*192 Decision will be entered under Rule 50.
At the time of his death decedent owned three insurance policies which contained identical language with respect to the rights of his widow thereunder. Respondent determined the surviving spouse does not have the power thereunder to appoint the principal proceeds of the policies to herself, and therefore that the total amount thereof does not qualify for the marital deduction pursuant to
*167 Respondent determined a deficiency in estate tax in the amount of $ 13,451.69 of which $ 3,078.39 has been paid by petitioner. The issue is whether the amounts of principal proceeds of insurance policies on decedent's life qualify for the marital deduction pursuant to
FINDINGS OF FACT.
Some of the facts were stipulated by the parties. Those so stipulated are found accordingly and incorporated herein by this reference.
Petitioner is the administrator of the estate of William Walker Wynekoop, who was also known as Walker William Wynekoop. At the time of his death intestate on October 24, 1948, decedent was a resident of Cook County, State of Illinois. The estate tax return involved herein was filed with the then collector of internal revenue for the first district of Chicago, Illinois.
Decedent left surviving him as his sole heirs at law and next of kin three children and his wife, Marcia V. Wynekoop, the administrator herein. Among*194 other items of property, decedent was the owner at the time of his death of 6 insurance policies on his own life of *168 which 3 were issued by The Northwestern Mutual Life Insurance Company. The principal proceeds of these policies payable upon decedent's death were as follows:
| Policy No. | Death benefit |
| 3443480 | $ 10,084.20 |
| 3443480 1/3 | 10,084.20 |
| 3411953 | 8,571.57 |
| Total | $ 28,739.97 |
These policies in part provide as follows under the general heading, "Special Provisions Relating to Settlement When This Policy Becomes Payable":
1. The Insured shall have the right, with the privilege of change before this Policy becomes payable, to elect payment of the then net proceeds, in whole or in part, under either Option "A", "B", "C" or "D", or under two or more of said options.
1a. If when this Policy becomes payable no such election by the Insured is then in force, the Direct Beneficiary or Beneficiaries may make such election in lieu of payment in one sum and upon such an election by the Direct Beneficiary or Beneficiaries the interest of any Contingent Beneficiary designated by the Insured shall terminate. The Direct Beneficiary or Beneficiaries may then, subject *195 to change, designate a Contingent Beneficiary or Beneficiaries under the election so made.
* * * *
7. The person then entitled as beneficiary shall upon due surrender of this Policy have the right at any time, provided the designator of such beneficiary shall not have specifically withheld such right, to withdraw any proceeds held by the Company under Option "A"; the commuted value, determined as provided in Special Provisions, paragraph "6", of any unpaid installments under Option "B"; or any remainder of the fund under Option "D". Benefits under Option "C" shall not be subject to commutation and withdrawal.
8. OPTION A: Subject to the limitations contained in Special Provisions, paragraph "5", to have the whole or any designated part of the net proceeds held by the Company, the Company in the meantime to pay interest thereon monthly at the minimum rate of $ 2.06 per $ 1000 of the amount so held, the first payment being due one month after date of death of Insured or the date of election if subsequent.
9. OPTION B: To have the whole or any designated part of the net proceeds paid in a specified number of monthly minimum installments as per the Limited Installment Table below, which*196 shall apply pro rata per $ 1000 of the amount to be so paid, the first installment being payable as of the date of death of Insured or the date of election if subsequent. * * *
Under date of October 4, 1946, decedent submitted a written designation of beneficiaries to Northwestern Mutual in part as follows:
THE COMPANY is requested by the undersigned to revoke all prior designations of beneficiaries and all prior designations, if any, of contingent beneficiaries, further payees in succession and settlement options and to make such revocation and the following designation and election a part of policy No. 3411953, 3443480 and 3443480 1/3.
*169 The Direct Beneficiary or Beneficiaries, share and share alike, the survivors or survivor, shall be Marcia V. Wynekoop, wife.
The Contingent Beneficiaries shall be Walker E. and Robert C. Wynekoop and Marcia W. Ayars, children, share and share alike, the survivors or survivor; * * *
The proceeds of each policy and the commuted value of the Supplementary Term Insurance Benefit thereto attached, if any, shall contribute a proportionate amount of any payment of proceeds.
Settlement with the direct beneficiary shall be made*197 in accordance with the provisions of Option A, with the privilege of changing settlement to Option B in 240 monthly installments. Settlement with the contingent beneficiaries shall, subject to the limitations contained in said policies, be made under Option A, with the privilege of surrender and withdrawal.
Any and all payments to the lawful surviving children of a deceased Contingent Beneficiary shall be made in one sum. In event of the death of a Contingent Beneficiary while receiving settlement as herein provided, the remainder interest of such Contingent Beneficiary in possession shall be paid in one sum.
The foregoing shall be made without the privilege of surrender or commutation except as therein expressly stipulated. [Italicized words were typewritten; others were printed.]
