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LAZAR ESTATE (01/30/70)

decided: January 30, 1970.

LAZAR ESTATE


Appeal from decree of Court of Common Pleas, Orphans' Court Division, of Philadelphia, No. 2621 of 1965, in re estate of Lena G. Lazar, deceased.

COUNSEL

Joseph J. Brown, for appellant.

Francis J. Gafford, Deputy Attorney General, with him William C. Sennett, Attorney General, for Commonwealth, appellee.

Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Cohen. Mr. Justice Jones joins in this opinion. Mr. Chief Justice Bell dissents. Concurring Opinion by Mr. Justice Roberts. Concurring Opinion by Mr. Justice Pomeroy. Mr. Justice Jones joins in this opinion.

Author: Cohen

[ 437 Pa. Page 172]

In this action we are called upon to decide whether the payment of $150,000 in compromise of a disputed claim is a taxable transfer under the Inheritance and Estate Tax Act of 1961, P. L. 373, Art. VI, 72 P.S. § 2485-632.

The relevant facts are as follows. Decedent, Lena G. Lazar (Lena) and Milton C. Lazar (Milton) were married in 1903 and remained married and without issue until his death on September 4, 1947. By written agreement dated May 18, 1947 Milton agreed to maintain

[ 437 Pa. Page 173]

    as his last will and testament his then existing will which bequeathed his entire estate to Lena, and in consideration of such promise, Lena agreed to bequeath three-fourths of the estate which she owned at the time of her death to certain relatives of Milton and to their issue, per stirpes. In explanation of such action, the agreement stated that Milton had received a substantial portion of his existing estate from his parents, that he desired Lena to have entire ownership of the income and principal during her lifetime, and that whatever was left should be returned to Milton's family line.

Milton's will did bequeath his entire estate to Lena. At the time of his death, the value of assets owned jointly by Milton and Lena had an approximate value of $260,000 while the value of assets owned by Milton individually was approximately $1900. As of January 22, 1965, the date of Lena's death, the value of her estate, including the assets of a trust created by her on February 14, 1963, was approximately $786,000. (In the 1947 agreement decedent agreed not to make gifts from the inheritance except normal charitable gifts and gifts to family members in case of financial emergency).

Decedent's last will, dated January 18, 1963, made no bequest to any of the proposed beneficiaries designated in the 1947 agreement with the exception of two who were each bequeathed $25,000. The will further provided for the annulment and revocation of the bequest to any beneficiary who sought to enforce the 1947 agreement. Lena's executor, appellant, took the position that the 1947 agreement was invalid and unenforceable because of the failure of the actual intended consideration and that any claim based on the agreement would cause the forfeiture of any bequest to the claimant. Counsel for all of Milton's then living designees contended that the 1947 agreement was valid and enforceable

[ 437 Pa. Page 174]

    and that said designees were creditors of the estate to the extent of $546,000, three-fourths of the total. Protracted negotiations and litigation involving the validity of the agreement were terminated by stipulation under which $150,000 was paid ...


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