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In re Transfer Inheritance Tax Assessment

Decided: January 28, 1972.

IN THE MATTER OF THE TRANSFER INHERITANCE TAX ASSESSMENT IN THE ESTATE OF GERARD BARNES LAMBERT, DECEASED. JOHN W. DRYE, JR., J. RICHARDSON DILWORTH AND BANKERS TRUST COMPANY, EXECUTORS OF THE LAST WILL AND TESTAMENT OF GERARD BARNES LAMBERT, DECEASED, APPELLANTS,
v.
SIDNEY GLASER, ACTING DIRECTOR, DIVISION OF TAXATION, DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY, RESPONDENT



Lewis, Kolovsky and Halpern. The opinion of the court was delivered by Lewis, P.J.A.D.

Lewis

Appellants, executors of the last will and testament of Gerard Barnes Lambert, deceased, challenged the final determination and tax assessment of the Division of Taxation, Transfer Inheritance Tax Bureau (Bureau), with respect to certain property transfers made by decedent during his lifetime.

We affirm substantially for the reasons set forth in the Assistant chief examiner's findings of fact and conclusions of law that were adopted by the Bureau. The issue presented being one of first impression, we deem it advisable to state the salient facts and the controlling principles of law.

In 1934 Lambert purchased 22 single-premium life insurance policies in conjunction with 22 nonrefundable annuity contracts. The total face amount of the single premium insurance policies was $1,800,000, and the payment therefor was $996,422.75. The cost of the annuity contracts was $936,227.25, which guaranteed the purchaser an annual income of $60,443.74 for the remainder of his life. That same year Lambert created an irrevocable inter vivos trust and assigned to the trustees thereof all of the life insurance proceeds, retaining no reversionary or other interest in the policies. He never received any dividends or income from

them. Lambert's children were the primary beneficiaries of the life insurance trust, but they could not benefit therefrom until the grantor's death.

Lambert retained ownership and possession of the annuity contracts and received the annual income therefrom until 1941. Thereafter, and prior to 1953, he made irrevocable assignments of all the income payments to various charitable organizations; he received no benefits from the annuity transaction after 1952.

On February 25, 1967 Lambert died and the trustees collected on the insurance policies a total sum of $2,021,956.56. The Bureau assessed a transfer inheritance tax of $72,105.27 against the proceeds of the insurance trust which was then distributable; this was in addition to the normal taxes on decedent's reported estate of approximately $6,500,000 which are not here involved.

The pivotal issue before us is whether, within the meaning of N.J.S.A. 54:34-1 and the exemption provisions of N.J.S.A. 54:34-4 and 54:34-1.1, the action of the Bureau in levying a transfer tax on the insurance trust was proper. The language of the pertinent statutory provisions reads:

54:34-1 Transfers taxable

Except as provided in section 54:34-4 of this Title, a tax shall be and is hereby imposed at the rates set forth in section 54:34-2 of this Title upon the transfer of property, real or personal, of the value of five hundred dollars ($500.00) or over, or of any interest therein or income therefrom, in trust or otherwise, to or for the use of any transferee, distributee or beneficiary in the following cases:

c. Where real or tangible personal property within this State of a resident of this State or intangible personal property wherever situate of a resident of this State or real or tangible personal property within this State of a non-resident, is transferred by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, ...


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