Appeal from decree of Orphans' Court of Luzerne County, No. 384 of 1964, in re estate of May D. Stegmaier, deceased.
Francis J. Gafford, Deputy Attorney General, with him George B. Ritchie, Special Assistant Attorney General, and Walter E. Alessandroni, Attorney General, for Commonwealth, appellant.
S. Keene Mitchell, Jr., with him Bedford, Waller, Griffith, Darling & Mitchell, for appellee.
Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Eagen. Mr. Justice Roberts dissents. Dissenting Opinion by Mr. Justice Cohen.
The issue herein is whether or not certain funds are subject to payment of the Pennsylvania Inheritance Tax.
The facts stipulated of record are these: William G. Daniels, an employee of the Commonwealth of Pennsylvania, retired on September 20, 1962. He died five days later before receiving payment of any benefits due him under the provisions of the State Employes' Retirement Code, Act of June 1, 1959, P. L. 392, as amended, 71 P.S. § 1725-101 et seq. Before his death, he designated three sisters, Florence C. Allen, Alice M. Daniels and
May D. Stegmaier, as beneficiaries of any unpaid benefits due him at the time of his death. Each was to receive one-third of the amount due. This totaled $7360.44 in each instance, since he had $22,081.32 in the fund at the time of his death. Florence C. Allen and Alice M. Daniels each elected to receive and were paid their respective shares in a lump sum. However, May D. Stegmaier elected*fn1 to leave her share in the State Retirement Fund, and to receive it in the form of a five-year annuity payable in monthly installments of $135.28 each.
At the time of the above election, May D. Stegmaier designated that in the event of her death, any balance of her share remaining unpaid should be paid to her sister, Alice M. Daniels. May D. Stegmaier died March 11, 1964. As of that date, the sum of $5,033.63 remained unpaid. However, since the designated beneficiary, Alice M. Daniels, predeceased her in death (having died on October 23, 1963), the Commonwealth in accordance with the directions of the code paid the balance due to the administrator of May D. Stegmaier's estate.
The above asset was reported by the administrator in his inventory and tax return as not taxable. The Commonwealth assessed inheritance tax thereon. The court below sustained the administrator's position and ruled the funds were not subject to the tax. The Commonwealth appeals.
Determination of the issue presented depends upon the correct interpretation and construction of § 803 of the Act of 1959, supra, 71 P.S. § 1725-803, which provides in relevant part as follows: "[A]ny benefit or right accrued or accruing to any person ...