Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1952 No. 411 -
Attorney General Smith Troy


The state inheritance tax does not apply to State Employees' Retirement Annuities.

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                                                              September 30, 1952 

Department of Social Security
Social Security Building
Olympia, Washington                                                                                                              Cite as:  AGO 51-53 No. 411

 Attention:  Loren Keely

Dear Sir:

            You request our opinion

             whether our state inheritance tax applies to State Retirement Fund annuities received by the beneficiary of a deceased state employee.

             We conclude that it does not.


             A state employee who is a member of the State Retirement program may choose certain options under the State Employees' Retirement Fund Act, chapter 41.40 RCW, by which upon his death his designated beneficiary, RCW 41.40.290 (and see RCW 41.40.270), if qualified becomes entitled to the balance of his annuity.  To qualify, a beneficiary must be one to whom regular insurance could have been made payable, that is, he must have an insurable interest in the life of the deceased employee.

             You do not present, and we therefore do not here decide, whether such funds must be inventoried as an asset of the estate when the same is probated.  (See RCW 83.04.010 and RCW 11.44.020.)  Further, we do not here determine whether probate is necessary to the operation of the option although a reading of the entire act would indicate that it is not.

              [[Orig. Op. Page 2]]

            Annuities in general are subject to the inheritance tax, RCW 83.16.020.  Therefore, the question resolves to whether the State Employees' Retirement Act exempts these particular annuities.  We conclude that it does.

             RCW 41.40.380 provides:

             "The right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt fromany state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable except as is in this chapter specifically provided."  (Emphasis supplied)

             Persons, not merelymembers, are exempted from tax.  The term "person" is of broad definition, including not only human but artificial beings such as corporations, Black's Law Dict. (3d Ed. 1933) 1355 et seq., and it is much broader than the limited term "member" defined by RCW 41.40.010 (6) and (7).  (In general, a "member" is a state employee covered by the act.)

             The legislative use of the general term "person" rather than the limited term "member," must be given effect.  We conclude that exemption is not limited to members but is granted to all who could receive under the act.  In other words, the legislature must have intended to grant tax exemption to a larger group of individuals than members; otherwise it would merely have used the latter term.  Such beneficiaries would be the only "persons" other than "members" entitled to receive.

             Further, such annuities are exempted

             "from any state * * * tax."

             The exemption is as broad as generally possible.  Since inheritance taxes are the only state taxes which could apply, the conclusion is only logical that the legislature must have intended exemption from such taxes.

              [[Orig. Op. Page 3]]

            The only manner by which any "person" other than a member could receive or be eligible for such funds, is by the death of a member.  The legislature, therefore, had in mind the beneficiaries of state employees when the broad tax exemption was made.  Normally the employee is the breadwinner and his beneficiary is the surviving spouse or other dependent.  Granting a tax exemption for long-time faithful state service, when there is no tax, and then denying the exemption when the only tax possible could apply and when death places increased financial strain upon survivors and dependents, is consistent neither with logic nor policy.

             We have fully considered and find to be without merit in this instance the argument that an inheritance tax is a tax on a transfer rather than upon the corpus of the funds.  Here the specific intent of the legislature to exempt annuities from all taxes must control.

 Very truly yours,
Attorney General