: .




                    THE      A
                                    OFTEXAS
                                   AUSTIN    11. TEXAS




                                 September    27,   1949


      Honorable Robert S. Calvert
      Comptroller    of Public Accounts
      Aus tin, Texas                          Opinion      No. V-914.

                                              Re:   Inclusion of one-half of caoh
                                                    surrender value of certain
                                                    insurance policies on surviv-
                                                    ing spouse’s   life in deceased
                                                    spouse’s  estate for inherit-
                                                    ance tax purposes.

      Dear   Sirt

                  . YOU have requested    the opinion of this office as to the
      inclusion of one-half   of the cash surrender    value of certain insur-
      ance policies on the life of a surviving spouse in the estate of the
      deceased   spouse for inheritance    tax purposes.    All of the policies
      were acquired after marriage.      All premiums      were paid from com-
      munity funds.   None of the policies have ever been assigned,         and at
      all times the deceased spouse was the beneficiary         of said policies
      although the policies   contained the usual provisions      authorizing   the
      insured to change the beneficiary     at will, etc.   The surviving    spouse
      does not presently    contemplate  surrendering     the policies.

                    In Womack v. Womack,          141 Tex. 299, 172 S.W.2d 307
      (1943), the Supreme Court held that the cash surrender            value of
      policies  of the type above described       was community property.        In
      the Womack case the parties had been divorced in April,             1941, but
      the divorce decree had made no disposition           of four life insurance
      policies,  three insuring the life of the husband and one insuring the
      life of the wife.   The policies     on the life of the husband had a cash
      surrender    value of $1,542.84     at the times of the divorce decree, and
      the cash surrender      value of the policy on the life of the wife was at
      that time $252.00.      All of the policies were obtained during the mar-
      ried life of the husband and wife, and all premiums           were paid from
      their community funds.        All of the other property rights had been
      adjusted, but the legal question as to whether the cash surrender             val-
      ue of the policies    constituted community property was left open for
      determination     by the courts as if no divorce had been granted, to
      the end that the parties should not be prejudiced by the fact that the
      divorce had been granted,        The trial court held that the cash surren-
      der value of the policies      constituted community property at the date
Honorable   Robert   S. Calvert,   Page   2 (V-914)




of the divorce and entered a judgment in favor of the wife for one-
half of the difference between the cash,surrander     value of the pol-
icy upon the life of the wife and the amount of the cash surrender
value of the policies  upon the life of the huabsnd.  The Court of
Civil Appeals affirmed.    The Supreme Court granted writ of eraor
based upon the allegation that the opinion of the Court of Civil Ap-
peals conflicted with the opinion in Whiteselle   v. Northwestern   Mut.
Life Ins. Co., 221 S.W. 575 (Tex, Comm. App. 1920).

             We quote    from   the opinion   of the Supreme   Court:

              “‘Article 4619, Vernon’s    Annotated Civil Stat-
      utes, as amended in 1927, defines community property
      as follows:      ‘All property acquired by either the hus-
      band or wife during marriage,       except that which is the
      separate property of either, shall be deemed the com-
      mon property of the husband and wife; and all the ef-
      fects which the husband and wife possess        at the time
      the marriage       may be dissolved  shall be regarded as
      common effects or gains, unless the contrary be satis-
      factorily proved. ’ ”

The court discussed   the meaning of the word “property”,  quoting
with approval the following excerpt from Titus v. Terkelsen,   302
M.ss.  84, 18 N.E.2d 444, 445 (1939):

             ““It is a word of comprehensive     meaning.  Hol-
      brook v. Brown, 2 Mass. 280, 282; Raymer v. Tax Com-
      missioner,     239 Mass. 410, 413,   132 N.E. 190.  In its
      ordinary legal signification   it “extends to every species
      of valuable right and interest,    and includes real and per-
      ronal property ***‘*”

             The court then stated that it was true that in the early
decisions  of the courts of this country, including the decisions    of
the courts of this State, it bad been held that policies  of life ineur-
ante were not property, but that the history of Article 4619, as a-
mended, clearly showed that the Legislature      intended to give the
term ‘“community property” a broader meaning than it was original-
ly given.

              ‘“The word ‘property” in our bankruptcy laws is
       construed to include the “cash surrender value’ of life
       insurance policies,    and such property right5 pas0 t0
       the crtditors   of the insured,  The courts recognize     the
       right of the insured to pay his creditors    the ‘cash aur-
       render value’ of his policy and retain the policy,      (Cita-
       tion of authorities   omitted,) The courts of this State
       have held that the “cash surrender     value” of a policy is
       property,   and may be considered    and treated as com-
       munity property. ”
.



    Honorable   Robert   S, Calvert,   Page 3 (V-914)




                 The court also pointed out that it had been held that
    the proceeds  of a life insurance policy, taken out by the husband
    and payable to the estate of the decedtnt,  the premiums   of which
    were paid for with community property belonging to the community
    estate, are one-half the property of the wife, and that said part is
    no part of the estate of the husband.

                 The judgments   of the trial court and of the Court of
    Civil Appeals were affirmed.    and the Whiteselle  case, supra, and
    any other case holding contrary to the ruling of the court were ex-
    pressly overruled.

                 In view of this express  holding of the Supreme Court
    we deem it unnecessary     to discuss various Court  of Civil Appeals’
    opinions which hold, under similar facts, #at the cash surrender
    v&lue of such insurance policies is community property,       See Locke
    v. Locke, 143 S.W,2d 637 (ISex. Civ. App. 1940); Russell     v. Run,
    79 S W 2d 639 (Tex, Civ. App, 1934, error dism.), B erdoll v. Berg
    doll, 145 S.W.2d 227 (Tex. Civ, App. 1940, error dism.).

                 Since the cash surrender value of policies  of the type
    here involved is held to be community property,   the value of which
    is divided or accounted for in dividing the community estate when
    marriage   is terminated  by divorce, Womack v. Womack,    supra, it
    is likewise community property at the time marriage     is terminated
    by death, and the share of the deceased  spouse must therefore    con-
    stitute a part of his or her estate,

                 It follows that the value of this share should be included
    in determining    the value of the deceased  spouse’s estate for inherit-
    ance tax purposes, and you are accordingly so advised.

                                       SUMMARY

                 Where community funds were used to pay all prer
          miums on certain insurance policies on life of surviv-
          ing spouse, deceased       spouse being beneficiary   of all
          said policies in which insured retained right to change
          beneficiaries     at will, one-half of the cash surrender vsl-
          ue of the policies at the date of deceased      spouse”s death
          should be included in determining       the value of deceased
          epouse's    estate for inheritance   tax purposes.   Cf, Worn-
          pk v. Womack,        141 Tex, 299, 172 S,W,2d 307 (194F

                                                        Yours   very   truly

    APPROVED                              ATTORNEYGENERALOFTEXAS



                                          g&L&Al~&w
                                             b&s0 Marietta h&Greg              Crool
                                                       Assistant
