Jackson v. United States
1964 U.S. LEXIS 2364, 376 U.S. 503, 11 L. Ed. 2d 871 (1964)
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Rule of Law:
The qualification of an interest in property for the federal estate tax marital deduction must be determined as of the date of the decedent's death. An interest that is contingent upon future events, such as a court order or the spouse surviving to a certain point, is a nondeductible 'terminable interest.'
Facts:
- George Richards died on May 27, 1951, a resident of California, and was survived by his wife, Mrs. Richards.
- Under California law at the time, a widow's right to a support allowance from her deceased husband's estate was not a vested right at the time of his death.
- The right to the allowance would be lost if the widow died or remarried before a probate court issued an order granting it.
- On June 30, 1952, more than a year after her husband's death, a California court granted Mrs. Richards a widow's allowance.
- The order provided for payments of $3,000 per month for a period of 24 months, starting from the date of her husband's death.
- A total of $72,000 was ultimately paid to Mrs. Richards from the estate's corpus as this widow's allowance.
Procedural Posture:
- The estate of George Richards filed a federal estate tax return and claimed the $72,000 paid as a widow's allowance as a marital deduction.
- The Internal Revenue Service disallowed the deduction and assessed a tax deficiency.
- The estate paid the deficiency and filed a claim for a refund, which the IRS denied.
- The estate's representatives sued the United States for a refund in the U.S. District Court.
- The District Court granted summary judgment in favor of the United States.
- Petitioners appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed the district court's decision.
- The U.S. Supreme Court granted certiorari to resolve a conflict among the circuit courts.
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Issue:
Does a California widow's allowance, which is not a vested right at the moment of the decedent's death and can be lost if the widow dies or remarries before the court issues a support order, constitute a 'terminable interest' under § 812(e)(1)(B) of the Internal Revenue Code of 1939, thus making it ineligible for the federal estate tax marital deduction?
Opinions:
Majority - Mr. Justice White
Yes. The California widow's allowance is a nondeductible terminable interest because its eligibility for the marital deduction must be determined at the moment of the decedent's death. The court reasoned that the terminability of an interest must be judged at the precise moment of death, not at a later date such as when a state probate court issues an order. Under California law, Mrs. Richards' right to the allowance was contingent at the moment of her husband's death; it would have failed if she had died or remarried before the court issued its order. Because this contingency existed at the date of death, the interest is 'terminable' as defined by the Internal Revenue Code. The court rejected the argument that the taxability of the funds in the widow's future estate should be the deciding factor, stating that the statutory definition of 'terminability' controls. This conclusion is reinforced by the code's specific, narrow exception for interests contingent on surviving the decedent by six months, which implies that other, longer contingencies are not permissible.
Dissenting - Mr. Justice Douglas
The opinion notes only that Mr. Justice Douglas dissents, without providing any reasoning.
Analysis:
This decision established the 'time of death' rule as the definitive moment for assessing whether an interest qualifies for the marital deduction. It clarifies that state law defines the nature of the property interest, but federal law dictates the timing for assessing its tax characteristics. The ruling prevents post-mortem events, like a favorable court order, from curing an interest that was terminable at death, thereby creating a bright-line rule for estate planners. This holding emphasizes the need for careful will drafting to ensure any interest intended for the marital deduction is indefeasibly vested at the moment of death to avoid being classified as a nondeductible terminable interest.
