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WILSON ESTATE (01/03/50)

January 3, 1950

WILSON ESTATE


Appeal, No. 146, Jan. T., 1949, from decree of Orphans' Court of Philadelphia County, 1947, No. 1586, in Estate of Irving L. Wilson, Deceased. Decree affirmed.

COUNSEL

F. Gilman Spencer, Special Deputy Attorney General, with him Arthur M. Cooper, Francis J. Gafford and George W. Keitel, Deputy Attorneys General and T. McKeen Chidsey, Attorney General, for appellant.

Robert E. Porter, with him Harold D. Greenwell, J. Montgomery Forster and Greenwell & Porter, for appellee.

Before Maxey, C.j., Drew, Linn, Stern, Patterson, Stearne and Jones, JJ.

Author: Stearne

[ 363 Pa. Page 548]

OPINION BY MR. JUSTICE ALLEN M. STEARNE

The Commonwealth has appealed from an assessment of transfer inheritance tax. The Orphans' Court of Philadelphia, two judges dissenting, sustained exceptions to the appraisement by the register of wills. There was allowed as an exempted deduction the balance due by decedent to a bank on his note, secured by collateral consisting, inter alia, of assigned life insurance policies. The policies were on the life of settlor and were payable to designated beneficiaries. The insured reversed the right to assign and to change the beneficiaries. Settlor died. His estate was solvent. The executors paid the debt out of assets of the estate which thus released the collateral, and the policies were re-assigned. The register ruled that when the insured assigned the policies as collateral for his debt, he thereby appropriated the proceeds of the policies (to the extent of the loan) to his estate and made them part of it. The learned hearing judge rejected this contention. He ruled, however, that the trust agreement disclosed an intent by the insured to pay his debt out of the insurance proceeds. The court in banc reversed. This appeal followed.

On July 27, 1945, settlor executed an inter vivos deed of trust wherein the insurance policies were made payable

[ 363 Pa. Page 549]

    to named trustees for the benefit of the designated beneficiaries, viz., named nephews and nieces and their issue. On the same day settlor executed his will (since probated), whereunder his residuary estate was devised and bequeathed to the same trustees as were named in the inter vivos trust deed, and for the same uses and trusts. The deed of trust was clearly identified by the will and referred to by it as being then in existence. The deed thereby became incorporated in the will and formed part of it under the doctrine of "incorporation by reference": Baker's Appeal, 107 Pa. 381; Nelson's Estate, 147 Pa. 160, 23 A. 373; Galli's Estate, 250 Pa. 120, 95 A. 422; Grubb's Estate, 263 Pa. 468, 106 A. 787; Clark v. Dennison, 283 Pa. 285, 129 A. 94; Hogue's Estate, 135 Pa. Superior Ct. 543, 6 A.2d 108.

While the beneficiaries under the will and under the deed are the sae individuals, the proceeds from insurance policies were not thereby blended with the assets of the estate. The same beneficiaries posses a different status under the will from that under the trust. The situation in this case is the reverse from that in Myers's Estate, 309 Pa. 581, 164 A. 611, and Kenin's Trust Estate (No. 1), 343 Pa. 549, 23 A.2d 837. In the present case the insurance proceeds were made payable to designated beneficiaries. In Myers's and Kenin's Estate, the insurance proceeds were directed to be distributed in accordance with the terms of settlor's will. Such designation was ambulatory. The beneficiaries could only be ascertained after death. Such a designation is necessarily testamentary in character and the proceeds form part of settlor's estate. Proceeds of life insurance policies made payable to designated beneficiaries are exempted from transfer inheritance tax: Act of June 20, 1919, P.L. 521, Art. I, sec. 1, as amended by the Act of June 22, 1931 P.L. 690, 72 PS 2301. They form no part of the deceased insured's estate: Weil v. Marquis, 256 Pa. 608,

[ 363 Pa. Page 550101]

A. 70; Townsend Trust, 349 Pa. 162, 36 A.2d 438; Logan Estate, 99 ...


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