Hen, Gee. H. Sheppard                     Opinion No. V-668
Comptroller   of Public Accounts
Austin, Texas                             Re:   Whether    inheritance
                                                tax due on receipt of
                                                decedent’s   interest
                                                in certain life iasur-
                                                ante policies.

Dear Sir:

           You have requested the opinion of this office en the
above-captioned   matter under submitted facts whick we quote
from your letter of March 10, 1948:

           “John H. Frost II died en December   15, 1945,
     . . . He died testate and appointed the Frost  Na-
     tional Bank of San Antonio executor of his estate.

           “An inheritance   tax report for his estate has
     been filed, and the value of all assets reperted by
     the executor has been agreed upen between the ex-
     ecutor and this department;     but there is a contro-
     versy between the executor and this department as
     to the inclusion of the c,ash value of six insurance
     pelicies taken out by decedent’s    father upan his
     own life and assigned in 1937 to the decedent and
     his brother jointly, or the survivor of them.     Both
     J. H. Frost, SP.,   the father, and  J. H. Frost, Jr.,
     the brother,   survive decedent.

          “Upon the date of death of John H. Frost II, the
     six insurance policies had a cash surrender      value
     of $181,254.81,  and we have included one-half of this
     value ($9Q,627.40)   as a part of the estate of John H.
     Frost II. By this inclusion,    the tax has been increas-
     ed approximately    $4,483,0@..   I 01s

Further information    regarding the nature of the decedent’s    in-
terest in the policies is given in the accompanying    letter ef t~he
attorney for the executor, which letter contains copies of the
assignment   of the Great Southern Life Insurance policy (in the
amount of $50,000),    the +equests for change of life owner on
five Aetna Life Insurance policies (in the total amount of $4OO,-
000), and the endorsements     on the five policies showing the
Hon. Geo.    H. Sheppard,   Page   2 (V-668)



change of Life Owner.    The Great Southern Life policy was as-
signed to “Joseph Hardin Frost, Jr., and John Frost, II, share
and share alike or survivor,  . .‘I., and the Life Owner designation
on four of the Aetna policies reads, in part, as follows:

           “Until the death of Joseph H. Frost, Jr. and
    John Frost, II, sons of the insured, said sons,
    jointly, or the survivor   shall be the life owner.

         “After the death of the survivor  of said sons
    the executors   or administrators of such survivor
    shall be the life owner.”

          The life owner designation    of the fifth policy, No. N-,797,-
783 omitted the words, “or survivor * following “jointly.”         The at-
torney’s letter states that “the discrepancy     between the request
for change and the endorsement      made on the policy was apparent-
ly due to an error in transcribing    from the request to the endorse-
ment and that the request for change Andythe intention of J. H. Frost,
Sr. as shown in that request.    . . was controlling.*    We concur in
this conclusion,  particularly in view of the provision     relating to the
death of the survivor.

           To recapitulate, J. H. Frost, Sr., who is still alive, took
out policies of insurance   payable to his two sons, John Frost      II and
J. H. Frost, Jr. In addition to being beneficiaries,     the two sons be-
came, by virtue of the assignments     described   above, the owners of
the policies and entitled to various benefits thereunder,     including
the cash surrender value of the policies.     One of the s’ons, John
Frost   II, has now died; and the question is whether the receipt of
his interest in these policies by the surviving son is subject to the
Inheritance    Tax levied by Article  7117, V.C.S.

            The pertinent   provisions   of Article   7117 are as follows:

           “‘All ‘property within the jurisdiction     of this State,
     real or personal,     corporate  or incorporate,     and any
     interest therein, including property passing under a
     general power of appointment exercised           by the dece-
     dent by will, including the proceeds       of life insurance
     to the extent of the amount receivable        by the executor
     or administrator     as insurance under policies taken
     out by the decedent upon his own life, and to the ex-
     tent of the excess over Forty Thousand Dollars ($40,-
     OO@.O,) of the amount receivable      by all other benefi-
     ciaries as insurance under policies taken out by the
     decedent upon his own life, whether belonging to in-
     habitants cf this State or to persons who are not in-
     habitants. rssardltss of whether such property is lo-
     catedlwitbin tr wltkout this State, which shall pass
Hon. Geo.   H. Sheppard,   Page   3 (V-668)




     absolutely   or in trust by will or by the laws of de-
     scent or distribution    of this or any other State, or
     by deed, grant, sale, or gift made or intended to
     take effect in possession     or enjoyment after the
     death of the grantor or donor, shall, upon passing
     to er for the use of any person,     corporation,  or
     association,   be subject to a tax for the benefit of
     the State’s General Revenue Fund, in accordance
     with the fallowing classification;    . . .”

