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§ 230

Where Beneficiary Can Exercise Appointment. provision clearly contemplates that there may be cases where it would be impracticable to appraise the property immediately upon the transfer. The court accordingly held that the time for appraising and assessing the tax upon the remainder interests created by this will must therefore be postponed until such time as the clear market value can be ascertained and determined.

555. b. Where Life Tenant Can Exercise a Power of Appointment over the Fund.

Where the life beneficiary is given a power of appointment over the fund held in trust for his benefit, the appraisal and taxation of the remainder estate to which such power relates must be postponed until the exercise thereof, or failure to exercise such power, by the donee thereof, has happened.

In the Matter of Howe, 86 App. Div. 286, 83 N. Y. S. 825, the testatrix bequeathed certain property to a trustee to hold the same for the life of a certain beneficiary, and pay the income therefrom to such beneficiary for his individual use and the use of his family. Upon the death of the life beneficiary the trustee was directed to transfer the trust fund to such persons as the life beneficiary should direct in his will. The court held that the provision of subdivision 5 of section 220, relating to transfers upon the exercise of a power of appointment, had not been repealed by implication by the amendment of section 230 of chapter 76, Laws 1899, taxing immediately all contingent remainders, and that, under the provisions of subdivision 5 of section 220 aforesaid, it is the exercise of the power and not the creation of the power which effects the transfer which the statute makes taxable, and that

When a Voidable Trust Is Created.

§ 230

the remainder was therefore not taxable until the time arrived for the exercise of the testamentary power of appointment conferred upon the life beneficiaries. (Overruling Matter of Le Brun, 39 Misc. Rep. 516, 80 N. Y. S. 486); affd., 176 N. Y. 570.

In the Matter of Clarke, 39 Misc. Rep. 73, 78 N. Y. S. 869, it was held that a remainder was not presently taxable where it is limited to children of a life tenant, or her appointees by will, and she is not shown to have any children, as, in such case, no transfer, defeasible or otherwise, of the remainder has yet been made.

556. Words Not Enlarging a Life Estate.

A devise and bequest by a testator of all "the rest, residue, and remainder" of his estate, real and personal, to his wife," and after her death I give and bequeath the remainder thereof as follows" affords no basis for the contention that the words "the remainder thereof " by implication give the wife a right to use the principal, and the interests of remaindermen are presently determinable and subject to transfer tax. Matter of Runice, 36 Misc. Rep. 607, 73 N. Y. S. 1120.

557. Discretionary Power to Beneficiary to Use Principal Creates a Voidable Trust.

A trust accompanied by a discretionary power to the life beneficiary of the income, to use such part of the principal as she may demand or need for her own use or that of her children, gives her the absolute ownership of the principal, if she so elects and makes the trust voidable. Solley v. Westcott, 43 Misc. Rep. 188, 88 N. Y. S. 297.

§ 230

Value of Annuity - How Ascertained.

558. Annuities, Value of, How Ascertained.

The value of an annuity should be ascertained by the rule of mortality employed by the Superintendent of Insurance in ascertaining the value of policies of life insurance and annuities (§ 230), and on the value so determined the transfer tax becomes payable forthwith out of the principal set apart for creating the annuity. Matter of Tracy, 179 N. Y. 501.

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Where a fund out of which the transfer tax is to be paid is the residuary estate of the testator, the tax paid on the annuity is to be returned to the residuary estate by deducting from each annual payment of the annuity a proportionate part of such tax, to be ascertained by dividing the amount of the tax paid by the number of years the annuity will probably continue. Matter of Tracy, 179 N. Y. 501.

560. Id. Tax on Fund Subject to Annuities.

Where decedent's widow is given a life estate in his personal property, subject to an annuity to a sister for life, and the payment of a certain sum daily to his brother for life, in calculating the present value of the widow's life estate it is proper to deduct from the net value of the personal estate the present value of the annuities instead of deducting therefrom the actual amount set aside as necessary to produce the annuities. Matter of Maresi, 74 App. Div. 76, 77 N. Y. S. 76.

561. Id. When Cost of Annuity Determines Its Value, as Affecting the Residuary Estate.

In the Matter of Hutchinson, N. Y. Law Journal of Jan. 13, 1905, Surrogate Thomas held, that where the

Id.; When Cost of, Determines Value.

§ 230

decedent requested his executors" to arrange for certain annuities" through specified insurance companies, the cost of such annuities should be deducted from the residuary estate, and not their present value as shown by the Superintendent of Insurance, it appearing that the actual cost was upward of $19,000 more than the appraised present value. Distinguishing Matter of Maresi, 74 App. Div. 76, 77 N. Y. S. 76, and Matter of Tracy, 179 N. Y. 501, it appearing in those cases that the annuities were to be raised from funds set apart for such purpose, which funds would revert to the residuary estate upon the death of the annuitants. The State Comptroller appealed to the Appellate Division of the First department from the order of the surrogate, and on June 23, 1905, that court handed down a decision affirming the order of the surrogate. Mr. Justice Ingraham states in the opinion, that by the provisions of section 230 of the Transfer Tax Law, it is the value of the annuity to the annuitant, or the value of the interest to the person to whom such interest is given that is taxable, and which this section regulates; and, therefore, it is the value of these annuities to the annuitants which the statute contemplated should be determined by the method described; that the executors followed the direction in the will and purchased the annuities from the two life insurance companies designated by the testator, to obtain which they were required to pay a certain sum of money, and having elected that these annuities should be chargeable upon the property in this State, the question upon the appeal is, "What is the value of the property transferred by the will to the Tulane University (the residuary legatee) which is subject to taxation?

it would seem that the tax upon that trans

§ 230

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Tax on Remainders Presently Payable.

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fer is to be based upon the amount that the residuary legatee will actually receive, and not upon an assumed value of an annuity to somebody else in which the residuary legatee has no possible interest." It follows therefore that the surrogate was right in directing a reappraisement which should fix the value of the interest of the residuary legatee in the amount that it will actually receive, by virtue of the transfer of the property of the decedent within this State." Matter of Hutchinson, 105 App. Div. 487. 562. Tax on Remainders in Trust Estates Since 1899 Are Presently Payable.

Where testator devised his residuary estate in trust for the benefit of his wife and daughter during their lifetimes, with remainder to his next of kin and heirs. at-law, or to the lawful issue of the daughter — held, that the transfer tax to which the estate in remainder was subject was presently payable; that the Legislature, by the amendment to section 230 (chap. 76, L. 1899) intended to change the law upon the subject, and to make the transfer tax upon property transferred in trust payable forthwith out of the property transferred. Matter of Huber, 86 App. Div. 458-461, 83 N. Y. S. 769. Citing Matter of Vanderbilt, 172 N. Y. 69; Matter of Brez, 172 N. Y. 609.

In the Huber case (supra) the decedent stated in his will: "It is my intention by this my last will and testament to dispose of all the property which I may now possess or may hereafter acquire, and more particularly all my right, title, and interest in and to all property, both real and personal, which I may have or hereafter acquire in the estate of my deceased father, which interest is now subject to the life estate of my mother," and the court held that the interest of Otto

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