CHAPTER V.

WHAT LAW GOVERNS.

PLACE.

19. Law of Domicile of Decedent. Change of Domicile. § 20. Power of Appointment.

§ 21. Extraterritorial Effect of Judgment as to Domicile.

Law of Domicile of Decedent.

Sec. 19.
Domicile.

Change of

Inheritance taxes may not apply to the estates of non-residents,1 unless such estates are specifically included. The law of the domicile of the decedent governs the rate of tax and the persons liable.3

Where the grantor, after making a deed in trust to assign the property in accordance with her will, moved from Pennsylvania, where the trustee resided, to New York, where she died, the court holds that the change in the domicile of the grantor did not affect the right of the state to collect the tax, that the statute grasped the estate when one citizen created the trust with the features described and made this the domicile or situs of the estate. As the grantor could not take the property out of its jurisdiction by any act of hers, so she could not make it follow her or affect it with any incidents of the new domicile when she removed.*

1 United States v. Morris, 27 Fed. 341. United States v. Hunnewell, 13 Fed. 617, aliens.

The question whether the statute of 1898, section 29, imposes a legacy tax upon the estates of persons who are not domiciled in the United States at the time of death, is not free from doubt, and the attorney general declines to give any opinion upon it. 23 Opinions of the Attorney General, 221 (September 7, 1900).

"In England the question of probate duty depends upon the situs of the property and not the domicile of the owner. Attorney General v. Hope, 1 Cromp., Mes. & Ros., 530. It was for some time held that the legacy duty imposed by 36 Geo. III, ch. 52, and 48 Geo. III, ch. 149, depended upon the same consideration. Attorney General v. Cockerell, 1 Price, 560. But these cases were overruled in Thompson v. Advocate General, 12 Clark & Fin. 1; and the principle was settled that the law of the domicile of the owner of personal property determines its liability to legacy duty. The same rule was adopted in respect to the succession duty under 16 and 17 Vic., ch. 51. Wallace v. Attorney General, L. R. 1 Ch. App. c. 1. In the case last referred to, Lord Chancellor Cranworth said,

'Parliament has, no doubt, the power of taxing the succession of foreigners to their personal property in this country; but I can hardly think we ought to presume such an intention unless it is clearly stated.' Thus whilst the power of Parliament to impose the tax without reference at all to the subject of domicile is distinctly recognized, it was held that the language of the acts did not furnish any indication of an intention to exercise that power, and that, therefore, the law of the domicile of the owner fixed the liability of his property to pay these taxes. In our opinion, for the reasons we have given, the Maryland statute cannot be so construed." Per McSherry, J., in State v. Dalrymple, 70 Md. 294, 304, 17 A. 82, 3 L. R. A. 372. See further, post, Chapter XXVIII.

2 Most states now tax the property in the state of non-residents. See tables, post, p. 1285.

3 The testator while a citizen of France married, and under French law his wife was entitled to one-half of his property on his death; but the court holds that where he afterwards becomes a citizen of New York and owns property there one-half his property is not exempt from taxation on the ground that it belongs to his wife. In re Majot, 135 N. Y. App. Div. 409, 119 N. Y. Suppl. 888. See post, s. 288.

The intestate died a citizen of Kentucky having personal property in Tennessee. Under the laws of Kentucky his mother was the sole distributee, while under the laws of Tennessee his brother would take one-half of the estate. Under Tenn. St. 1893, c. 174, s. 1, this property is not subject to tax, as it is settled that if one dies domiciled in a foreign state leaving personal property in this state the laws of the domicile of the deceased will determine who are entitled to the surplus after the payment of debts. Fidelity & Deposit Co. v. Crenshaw, 120 Tenn. 531, 110 S. W. 1017.

Conversion. A note in 19 Harvard Law Review, pp. 201, 202, discusses conversion and suggests that the question as to whether a conversion has taken place must be determined by the law of the state where the land is situate, since that state alone has dominion over the property. But if it is determined that there is a conversion succession will occur by the law of the decedent's domicile as in the case of other personalty.

Findings as to Domicile. The court upholds a finding as to domicile in Pittsfield, where it appears that it was the only place where the testator ever voted or paid a personal tax, and that he continued to return there to his home with a friend to the very time of his death, and died there, that he declared that to be his home, and made it a point to return there and vote at the presidential elections when his business interests would permit. In re Dalrymple, 215 Pa. St. 367, 371, 64 A. 554.

Under the Illinois inheritance tax a man is a resident of Illinois who has lived in Illinois for some years and who has declared his intention of moving out of the state as soon as his business is settled. He was taken ill and went to the house of a daughter in another state, where he died. The facts show that he went to his daughter's house for a temporary purpose only. In re Moir, 207 Ill. 180, 69 N. E. 905, 99 Am. St. Rep. 205. As to disputed domicile see further, post, s. 192.

* Commonwealth v. Kuhn, 2 Pa. Co. Ct. 248.

Sec. 20. Power of Appointment.

Where a testator died in 1870 a resident of New York, leaving a will under which he gave his daughter a life estate with a power of appointment, and the daughter died in 1908, being a resident of the state of Rhode Island, leaving a will by which she exercised the power, no tax can be imposed under New York law, as the life tenant in making her will exercised a privilege granted by the laws of her own state, and not by those of the state of New York.

In re Fearing, 200 N. Y. 340, 93 N. E. 956, affirming 123 N. Y. Suppl. 396. As to powers, see further, post, s. 139 et seq.

