AGO 1949 No. 171 - Dec 5 1949
WILLS -- POWER OF TESTATOR TO WILL ENTIRE COMMUNITY ESTATE -- DOCTRINE OF ELECTION -- INHERITANCE OR GIFT TAX
1. Generally, testator may not dispose of the one half interest of surviving spouse in community property by will.
2. The doctrine of election is recognized in Washington where the testator clearly shows in his will that he intended to dispose of the entire community estate and the surviving spouse is thus put to her election either to renounce her moiety in the community property and accept the benefits under the will, or demand her community interest; such election may be made either by accepting the benefits of the will at distribution or by waiver or estoppel.
3. An order interpreting a will, where no notice was given to the supervisor, declaring that surviving spouse had been put to her election is not controlling on the Inheritance Tax Division but should not be ignored in the ordinary case.
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December 5, 1949
Ernest C. Huntley, Supervisor
Inheritance Tax Division
State Tax Commission
Olympia, Washington Cite as: AGO 49-51 No. 171
Attention: !ttDaniel S. Bigelow,
You have requested an opinion on the following questions:
"1. Can the one half interest of a surviving spouse in community property in the State of Washington be disposed of by the will of the deceased spouse?
"2. In the event that such a disposition cannot be made under our laws, can the surviving spouse be required to make an election as to whether or not she will take her community interest or whether she will take under the [[Orig. Op. Page 2]] terms of the will, and if she elects to take under the will, what is necessary to make such disposition by the decedent effective?
"3. What binding effect, if any, would a court decree have upon this Division in the matter of levying inheritance tax? Could we ignore the decree and levy our tax on one half of the property in each estate, or are we bound by the holding that the entire property passed in Mr. Hoffman's estate and compelled to tax it all in his estate?"
Our conclusions on the problems presented are summarized as follows:
1. One may not devise property, including community property, which is not owned by the testator;
2. Notwithstanding the above, the surviving spouse may be put to an election whether to take under the will of the deceased spouse or to assert his or her community interest in the property; but, an election to take under the will must be made by a positive act or by accepting the provisions of the decree of distribution made under the terms of the will;
3. Normally, an order of a court interpreting a will, entered without the Inheritance Tax Division being made a party to the proceedings, is not binding on the division for inheritance tax purposes. However, we believe it should not be ignored;
4. Where an election to take under the will is found to have been made, the transferees under the will of the decedent's one half interest would be liable for inheritance taxes, and the surviving spouse would be liable for gift taxes on the remaining one half interest.
You advise that a marital community, domiciled in California, owned community property in Washington. The husband's will stated that all of his property, whether community or separate in nature, of which he died possessed or having an interest therein, shall pass to a trustee for the benefit of his wife and at her death to another; further, that the wife survived but later also died, and pursuant to friendly proceedings for an interpretation of the will, in which the Inheritance Tax Division received no notice and was not made a [[Orig. Op. Page 3]] party, the court determined that the husband by the terms of his will had required his wife to make her election; that she had elected to take under the terms of the will and that all of the property in Washington of the decedents passed under will of the husband and in his estate.
The law of Washington, as well as that of California, is that a testator may not dispose of property which is not his own, and specifically may not devise any of the community estate other than his one half interest therein. SeeStafford v. Stafford, 10 Wn. (2d) 649, 117 P. (2d) 753 (1941); In re:McGovern's Estate, 181 Wash. 231, 42 P. (2d) 796 (1935);Tacoma Savings and Loan Association v. Nadham, 14 Wn. (2d) 576, 128 P. (2d) 982 (1942).
Nevertheless, the doctrine of election is well established in California and has received acceptance in Washington, based principally upon Herrick v. Miller, 69 Wash. 456, 125 Pac. 974 (1912). See also,Andrews v. Kelleher, 124 Wash. 517, 214 Pac. 1056 (1923);Collins v. Collins, 152 Wash. 499, 278 Pac. 187 (1929); Tacoma Savings & Loan Association v. Nadham,supra. From the above authorities it is shown that the court may find such an election, either on the fact of a voluntary renouncement by the surviving spouse or under the laws of waiver and estoppel. It will also be noted that McKay, in his treatise Community Property, speaks of election by the surviving spouse as being a voluntary act, either by renunciation of right to the community property interest, or as implied from other action taken, including waiver or estoppel.
The basic inheritance tax act on transfer of decedent's property in Washington § 1, chapter 55, Laws of 1901, as last amended by § 1, chapter 218, Laws of 1949 [11201 Rem. Supp. 1945, 974-1 PPC 45], provides that all property and any interest therein which would pass by will or under the statues of inheritance shall be subject to said tax. It does not purport to tax the transfer of property which the decedent does not own. For the same reason, i.e., that it is her property and not her deceased husband's, it would seem to follow that the property should not be considered in measuring the tax upon the transfer of the husband's [[Orig. Op. Page 4]] estate if she elects to take under the will. We do not overlook the possibility that it might be argued that the property thus renounced passes by decedent's will and thus is to be considered in measuring the tax on the transfer of decedent's estate; however, in the light of the aforementioned considerations that one spouse can devise no more than his one half interest in the community property, and that by electing to take under the will the survivor is merely renouncing or not enforcing her interest in the property in favor of other benefits given in the will, and in view of the rule of construction that taxing statutes are construed most favorably for the taxpayer, we think it most unlikely that the court would hold that property renounced by the wife passes by the will of the decedent within the meaning of our inheritance tax statute. By such an election, it does seem that said survivor made a voluntary transfer, a gift of her interest, which would be subject to the gift tax act. Chapter 119, Laws of 1941, 11218-11 et seq. Rem. Supp. 1941, PPC 973-1.
It may be that the facts of the instant case do not amount to an election. Where, however, a court of competent jurisdiction has decreed that a testator has put his surviving spouse to her election and that she had elected to take under the will, we believe the Inheritance Tax Division should give considerable credence to it and not ignore the order, even though it would not necessarily be binding on it. SeeIn re: Kreuger's Estate, 11 Wn. (2d) 329, 119 P. (2d) 312 (1941).
Very truly yours,
PHILIP W. RICHARDSON
Assistant Attorney General