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Cruthers v. Neeld

Decided: March 1, 1954.

TACIE IRENE CRUTHERS, INDIVIDUALLY AND AS EXECUTRIX UNDER THE LAST WILL AND TESTAMENT OF THOMAS CRUTHERS, DECEASED, PLAINTIFF-APPELLANT,
v.
AARON K. NEELD, DEPUTY DIRECTOR, DIVISION OF TAXATION, DEPARTMENT OF THE TREASURY OF THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT



On appeal from inheritance tax assessment by the Division of Taxation, Department of the Treasury of the State of New Jersey.

For affirmance -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling, Jacobs and Brennan. For reversal -- None. The opinion of the court was delivered by Wachenfeld, J.

Wachenfeld

The appeal is from an assessment made by the Division of Taxation, Department of the Treasury of the State of New Jersey, of a transfer inheritance tax in the amount of $1,679, plus interest, levied against the plaintiff. We certified the cause on our own motion.

The inquiry is directed toward three contracts issued by an insurance company, to determine whether the proceeds

thereof were properly included in the taxable estate of the decedent, plaintiff's husband, by reason of R.S. 54:34-1(c). That section of the statute imposes a tax where certain property is transferred "by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment at or after such death."

The record consists of a stipulation of facts, supplemented by a copy of one of the pertinent contracts, a related trust agreement, and findings of the inheritance tax examiner.

These papers reveal that Thomas Cruthers, the decedent, had been an executive of Worthington Pump and Machinery Corporation, which entered into a retirement plan and trust agreement dated May 1, 1943, with participating employees and the Fidelity Union Trust Company. In the Agreement the employer, Worthington, promised participating employees to make application to an insurance company for contracts for their benefit. The application was to be made through a retirement committee having the power to determine, "in its uncontrolled discretion, the form of the Contract * * * including who shall be the Beneficiaries and the mode of settlement," and its decision was "conclusive, final and binding" upon all parties to the agreement and upon all persons claiming rights thereunder, including beneficiaries.

In both the application and the contract itself the trustee was designated as sole owner of the contract, subject to the terms and provisions of the trust agreement. Its function was to administer the plan.

Article V of the trust agreement required the contract to contain an option of settlement providing for monthly payments to the participant during his lifetime after the date of his retirement, with a guarantee of 120 monthly payments to him. There was a further requirement that the contract provide for the payment of an amount equal to the unpaid guaranteed benefits to a designated beneficiary or beneficiaries in the event of the death of the participating employee prior to the expiration of ten years after his

retirement date. These provisions were termed the "standard option" of settlement.

In accordance with these and other directives of the trust agreement, Contract No. RA 1500257 of Massachusetts Mutual Life Insurance Company, the insurance company selected by the retirement committee, was issued on May 1, 1943, naming Thomas Cruthers, a participating employee, as the annuitant. This contract is identical with two others under consideration, issued at later dates, with respect to the applications, endorsements and undertakings by the Massachusetts Mutual Life Insurance Company for payment to the beneficiary if the annuitant should die prior to the date fixed for his retirement.

The policy provided Thomas Cruthers was to receive, upon the occasion of his retirement on May 1, 1953, an annuity consisting of a monthly retirement income of $402.50. Should he die before that date, which is what actually occurred here, then the insurance company was obligated to pay to the beneficiary, in one sum, "an amount equal to the cash surrender value hereunder at the date of the death of the annuitant or an amount equal to the total premiums paid ...


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