Sec. 21. Extraterritorial Effect of Judgment as to Domicile. The decision of one state as to domicile is binding on courts in other states.

Where a will was probated by the probate court of New Jersey which found that the deceased was a resident of New Jersey, this decree is entitled to full faith and credit under the federal constitution in another state and is a bar in the courts of another state against an attempt in the latter state to enforce a claim for the inheritance tax on the ground that the testator was domiciled there at the time of his death. Tilt v. Kelsey, 207 U. S. 43, 52 L. Ed. 95, reversing 182 N. Y. 557. See, however, In re Hartman, 70 N. J. Eq. 664, 62 A. 560; In re Cummings, 142 N. Y. App. Div. 377, 127 N. Y. Suppl. 109, reversing 63 Misc. 621, 118 N. Y. Suppl. 684. See also, post, s. 192.

The action of the court of the domicile as to distribution of assets may be binding on the court of the jurisdiction where the assets are, on the question of marshaling assets. In re Clark, 37 Wash. 671, 80 P. 267.

Sec. 22. Law at Death of Decedent.

The substantive rights of the state and the taxpayer in an inheritance tax depend on the law in force at the death of the decedent,' even under a will executed before the passage of the statute in force at his death,2 and not on the time the remainder falls in, but the procedure governing its collection will depend on the law in force at the date when the proceedings began.4

In re

1In re Stanford's Estate, 126 Cal. 112, 58 P. 462, 45 L. R. A. 788. Trippet v. State, 149 Cal. 521, 86 P. 1084, 8 L. R. A. (N. S.) 1210. In re Woodard's Estate, 153 Cal. 39, 94 P. 242. Crocker v. Shaw, 174 Mass. 266, 54 N. E. 549. State v. Switzler, 143 Mo. 287, 330, 45 S. W. 245, 40 L. R. A. 280, 65 Am. St. Rep. 653. In re Fayerweather, 143 N. Y. 114, 38 N. E. 278, right to interest. Davis, 149 N. Y. 539, 545, 44 N. E. 185, affirming 91 Hun 53. In re Sloane, 154 N. Y. 109, 47 N. E. 978, 19 N. Y. App. Div. 411, 46 N. Y. Suppl. 264. In re Milne, 76 Hun 328, 27 N. Y. Suppl. 727, penalties and interest. In re Sterling, 9 Misc. Rep. 224, 30 N. Y. Suppl. 385.

N. Y. St. 1885, c. 483, which was approved June 10, 1885, did not take effect until twenty days after its passage, and therefore no tax could be levied on the estate of a testatrix who died June 16, 1885. In re Howe, 112 N. Y. 100, 19 N. E. 513, 2 L. R. A. 825, affirming 48 Hun 235. (Law governing action for refunding, post, s. 414).

2 In re Seaman, 147 N. Y. 69, 77, 41 N. E. 401, reversing 87 Hun 619. "Where the testator died in 1828, leaving a life tenant who died in 1864, the whole estate passed in 1828, and the tax on the remainder interest is payable at the rate under the statute in force in 1828 of two and one-half per cent and not under the higher rate in force on the death of the life tenant. Commonwealth v. Eckhert, 53 Pa. St. (3 P. F. Smith) 102.

In re Sloane, 154 N. Y. 109, 47 N. E. 978, 19 N. Y. App. Div. 411, 46 N. Y. Suppl. 264. In re Davis, 149 N. Y. 539, 545, 44 N. E. 185, affirming 91 Hun 53. See further, Proceedings for collection, post, s. 395 et seq.

Sec. 23. Effect of Unconstitutional Statute.

Where an unconstitutional statute was nominally in force at the date of a certain transfer, and after the transfer was made a valid law was passed, the transfer is subject to no tax whatever. The act was void from the beginning and its nominal existence in no way affected the validity of the transactions.1 So an unconstitutional amendment has no effect on the original act.2

1State v. Probate Court, Washington County, 102 Minn. 268, 285, 113 N. W. 888. 2Eastwood v. Russell (N. J 1911), 81 A. 108.

Sec. 24. Property in Hands of Trustee.

A trustee who at the time of the passage of the inheritance tax act held personal property upon a trust under a will to be distributed on a future date is not “a person possessed" of such property. Personal estate passing under the intestate laws passes from the intestate himself and never from the administrator.

McClain v. Pennsylvania Co. for Insurance and Annuities, 108 Fed. 618, 47 C. C. A. 529.

Trustee's Commissions. Where the testator died March 27, 1845, the court holds that the commissions of the trustees were subject to a tax of ten per cent in favor of the state imposed by the act of 1844, c. 187, which went into effect June 2, 1845. Williams v. Mosher, 6 Gill (Md.) 339.

Sec. 25. Gifts Causa Mortis.

Gifts causa mortis are governed by the law in effect at the death of the donor.

In re Seaman, 147 N. Y. 69, 77, 41 N. E. 401, reversing 87 Hun 619 (under N. Y. St. 1892, providing for the imposition of a tax when any person becomes beneficially entitled by any such transfer "whether made before or after the passage of this act"). See also, post, s. 99.

Sec. 26. Deed Inter Vivos.

A deed inter vivos is governed by the law of the date of the transfer.

Minn. St. 1905, c. 288, has no application to property which was actually sold and disposed of before the date of its enactment. Washington County, 102 Minn. 268, 285, 113 N. W. 888. Shaw, 174 Mass. 266, 54 N. E. 549, reported fully under further, post, s. 99.

State v. Probate Court, But see also Crocker v. post, s. 141, n. 3. See