           The attorneys for the executor take the position that
 “the assignment      of the Great Southern Life policy and the en-
dorsements      on the Aetna Life policies by their terms constituted
Joseph Hardin Frost, Jr. and John Frost II, joint owners, with
right of survivorship;      0 that “the contractual provisions   for sur-
vivorship resulted in the policies being owned by Joseph Hardin
Frost, Jr. and John Frost II as joint tenants, with right of sur-
vivorship.    . . ‘with all the rights of such tenants in common law,
including the right of survivorship;‘”       and that the provisions   of
Article 7117, above quoted, do not impose a tax upon the privi-
lege of receiving      an interest in a joint tenancy by the surviving
joint tenant.

          Although Article  2580, V.C.S.,    abolished the doctrine
of jus accrescendi  in this State, it is settled that parties may, by
contract, will, or deed of conveyance,     create a common law joint
tenancy, with its accompanying     incident of survivorship.   Chandler
v. Kountze, 130 S.W. 2d 327.

          The first question, then, is whether ar not a common          law
joint tenancy has, in fact, been created in this case.

           “In a joint tenancy there are said by Blackstone         to be
four unities, to wit, unity of interest, unity of title, unity of time,
and unity of possession,     or, in other words, joint tenants have
one and the same interest accruing by one and the same convey-
ance, commencing       at one and the same time, and held by one and
the same undivided possession.         Of these unities, only the unity
of possession    exists in all forms of co-ownership.”        Tiffany, Law
of Real Property,     § 418. The joint tenants have together but one
estate which each joint tenant awns conjointly with the other co-
tenant.   “Each joint tenant is regarded as the tenant of the whole
for purposes of tenure and survivorship,        while for purposes of
alienation and forfeiture    each has an undivided share only . / .
The leading characteristic      of joint tenancy is the fact that, on
the death of one joint tenant, the other joint tenant or tenants who
may survive him, if it is an estate of inheritance,       have the whole
estate. . . The survivor takes no new title by survivorship,            but
holds under the deed by virtue of which he was originally            seized
of the whole.”    Tiffany, Law of Real Property,       58418,   419.
Hon. Geo.       H. Sheppard,   Page 4 (V-668)




          The law is well settled that a joint tenancy may exist in
personal property.     11 Tex. Jur. 418.     In the brief submitted by
the attorneys for the executor the various characteristics          of a
joint tenancy are discussed     in some detail, and much emphasis
is placed on the doctrine of survivorship       as the distinguishing
incident of title by joint tenancy for the purpose of supporting
their contention that these policies were held in joint tenancy.
However, no mention is made of the fact that the destruction           of
any one of the aforenamed     unities results in a ‘severance”       of
the joint tenancy.   For example,     if one of two joint tenants dis-
poses of his interest,   the other joint tenant and the grantee be-
come tenants in common.       Tiffany, Law of Real Property,        g 425.
In other words “by its very nature a joint tenancy is always re-
vocable by conveyance     at the option of either joint tenant.”      Glea-
son and Otis, Inheritance Taxatian.        We think that the assignment
of the Great Southern Life policy, the requests for change, and
the endorsements    on the Aetna policies deny this option to the co-
tenants of these policies.    The brief of the attorneys for the ex-
ecutor contains a copy of a letter dated April 14, 1948, from Mr.
D. P. Cavanaugh, a member        of the Legal Department      of the Aetna
Life Insurance Company, to Mr. E. A. Sibley, Trust Officer of the
Frost National Bank.      We quote the following excerpt from this
letter:

          “While John Frost II and Joseph Frost, Jr., were
     both living we would not have allowed either of them
     to take any action with respect to these policies ex-
     cept by their joint action.”

