calvert
Comptroller of Public Accounts
Aus tin, Texas Opinion No. V-914.
Re: Inclusion of one-half of caoh
surrender value of certain
insurance policies on surviv-
ing spouse’s life in deceased
spouse’s estate for inherit-
ance tax purposes.
Dear Sirt
. YOU have requested the opinion of this office as to the
inclusion of one-half of the cash surrender value of certain insur-
ance policies on the life of a surviving spouse in the estate of the
deceased spouse for inheritance tax purposes. All of the policies
were acquired after marriage. All premiums were paid from com-
munity funds. None of the policies have ever been assigned, and at
all times the deceased spouse was the beneficiary of said policies
although the policies contained the usual provisions authorizing the
insured to change the beneficiary at will, etc. The surviving spouse
does not presently contemplate surrendering the policies.
In Womack v. Womack, 141 Tex. 299, 172 S.W.2d 307
(1943), the Supreme Court held that the cash surrender value of
policies of the type above described was community property. In
the Womack case the parties had been divorced in April, 1941, but
the divorce decree had made no disposition of four life insurance
policies, three insuring the life of the husband and one insuring the
life of the wife. The policies on the life of the husband had a cash
surrender value of $1,542.84 at the times of the divorce decree, and
the cash surrender value of the policy on the life of the wife was at
that time $252.00. All of the policies were obtained during the mar-
ried life of the husband and wife, and all premiums were paid from
their community funds. All of the other property rights had been
adjusted, but the legal question as to whether the cash surrender val-
ue of the policies constituted community property was left open for
determination by the courts as if no divorce had been granted, to
the end that the parties should not be prejudiced by the fact that the
divorce had been granted, The trial court held that the cash surren-
der value of the policies constituted community property at the date
Honorable Robert S. Calvert, Page 2 (V-914)
of the divorce and entered a judgment in favor of the wife for one-
half of the difference between the cash,surrander value of the pol-
icy upon the life of the wife and the amount of the cash surrender
value of the policies upon the life of the huabsnd. The Court of
Civil Appeals affirmed. The Supreme Court granted writ of eraor
based upon the allegation that the opinion of the Court of Civil Ap-
peals conflicted with the opinion in Whiteselle v. Northwestern Mut.
Life Ins. Co., 221 S.W. 575 (Tex, Comm. App. 1920).
We quote from the opinion of the Supreme Court:
“‘Article 4619, Vernon’s Annotated Civil Stat-
utes, as amended in 1927, defines community property
as follows: ‘All property acquired by either the hus-
band or wife during marriage, except that which is the
separate property of either, shall be deemed the com-
mon property of the husband and wife; and all the ef-
fects which the husband and wife possess at the time
the marriage may be dissolved shall be regarded as
common effects or gains, unless the contrary be satis-
factorily proved. ’ ”
The court discussed the meaning of the word “property”, quoting
with approval the following excerpt from Titus v. Terkelsen, 302
M.ss. 84, 18 N.E.2d 444, 445 (1939):
““It is a word of comprehensive meaning. Hol-
brook v. Brown, 2 Mass. 280, 282; Raymer v. Tax Com-
missioner, 239 Mass. 410, 413, 132 N.E. 190. In its
ordinary legal signification it “extends to every species
of valuable right and interest, and includes real and per-
ronal property ***‘*”
The court then stated that it was true that in the early
decisions of the courts of this country, including the decisions of
the courts of this State, it bad been held that policies of life ineur-
ante were not property, but that the history of Article 4619, as a-
mended, clearly showed that the Legislature intended to give the
term ‘“community property” a broader meaning than it was original-
ly given.
‘“The word ‘property” in our bankruptcy laws is
construed to include the “cash surrender value’ of life
insurance policies, and such property right5 pas0 t0
the crtditors of the insured, The courts recognize the
right of the insured to pay his creditors the ‘cash aur-
render value’ of his policy and retain the policy, (Cita-
tion of authorities omitted,) The courts of this State
have held that the “cash surrender value” of a policy is
property, and may be considered and treated as com-
munity property. ”
.
Honorable Robert S, Calvert, Page 3 (V-914)
The court also pointed out that it had been held that
the proceeds of a life insurance policy, taken out by the husband
and payable to the estate of the decedtnt, the premiums of which
were paid for with community property belonging to the community
estate, are one-half the property of the wife, and that said part is
no part of the estate of the husband.
The judgments of the trial court and of the Court of
Civil Appeals were affirmed. and the Whiteselle case, supra, and
any other case holding contrary to the ruling of the court were ex-
pressly overruled.
In view of this express holding of the Supreme Court
we deem it unnecessary to discuss various Court of Civil Appeals’
opinions which hold, under similar facts, #at the cash surrender
v&lue of such insurance policies is community property, See Locke
v. Locke, 143 S.W,2d 637 (ISex. Civ. App. 1940); Russell v. Run,
79 S W 2d 639 (Tex, Civ. App, 1934, error dism.), B erdoll v. Berg
doll, 145 S.W.2d 227 (Tex. Civ, App. 1940, error dism.).
Since the cash surrender value of policies of the type
here involved is held to be community property, the value of which
is divided or accounted for in dividing the community estate when
marriage is terminated by divorce, Womack v. Womack, supra, it
is likewise community property at the time marriage is terminated
by death, and the share of the deceased spouse must therefore con-
stitute a part of his or her estate,
It follows that the value of this share should be included
in determining the value of the deceased spouse’s estate for inherit-
ance tax purposes, and you are accordingly so advised.
SUMMARY
Where community funds were used to pay all prer
miums on certain insurance policies on life of surviv-
ing spouse, deceased spouse being beneficiary of all
said policies in which insured retained right to change
beneficiaries at will, one-half of the cash surrender vsl-
ue of the policies at the date of deceased spouse”s death
should be included in determining the value of deceased
epouse's estate for inheritance tax purposes. Cf, Worn-
pk v. Womack, 141 Tex, 299, 172 S,W,2d 307 (194F
Yours very truly
APPROVED ATTORNEYGENERALOFTEXAS
g&L&Al~&w
b&s0 Marietta h&Greg Crool
Assistant