On appeal from the Tax Court of New Jersey, whose opinion is reported at 9 N.J. Tax 419 (Tax Ct. 1987).
J. H. Coleman, Deighan and Baime.
[232 NJSuper Page 438] Defendant, The Director of the Division of Taxation, Transfer Inheritance Tax Bureau (Director), appeals from a judgment of
the Tax Court holding that the use of gender-based mortality tables in evaluating life estates is unconstitutional because it discriminates against women. Plaintiff, the Estate of David M. Darrin, cross-appeals from the Tax Court's affirmance of a compromise tax which the defendant assessed on the contingent remainder interest in the life estate of Margaret Darrin, David Darrin's widow. The matter was heard on cross-motions for summary judgment. Darrin Est. v. Taxation Div. Director, 9 N.J. Tax. 419, 420 (N.J. Tax. Ct.1987). The parties stipulated to the following facts concerning defendant's calculation of the direct tax on the surviving wife, Margaret A. Darrin's life estate.
David M. Darrin died testate on June 6, 1983. He was survived by his wife, Margaret A. Darrin, who was 58 years old on the date of his death, as well as by three sons, David, Timothy and Drake. His will created a marital trust, with income from the trust to be paid to his wife during her lifetime. The will further provided that the trustee could pay to her such principal as the trustee, in his discretion, felt was advisable for her health, support and maintenance and best interests. Upon decedent's wife's death, the corpus of the trust is to be distributed among decedent's issue, either as his wife shall appoint under a power of appointment limited to one or more of a class consisting of decedent's issue or, if she fails to appoint, as directed in decedent's will. Under his will, decedent provided that all death taxes be paid by the executor from the residuary estate.
On July 10, 1984, decedent's executor filed a New Jersey inheritance tax affidavit which listed a total estate of several million dollars. The executor made payments on account of the New Jersey transfer inheritance taxes assessable against the estate on February 6, 1984, July 12, 1984 and July 9, 1985. On March 21, 1986, the Director sent to the executor a statement for direct taxes assessed against the estate and also a suggested compromise tax on the contingent interests, and a copy of
the computation of the tax. An additional assessment for contingent interest was made for the direct taxes.
The parties stipulated to the following facts concerning defendant's calculation of the direct tax on Margaret Darrin's life estate.
In evaluating life estates, the Director applied factors set forth in separate tables for males and females published in an Internal Revenue Service pamphlet, Publication 823A (December 1970): Actuarial Values II, Factors at 6% Involving One and Two Lives (hereafter publication 723A). Prior to 1977, the Director used unisex tables in evaluating life estates but switched to gender-based tables after the enactment of L. 1977, c. 219, codified at N.J.S.A. 54:36-2. The statute directs that, in determining the value of a life estate, annuity, or estate for a term of years, United States life tables, single life male 6% and single life female 6%, published by the United States Department of Health, Education and Welfare, are to be used with respect to estates of decedents dying on or after January 1, 1978. The Department of Health, Education and Welfare never published such tables, although it did publish certain tables labelled United States Life Tables: 1959-61, publication 1252.
Publication 723A apparently uses the mortality figures in publication 1252, with some technical adjustments, to develop its 6% life tables. The mortality figures published by publication 1252 can be used to compute the present worth of life estates on either a gender-based or sex neutral basis, assuming a 6% annual interest rate. In 1983, the federal government ceased using the gender-based tables currently used by the Director and now uses unisex tables to value life estates, annuities and remainders as required by Treasury regulations § 20,2031-7.
The Director computed the value of Margaret Darrin's life estate in the marital trust by multiplying the value of the trust by the factor for a female age 58 ...