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U.S. Supreme Court

Fidelity-Philadelphia Trust Co. v. Smith, 356 U.S. 274 (1958)

Fidelity-Philadelphia Trust Co. v. Smith

No. 130

Argued January 30, 1958

Decided April 28, 1958

356 U.S. 274


At the age of 76 and without a medical examination, petitioners' decedent purchased at regular rates three single-premium life insurance policies on her own life, payable to named beneficiaries, and, from the same companies at the same time, as required by the companies, three single-premium nonrefundable life annuity policies. The use and enjoyment of the annuity policies were entirely independent of the life insurance policies, but the size of each annuity was calculated so that, in the event the annuitant-insured died prematurely, the annuity premium, less the annuity payments already made, would combine with the life insurance premium, plus interest, to equal the amount of insurance proceeds to be paid, plus expenses. The decedent received the annuities throughout the remainder of her lifetime, but, paying a gift tax, she irrevocably assigned all rights and benefits under the insurance policies, including the rights to receive dividends, to change beneficiaries, and to surrender or assign the policies. Two policies were assigned to her children and the third to a trustee, the decedent retaining no beneficial or reversionary interest in the trust.

Held: the proceeds of the life insurance policies should not be included in the decedent's estate for the purpose of the federal estate tax under § 811(c)(1)(B) of the Internal Revenue Code of 1939. Pp. 356 U. S. 275-281.

(a) Helvering v. Le Gierse, 312 U. S. 531, distinguished. Pp. 356 U. S. 277-279.

(b) Under the assignment, the decedent had not become a life tenant who postpones the possession and enjoyment of the property by the remaindermen until her death. Pp. 356 U. S. 278-279.

(c) Nor are the assignees like second annuitants in survivorship annuities or joint annuitants in joint and survivor annuities. P. 279, n 5.

(d) The annuity payments were not income from property which the insured transferred to her children under the life insurance

Page 356 U. S. 275

policies, since the use and enjoyment of the annuity policies were entirely independent of the life insurance policies. Pp. 356 U. S. 279-281.

241 F.2d 690, reversed.

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