1. A state law imposing a graduated tax on the transfer of
contingent remainders measured by the value at the testator's death
of the estate transferred, undiminished by the value of the
intervening life estate, and requiring the executor to deposit
security for the payment of the tax, but postponing the definitive
assessment and the payment of the tax until after the death of the
life tenant, held
consistent with due process of law. P.
278 U. S.
2. The due process clause places no restriction on a state as to
the time at which an inheritance tax shall be levied or the
property valued for purposes of such tax. P. 278 U. S.
3. The graduation of the tax and the impossibility of
forecasting exactly the duration of life estates may cause a lack
of equivalency of tax burden as between a contingent remainder,
when taxed as above stated, and a like vested remainder when the
tax on the latter is based on its value separate from the
intervening life estate and is paid at the testator's death, but
such differences do not amount to an unjustifiable discrimination
against the contingent remainderman violative of the equal
protection clause. Id.
Page 278 U. S. 485
4. There are differences between vested and contingent
remainders which justify classification in imposing inheritance
taxes. P. 278 U. S.
5. The fact that a state tax is not the best that might be
conceived and produces minor inequalities and hardships does not
render it invalid under the Constitution. Id.
Error to judgments fixing transfer taxes, entered in the
Surrogates' Court of the County of New York, on remittitur from the
court of appeals, the latter court having affirmed judgments of the
Supreme Court, Appellate Division, which had affirmed the
assessments as originally made in the Surrogates' Court.
127 Misc. 211, 219 App.Div. 56, 246 N.Y. 601, 602.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
These cases, which were argued together, present the question
whether the provision in the New York Transfer Law for taxing the
transfer of contingent remainders violates the due process clause
or the equal protection clause of the Fourteenth Amendment. That
statute imposes a graduated succession tax. On the transfer of life
estates and vested remainders, the tax is measured by their
respective values as of the testator's death, and are payable then.
The tax on the transfer of contingent remainders is not payable
until the death of the life tenant, and it is measured by the value
at the testator's death of the estate transferred, undiminished by
the value of the intervening life estate. For the due payment of
the deferred tax, the
Page 278 U. S. 486
executor must furnish adequate security. The amount of the
security is fixed by a temporary taxing order. Laws of 1925, c.
144, §§ 230 and 241.
It will be sufficient to state the facts and proceedings in the
case. Meyer Hecht died in 1925 a resident of New
York. He bequeathed his residuary estate in trust to his widow for
life, and upon her death one equal share thereof to each child then
living and to the then living issue per stirpes of each deceased
child. The value of the residue as of the testator's death was
appraised at $322,094.37. The then value of the widow's life estate
therein, computed according to the standard mortality tables using
5 percent interest, was appraised at $124,957; the tax then payable
was assessed thereon, and no objection is made thereto. If the
future interests had been vested remainders, the tax thereon would
have been payable then on an appraisal of $197,137.37 -- that is,
on the difference between the then value of the residue and the
then value of the life estate. The future interests were all
contingent. The tax was not payable until the death of the life
tenant. The temporary taxing order appraised their aggregate value
at the widow's death as $322,094.37 -- that is, at the value of the
residue undiminished by the value of the life estate. Security for
the future payment of the tax was required to be given as the
statute requires. An appeal from the appraisal was denied by the
surrogate of New York County. Matter of Hecht's Estate,
127 Misc. 211. His judgment was affirmed by the Appellate Division
of the Supreme Court, 219 App.Div. Its judgment was affirmed by the
Court of Appeals without opinion, 246 N.Y. 602, and, by the
remittitur, it became the judgment of the Surrogate's Court. That
judgment is final within the meaning of § 237(a) of the Judicial
Code, as amended by the Act of February 13, 1925, c. 229, 43 Stat.