Also in October 1946, petitioner changed the beneficiary provisions of his other three life insurance policies (taken out with companies other than Northwestern Mutual) to provide generally under the circumstances here present as follows: The principal proceeds of each policy to be retained by the company without right of withdrawal by the widow; interest thereon to be paid regularly to the widow (along*198 with a monthly installment payment of $ 50 in the case of one policy); and upon her death the proceeds to be divided equally among the children.
The above provisions were in effect at decedent's death. In the estate tax return, petitioner included the principal proceeds of all six policies as parts of the gross estate in Schedule D thereof. It also listed the total proceeds as property interests passing to the surviving spouse in Schedule M of the return and included that amount as part of the marital deduction claimed in Schedule O.
On February 5, 1953, after the deficiency notice had been issued in the instant case, the widow notified Northwestern Mutual in writing that, pursuant to the terms and conditions of policy number 3411953, she elected to withdraw the proceeds of that policy then held by the company under Option A, and she demanded that it pay that amount to her. The company refused on the ground that her only election under the policy was to change to Option B for 240 monthly installments. Thereafter, on February 24, 1953, the widow filed a complaint against Northwestern Mutual in the Circuit Court of Cook County, No. 53 C 2483, in which she prayed for a judgment against*199 the company in the amount of $ 8,500 together with interest. The complaint was subsequently amended to add decedent's children and grandchildren as parties defendant, and later to add a prayer for a *170 declaratory judgment that plaintiff is entitled to the entire proceeds of the policy and that none of the defendants has any right, title, or interest therein.
Northwestern Mutual and the guardian ad litem of the minor grandchildren filed answers to the complaint as amended, and subsequently trial was held before Judge Harry M. Fisher on November 17, 1954. The proceeding was contested by Northwestern Mutual and was an adversary one between the company and the widow. The guardian ad litem, however, submitted the rights and interests of the grandchildren to the consideration and protection of the court. The court thereafter found for plaintiff and, on December 8, 1954, entered its order in which it adjudged in part as follows:
Therefore, it is considered by the Court that the plaintiff, Marcia V. Wynekoop, do have and recover of and from the defendant, The Northwestern Mutual Life Insurance Company, her said damages of $ 8,581.17, in form as aforesaid by the Court assessed, *200 together with her costs and charges in this behalf expended, and have execution therefor; and
It Is Further Adjudged that plaintiff is entitled to receive the entire proceeds of Life Insurance Policy No. 3411953, issued by The Northwestern Mutual Life Insurance Company, upon the life of Walker W. Wynekoop; and that none of the defendants has any right, title or interest therein.
No appeal was taken from the above judgment which was satisfied by the company on December 9, 1954. Although no demand has been made by the widow upon Northwestern Mutual for the principal proceeds of the other two policies with that company, the attorney for Northwestern Mutual has informally advised her attorneys that it will not pay her the proceeds of those policies except on order of a court of competent jurisdiction.
The widow has the power to appoint the principal proceeds of policies numbered 3443480 and 3443480 1/3 in favor of herself.
OPINION.
Respondent determined that none of the proceeds of six insurance policies on decedent's life qualify for the marital deduction pursuant to
*171 Respondent contends that under the terms of the policies the widow has only a terminable interest in the proceeds of the policies which does not qualify for the marital deduction. Although he concedes in his brief that the amount of the proceeds of policy number 3411953 qualifies for the marital deduction "because the [circuit court] hearing was an adversary proceeding and because the surviving spouse has received the proceeds," he argues that the decision of the State trial court is not controlling in the instant case with respect to the two policies involved herein which were not at issue in that litigation. *202 We disagree with respondent for the reasons indicated below.
Whether the widow acquired more than a terminable interest in the principal proceeds of the policies in issue must be determined from all the facts and circumstances as they would be interpreted under Illinois law. Cf.
In
Speaking first as to the grievance of the taxpayer based on the Board's inclusion of the ordinary trust income, it is necessary to state that one of these New York trusts was construed in
* * * *
Since the trusts must now be construed in accordance with the above decision of the New York court, the statute upon which the Board relied has become inapplicable and to that extent its decision must be reversed.
In the instant case, there were three policies under each of which the rights of the widow depend upon the interpretation or construction of identical contractual language. The Illinois court construed one of the policies as giving the widow the right to draw down the principal proceeds, and that judgment was satisfied and not appealed. In the absence of authorities to the contrary, we are not convinced that the interpretation of these provisions by the Circuit Court of Cook County was other than in accord with the law of the State of Illinois. Accordingly, in*205 the language of the Court of Appeals in the Morris case, supra, "that construction * * * is to be applied here to each of the other [policies]." We therefore hold that the surviving spouse has the power to appoint the principal proceeds of the two policies in favor of herself, and that the total amount of those proceeds qualifies for the marital deduction pursuant to
We do not deem it material under the peculiar facts of the instant case that the authority for our determination of applicable State law is a judgment of a trial court rather than a decision of an appellate court. See
The petition filed herein also assigns as error respondent's determination with respect to the valuation of, and the extent of the widow's interest in, certain realty included in decedent's gross estate. This issue has now been settled by stipulation of the parties and will be reflected in the decision.
Decision will be entered under Rule 50.