April 28, 1983

As trustee of the ******************** Trust, the ******************** Bank inquires whether the balance of the trust property passing on the death of the life tenant, ******************** will be subject to either the Massachusetts inheritance tax or estate tax.

******************** ("father") executed a revocable trust in 1932 and named the

Bank, as trustee. The trust provided for payments of income and discretionary payments of principal to ******************** ("daughter") for her life, and, upon her death, for the trust property to pass according to her will or, in the absence of a will, to her heirs by intestacy. The father, a legal resident of Massachusetts, died on December 10, 1934. Massachusetts inheritance taxes were paid on the discretionary payments of principal to the daughter. There was no compromise of taxes on future interests in the trust. The daughter, a legal resident of Vermont, died on October 20, 1982.

The Massachusetts inheritance tax applies to estates of decedents who died before January 1, 1976; and the Massachusetts estate tax applies to estates of decedents dying on or after January 1, 1976. (St. 1975, c. 684, § 97).

An interest in property of a decedent who died prior to 1976, which is to take effect in possession after the death of the decedent, is subject to the inheritance tax when the right of possession accrues. (G.L. c. 65, §§ 1 and 7). However, no inheritance tax is imposed on future interests in property subject to a power of appointment which is included in the Massachusetts gross estate of a decedent subject to the estate tax. (St. 1975, c. 684, § 97).

Any person entitled to a future interest in property may pay the inheritance tax before the tax is due upon the value of the interest at the time of payment. (G.L. c. 65, § 14). If the inheritance tax on a future interest has been paid before the death of the holder of the power of appointment, the value of the future interest in the property is not subject to the estate tax. (St. 1975, c. 684, § 83).

The intent of Section 97 of Chapter 684 of the Acts of 1975, when read with Section 83 of Chapter 684, is to avoid the imposition of both an inheritance tax under General Laws Chapter 65 and an estate tax under General Laws Chapter 65C on the same property upon the death of the life tenant. A future interest conveyed by a Massachusetts decedent who died prior to 1976 remains subject to taxation even though the life tenant is a non-resident. The exemption from the inheritance tax, under Section 97, applies only if the property is subject to the estate tax.

Based on the foregoing, it is ruled that the trust property is subject to the inheritance tax. The property is not subject to the estate tax because the daughter was a non-resident at her death.

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson
Commissioner of Revenue

IAJ:VGS:mf

LR 83-32