presented while Mrs. Leggett's estate was being audited by the Internal Revenue Service, of the two questions relating to Mrs. Leggett's status as either a fiduciary or a debtor to the remaindermen. Under the circumstances of the case, the answers to these questions were not necessary to a settlement of either estate.
The law governing the determination of what interests were created by the will of William T. Leggett (the testator's intent) is that which was in effect when the testator used the language which is contained in his will. Moltrup's Estate, 424 Pa. 161, 225 A. 2d 676, 680 (1967). At the time the will was executed and at the time the testator died, the Act of 1871, P.L. 269 was in effect. The cases decided under this Act, as well as under the Act of 1834, P.L. 73, and the Act of 1917, P.L. 447, uniformly hold that a devise such as is before this Court creates a debtor-creditor relationship between the life tenant (who has a legal life estate) and the remaindermen, wherein the life tenant is indebted to the remaindermen for the value of the personalty when received by him. Reiff's Appeal, 124 Pa. 145, 16 A. 636 (1889); Kirkpatrick's Estate, 284 Pa. 583, 131 A. 361 (1925). This is true even when the life tenant is not excused from giving security by the terms of the testator's will (this case) and did not, in fact, give security (this case). Strawbridge's Estate, 14 Pa. D. & C. 703 (1931); Gillett's Estate, 130 Pa. Super. 309, 197 A. 517 (1938). See also Powell's Estate, 340 Pa. 404, 17 A. 2d 391, 394 (1941). The Supreme Court of Pennsylvania regards the above-cited cases as correctly reflecting the law as it existed under these three Acts. Gramm's Estate, 420 Pa. 510, 218 A. 2d 342, 345 (1966); Purnell's Estate, 424 Pa. 263, 226 A. 2d 488, 489-490 (1967).
This Court therefore concludes that the bequest contained in the will of William Leggett created a debtor-creditor relationship between the life tenant and the remaindermen. The cases cited clearly show that, contrary to plaintiff's position, in a conveyance of the type in question, a life tenant does not [prior to the Estates Act of 1947, 20 P.S. § 301.13] elect to become a debtor of the remaindermen. This status, under the three Acts named above, is thrust upon him by the very nature of the bequest, unless the terms of the will provide otherwise by naming him a trustee for the remaindermen's interest or unless he petitions the court to appoint a trustee. Here, the life tenant was not appointed trustee by her husband's will and she took no affirmative action during her life to change her relationship vis a vis the remaindermen. Neither did she effectively disclaim her interest under the will.
Having found a debtor-creditor relationship to exist between the life tenant and the remaindermen, this Court concludes that the appreciation in value of the original principal occurring during the life tenant's lifetime is properly includible in her gross estate under § 2033 of the Internal Revenue Code of 1954. Soars v. Graham, 163 F. Supp. 239, (M.D. Pa. 1957), aff'd 256 F.2d 762 (3 cir. 1957). As there is no genuine issue as to any material fact, and in view of the clarity of the Pennsylvania law, the entry of summary judgment for the Government under Fed. R. Civ. P. 56 is appropriate. There is no doubt in the Court's mind that Mrs. Leggett did not regard the principal as her property and that she carefully, meticulously and selflessly managed it for the benefit of the remaindermen, watching it increase in value to an amount seven times that of the original sum. Nevertheless, the law of Pennsylvania, as applied to the facts, requires that the Government prevail.
The plaintiff's objection that cases decided after the year 1909 are not applicable is without merit. The cases relied on by the Court either deal with bequests occurring under one of the three Acts mentioned or summarize the law under one or all of these Acts. The holding of Powell's Estate, supra, for example, with regard to the debtor-creditor relationship between a life tenant with a power to consume and the remainderman [which was overruled by the Estates Act of 1947, Moltrup's Estate, supra] does not invalidate or otherwise render inapposite that decision's analysis of prior case law, as it applies to this case.
The Court's holding is not a retroactive application of the Estate Tax as the tax is being assessed against the estate of Kate Leggett, who died in 1960, and not against the estate of William Leggett who died before the first Federal Estate Tax was enacted (1916). This is not an "ordinary" life estate. See Lowndes and Kramer, Federal Estate and Gift Taxes § 4.6.
In view of the foregoing analysis the Court does not express any opinion on the Government's alternate ground with regard to apportionment of principal and income under the Principal and Income Act of 1947, 20 P.S. § 3470.1 et seq.
AND NOW, November 15, 1968, for the reasons stated above, the motion for summary judgment of the defendant is granted and that of the plaintiff is denied, and the complaint is dismissed.
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