Meyer v. United States (364 U.S. 410)/Dissent Douglas

Mr. Justice DOUGLAS, with whom Mr. Justice CLARK and Mr. Justice BRENNAN concur, dissenting.

The decedent had two life insurance policies in two separate companies; and each provided for the payment of the proceeds in 20 annual instalments by monthly payments to decedent's wife, Marion E. Meyer, if living, and thereafter during her lifetime. If the wife was not living at decedent's death, the instalments were to be paid to a daughter. If the wife died after decedent and before payment in full of the instalments, any remaining instalments were to be payable to the daughter. If the wife lived beyond the 20 years, she would be entitled to like monthly payments for her life. Decedent was survived by his wife and daughter, the wife being then 42 years old.

The insurance companies calculated the sums necessary to provide the designated monthly payments for 20 years: $17,956.41 in the case of one policy and $4,012.24 in the case of the other. They then computed the amount necessary to provide a monthly income to the wife in the event she lived beyond the 20-year period: $7,231.09 for one policy; $1,007.36 for the other.

Neither of the policies provided (and decedent did not request) that there be any segregation of the proceeds between the amounts computable for the term certain and for funding of the contingent life annuity. The amounts required to provide monthly payments for 20 years-$17,956.41 and $4,012.24-were not claimed as marital deductions. This controversy concerns only the amount needed to fund the contingent life annuities of the wife-$7,231.09 plus $1,007.36, or $8,238.45, which the executors claim as a marital deduction.

Concededly the amount necessary to make the 20-year payments does not qualify as a marital deduction because it may 'terminate or fail' within the meaning of the Code, the daughter being entitled to any remaining payments during that term should the wife die before it terminates. The daughter, however, has no interest in the annuities payable beyond the 20-year period. And it seems to me that the wife's 'interest' in that part of the insurance contracts does not 'terminate or fail' within the meaning of § 812(e)(1)(B).

If the decedent had taken out one group of policies to pay instalments for 20 years to his wife or, if she died within that period, to his daughter, and another group of policies to pay instalments to his wife for life if she lived more than 20 years, the former would be nondeductible, but the latter would qualify for the marital deduction. Does then the continuation of the two types of insurance in one policy change the result? The Government maintains that it does because in its view the entire insurance proceeds of each policy are a single 'property' as that term is used in the statute; and the Court so holds. Yet, with all deference, that conclusion is wide of the mark.

The Senate Report states that terminable interests include all interests that are subject to contingencies and conditions. Yet these contingencies and conditions are not all-inclusive. They do not include the death of the transferee. And, as I shall show, contingencies of the kind we have here are not included.

The Court, with all deference, errs in making its decision turn on whether the wife's interest after the 20-year term is a separate 'property' within the meaning of the statute. The ruling of the Court is on a statutory provision that does not exist. Under the statute the question is not whether 'property' is terminable; it is whether an 'interest' is terminable. The statute indeed draws a marked distinction between 'property' and 'interest.' Section 812(e)(1)(A) speaks not of 'property,' but of any 'interest' in property. Section 812(e)(1)(B) speaks only of an 'interest passing to the surviving spouse' that will 'terminate or fail.' The statute at these points is concerned with 'interest' in property-not with 'property' Yet the Court, disregarding the statutory scheme, looks only to 'property' and finding but one insurance policy denies the deduction.

Plainly there may be more than one 'interest' in a single 'property.' A deduction is not denied merely because the surviving spouse and someone else each have an 'interest' in the same 'property.' S.Rep. No. 1013, 80th Cong., 2d Sess., Pt. 2, p. 8. The Senate Committee gave several examples: ' * *  * if the decedent by his will devises Blackacre to his wife and son as tenants in common, the marital deduction is allowed, since the surviving spouse's interest is not a terminable interest.'

There seems to me to be a like separation of interests in the present case. These insurance policies created, of course, no fund or res. The sum of $21,968.65 representing the wife's terminable interest and the $8,238.45 representing her other interest were, of course, no more segregated in the insurance companies' assets than a customer's checking account is segregated in a commercial bank. Yet that seems immaterial. Each represented a chose in action. The wife or daughter, as the case might be, could sue for the one during the 20-year period. Only the wife could enforce the claim here in question.

That the proceeds of one life insurance policy may create two or more 'interests' for purposes of the estate tax is implicit in the Senate Report. Thus one example of a marital deduction that is given is an annuity payable to the decedent during his life and to his spouse during her life if she survived him.

'The decedent during his lifetime purchased an annuity     contract under which the annuity was payable during his life      and then to his spouse during her life if she survived him. The value of the interest of the decedent's surviving spouse     in such contract at the death of the decedent is included in      determining the value of his gross estate. A marital     deduction is allowed with respect to the value of such      interest so passing to the decedent's surviving spouse      inasmuch as no other person has an interest in the contract. If upon the death of the surviving spouse the annuity     payments were to continue for a term to her estate, or the      undistributed portion thereof was to be paid to her estate,      the deduction is nevertheless allowable with respect to such      entire interest. If, however, upon the death of the surviving     spouse, the payments are to continue to another person (not      through her estate) or the undistributed fund is to be paid      to such other person, no marital deduction is allowable      inasmuch as an interest passed from the decedent to such      other person.' Id., pp. 12-13.

The last sentence of the foregoing quotation, on which the Court relies, describes with accuracy the terminable 'interest' of the wife in that part of the annuity payable during the 20-year period after the death of the decedent. It has no relevancy to the 'interest' with which we are here concerned, viz., the instalments payable after that 20-year period.

My conclusion is that where the 'interest' that accrues to the surviving spouse is, as here, shared with no one else and is subject to no termination except her own death, it qualifies for a marital deduction under this statute, even though another 'interest' of hers in the same annuity contract would not qualify.