This result is in line with Tiffany’s criticism   of regarding a gift
to two or more persons and the survivor      or survivors   of them as
showing an intention to create a joint tenancy.    The following quo-
tation is taken from Tiffany on Real Property,     § 425:
            ”
            . . . But whether the mere fact that the donor in-
     dicates an intention that the survivor       or survivors
     shall take should be given such an effect appears to
     be opento question.     The right of survimrship        is mere-
     ly one incident of a joint tenancy.      Another incident of
     such tenancy is that any one of the tenants can destroy
     it, with the incidental right of survivorship,      by a con-
     veyance to a third persan, and when one makes a gift
     to two or more with the right of survivorship,         it ap-
     pears to be a reasonable      canclusion    that he has in
     mind an indestructible     right of survivorship.     The
     view that there is in such a case a tenancy in common
     for life with a contingent remainder       in favor of the
     survivor,    or even that there is a tenancy in common
     in fee simple with an executory       limitation in favor of
     the survivor,    might seem more in accord with the in-
     tention of the grantor l r testator .”
.-




     Hon. Gee.   H. Sheppard,    Page   5 (V-668)




                Holding, as we do, that no joint tenancy existed in these
     policies,  it is not necessary     to decide whether or not the privilege
     of receiving     the interest of a deceased joint tenant may be subject
     to tax by virtue of the provisions       of Article   7117, V.C.S.    Nor in
     the view we take of the language of that article is it necessary            to
     decide the exact nature of the interest of John H. Frost11 in these
     policies.   Article    7117 taxes “property     . . . passing under a gen-
     eral power of appointment exercised          by the decedent by will. . .‘I
     This provision is obviously inapplicable          as is the provision re-
     garding insurance       “under policies taken out by the decedent upon
     his own life.” (Emphasis       added) Nor did the “property        , . . pass
     absomely      or in trust by will or by the laws of descent and dis-
     tribution,   , .‘I The only provision, left is that which makes sub-
     ject to tax transfers      “by deed, grant, sale or gift made or intend-
     ed to take effect in possession       or enjoyment after the death of the
     grantor or donor. . .” As to this provision,          John Frost II was not
      the “grantor or donor “‘of his interest but was, in fact, one of two
     donees, who took his interest subject to the condition made by the
     original donor, by virtue of which condition his interest ceased at
     his death and passed to Joseph H. Frost, Jr,

                We are therefore of the opinion that the receipt of John
     H. Frost II’s interest in the six insurance policies was not accom-
     plished by any of the methods of transfer enumerated in Article
     7117, V.C.S.    If the Legislature    so desires,   this type of transfer
     could result in the imposition of inheritance        taxes by the inclusion
     in Article  7117 of a provision similar to that found in Section 811(e)
     of the Federal Estate Tax Act, Ch. 3, Title 26, Internal Revenue
     Code, U.S.C.A.      This provision    of the Federal Act applies to and
     brings within the scope of the Act all classes         of property whether
     real or personal in case the survivor takes the entire interest
     therein by right of survivorship,       and no interest therein forms a
     part of the decedent’s    estate for purposes     of administration.      Reg.
     105, Sec. 81.22; Paul, Federal Estate and Gift Taxation,          Vol. 1. §
     8.04,   However, until some such provision is embodied in our law,
     the receipt of a decedent’s     interest which is accomplished        in the
     manner presented by the facts of this case escapes the provisions
     of our Inheritance    Tax Law; and no tax is due the State by reason
     of the provisions    of Ch. 5, Title 122, V.C.S.

                                   SUMMARY

               Where a third party makes a valid gift of insur-
          ance policies on his own life to two persons *or sur-
          vivor , ” neither co-owner  having the right acting alone
          to affect the interest of the other in the policies or
          his right to take as survivor,   no inheritance  tax is
Hon. Geo.   H. Sheppard,   Page    6 (V-668)




    levied by Article  7117,      V.C.S., on the survivor’s
    receipt of the deceased       co-owner’s interest.


                                         Yours     very    truly

                               ATTORNEYGENERALOF                   TEXAS



                               pJy
                                 BL&                           (I?&!.&
                                      Mrs.     M&rietta    Creel
                                               Assistant

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