937. Compare Wheeler v. Sohmer, 233 U.
; Watson v. State Comptroller,
254 U. S. 122
Page 278 U. S. 487
The constitutional claims were duly made below, and the case is
The need of a peculiar provision for taxing the transfer of
contingent remainders arises from the fact that the New York law
imposes a graduated tax. The rates differ according to the amount
or value of the gift to the particular beneficiary and also
according to his relationship to the decedent. The lowest rate
payable by a lineal descendant is 1 percent; the highest, 4
percent. The lowest rate payable by a stranger is 5 percent; the
highest, 8 percent. As the remainders are contingent, it is
impossible to know, before the contingency happens, in whom the
remainders will vest, and it may be impossible to determine until
then the relationship of the beneficiaries to the testator and the
portions of the estate which they will respectively receive. Thus,
the rate of taxation will remain uncertain. For this reason, the
statute postpones until the contingency happens both the definitive
assessment of the tax on the transfer of the contingent remainders
and the payment thereof. In respect to vested remainders, there is
no obstacle to requiring both assessment and payment of this
graduated tax as of the testator's death. The amount of the tax can
be determined then, because it is known who the vested remaindermen
are, what the share of each is, and what his relationship to the
testator was. And the value of the remainders as of the testator's
death is likewise known, being the difference between the then
value of the property transferred and the computed value of the
The need of a special provision for the taxation in respect to
contingent remainders and the reasonableness of the particular
measure adopted in 1925 appear from the history of the legislation.
Since the enactment of the Transfer Tax Law in 1885 (Ch. 483), the
aim of the legislature has been at all times to adopt a method of
laying the tax which would be fair to both the life tenant
Page 278 U. S. 488
and the future interest and would protect the revenues of the
state. From time to time, various methods for doing this were
tried. Experience revealed their defects. Under the original law
and the early amendments, the transfers to contingent remaindermen
were not taxable upon the testator's death. Matter of
111 N.Y. 343. They were taxable at the time when they
vested in possession. Matter of Stewart,
131 N.Y. 274. And
the tax then payable was computed upon the value, as of the
testator's death, of the property transferred, less the value of
the intervening life estate. Matter of Sloane's Estate,
154 N.Y. 109. Under this method, the revenue derived from the tax
on the contingent remainder was less than it would have been had
the remainder been a vested one. For the state lost the benefit of
the money during the period intervening between the death of the
testator and that of the life tenant. To overcome this loss to the
state and the discrimination thereby in favor of the contingent
remaindermen, the legislature provided by chapter 284 of the Laws
of 1897 that the tax payable on the vesting of the contingent
remainder should be measured by the full value of the property as
of the testator's death, without deducting the value of the
intervening life estate. Matter of Seligmann's Estate,
N.Y. 656. This statute, while on its face eliminating the
discrimination in favor of contingent remaindermen, was found to
result in serious loss of revenue to the state. Taxes escaped
collection when they became due, because it proved to be impossible
to ascertain currently when the contingencies happened, and hence
when a tax became payable. To remedy this defect, it was provided
by Chapter 76 of the Laws of 1899 that the tax must be paid upon
the testator's death, and that it should then be paid out of the
corpus of the estate at the highest applicable rate, with a
provision for paying to the remainderman the surplus with interest
if it should prove that a lower rate was applicable. Matter of
Page 278 U. S. 489
172 N.Y. 69. This provision, while fully
safeguarding the state's revenues, favored the remainderman at the
expense of the life tenant. Matter of Brez's Estate,
N.Y. 609. For under this provision, the life tenant lost the income
on the full amount deducted to ensure payment of the tax on the
contingent remainder, and the remainderman received from the state,
with interest, such part thereof as proved not to be required for
the ultimate payment of the tax. Thereupon, some relief to the life
tenant was afforded by Chapter 800 of the Laws of 1911. But it was
not until the Act of 1925, here challenged, provided for appraisal
of the remainder as stated that the legislature succeeded in
devising a means of laying the tax which operated justly as between
life tenant and remaindermen and safeguarded the state's
The contention that the method of taxation
prescribed violates the due process clause rests upon the assertion
that, in measuring the transfer tax in respect to a contingent
remainder by the corpus of the trust fund undiminished by the value
of the intervening life estate, something is taxed which does not
exist. The argument is that taxation even of an inheritance must be
measured by property taxable within the jurisdiction, Frick v.
Pennsylvania, 268 U. S. 473
that New York levies the tax on the transfer of title from the
testator, not on its value at the time of the transfer of
possession, Matter of Davis' Estate,
149 N.Y. 539; that
the tax must therefore be measured by what he transferred when he
transferred it; that the aggregate value of the parts transferred
by the testator cannot be greater than the value of the whole; but
that here, the state lays a tax upon both the value of the life
interest and the undiminished value of the corpus.
