Estate of Legatos

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 659 OPINION

Appeal from order of the Superior Court of Sacramento County in probate, fixing the amount of inheritance tax.

Under the will of Antonios Legatos, who died on October 6, 1964, a trust was created for his wife, Hresoula Legatos, by transferring all of his property to the Bank of California National Association, as trustee. The trustee was directed (a) to pay or apply all the net income of the trust estate for her benefit during her lifetime; (b) to pay to her or apply for her benefit such amounts from the principal of the trust estate as she designates in writing; to pay or apply for her benefit any amounts from principal for her proper care, maintenance and support, in the trustee's absolute discretion.

Likewise, relatives and charities were listed as remaindermen to receive the residue of the trust estate upon her death. But Hresoula Legatos was given a power of appointment whereby she was authorized to revoke, delete from or add to any of the listed legatees and devisees.

Following the death of Antonios Legatos, Hresoula Legatos, under (b) above, directed the trustee to immediately deliver to her the entire corpus of the intended trust estate. This delivery was approved in the court's decree of preliminary distribution.

The inheritance tax appraiser filed a report upon this devolution of property, finding due an inheritance tax of $22,652.67, which finding was confirmed, over objections of The Bank of California National Association, as executor, and Mrs. Legatos. This appeal followed.

It is conceded the trust estate consisted of community property, which appellants contend is free of inheritance tax under the first sentence of section 13551, subdivision (a), of the Revenue and Taxation Code, which then read "None of the community property transferred to a spouse is subject to this part." The respondent State Controller contends that the transfer is governed by the remaining sentence of that section, which read: *Page 660 "If, however, on the death of the husband the wife is given by will either (1) a life estate in the one-half of the community property subject to the testamentary disposition of the husband or (2) a general or special power of appointment in conjunction with such one-half, all of such one-half is subject to this part."

(1) This section speaks as of the date of death of Antonios Legatos. Subject to probate, Mrs. Legatos then became vested with the life estate and power of appointment of which section 13551, subdivision (a), speaks. Only outright transfers of the community property to the wife were intended to be exempt.1