The argument presented is unsound, because it ignores the fact
that the tax in respect to the contingent remainders is not payable
until after the death of the life tenant. The temporary taxing
order, entered upon the
Page 278 U. S. 490
testator's death, is made solely to ensure that the tax so
deferred will be paid when ultimately assessed. The requirement may
be satisfied by depositing with the state either approved
securities or cash. In either event, the income collected from the
security prior to the time when the tax becomes payable is
accounted for to the executor, and, after the tax has been paid,
the securities or cash remaining on deposit will be accounted for
to him. By applying the applicable rate to the full value of that
which comes into enjoyment, and not exacting payment of the tax
until then, a just result is sought. For the definitive assessment
of the contingent remainder and the payment of the tax thereon are
postponed to the same date. The due process clause places no
restriction on a state as to the time at which an inheritance tax
shall be levied or the property valued for purposes of such tax.
Compare Cahen v. Brewster, 203 U.
It is claimed that the tax violates the equal
protection clause. One contention is that it unjustifiably
discriminates between contingent and vested remainders in that the
value of the life estate is first deducted in assessing the latter.
It is true that an exact equivalency is not always achieved,
because the tax is graduated according to the value of the
remainder. But, since the payment of the tax is postponed until the
termination of the life estate, the present value of the tax will
tend to approximate what it would have been if vested remainders
had been given to the same persons and in the same shares that
eventually go to the contingent remaindermen -- assuming, of
course, that the same rate of interest is used in making the
calculation of both the present value of the tax and the present
value of the future estate. It is true also that there is not an
exact equivalency, since life tenants do not die at the precise
termination of their expectancies. But this uncertainty underlies
the taxation of all future interests, vested
Page 278 U. S. 491
or contingent, wherever the tax is laid separately in respect to
life estates and remainders. The uncertainty is unavoidable unless
the state concludes to postpone laying the tax upon the remainders
until they come into enjoyment, a course which it is not obliged to
pursue. Moreover, there are differences between vested and
contingent remainders which justify classification in imposing
inheritance taxes. Compare Stebbins v. Riley, 268 U.
, 268 U. S. 141
268 U. S. 143
Billings v. Illinois, 188 U. S. 97
Board of Education v. Illinois, 203 U.
; Beers v. Glynn, 211 U.
; Keeney v. Comptroller of New York,
222 U. S. 525
Several other reasons are urged why the statute
should be held obnoxious to the equality clause. It is said that,
the tax being graduated according to amounts, there will result
from the use of mortality tables discrimination between members of
the same class. It is urged that, since the tax is not collected
until the termination of the life estate, a more perfect equality
would be achieved by assessing the tax on the value of the
remainder, after deducting the value of the life estate, and
allowing interest to the state for the actual known period during
which the tax was withheld. The fact that a better taxing system
might be conceived does not render the law invalid. As was said in
Metropolis Theater Co. v. Chicago, 228 U. S.
, 228 U. S.
"To be able to find fault with a law is not to demonstrate its
invalidity. . . . The problems of government are practical ones,
and may justify, if they do not require, rough accommodations --
illogical, it may be, and unscientific."
Further, it is said that postponing payment of the tax will
prove burdensome, because it involves giving security to ensure the
deferred payment, and that, where the security is given by the
deposit of cash, the income earned thereon will probably be less
than would have been earned if the money had been otherwise
employed. To all such objections it may be answered that minor
Page 278 U. S. 492
hardships are incidents of every system of taxation, and do not
render the legislation obnoxious to the Federal Constitution.
American Tank Car Corp. v. Day, 270 U.
Whether the state's power to tax the privilege of taking by will
or descent property within its jurisdiction is in any way limited
by the Fourteenth Amendment has not been argued. As we are of
opinion that none of the objections urged can be sustained, we have
no occasion to consider that question. Compare Stebbins v.
Riley, 268 U. S. 137
268 U. S.
* See also State Railroad Tax Cases, 92 U. S.
, 92 U. S. 612
Bell's Gap R. Co. v. Pennsylvania, 134 U.
; Merchants' & Manufacturers' Nat. Bank v.
Pennsylvania, 167 U. S. 461
167 U. S. 464
Magoun v. Illinois Trust & Savings Bank, 170 U.
; Travelers' Insurance Co. v.
Connecticut, 185 U. S. 364
Beers v. Glynn, 211 U. S. 477
211 U. S. 485
Citizens' Telephone Co. v. Fuller, 229 U.
, 229 U. S. 331
Northwestern Mut. Life Insurance Co. v. Wisconsin,
247 U. S. 132
247 U. S. 137
247 U. S. 141
Maxwell v. Bugbee, 250 U. S. 525
250 U. S. 543
Southern Ry. Co. v. Watts, 260 U.
, 260 U. S.