Guaranty Trust Co. v. Blodgett

Background

A Connecticut resident, Harriet D. Sewell, executed an irrevocable deed of trust on December 28, 1926, transferring securities to a trustee (the appellant). The trust paid income to Mrs. Sewell for her life, then to her husband for his life, and on his death directed the trustee to transfer the principal to the couple’s daughter if she survived, otherwise to her descendants. Mrs. Sewell died on May 20, 1930, domiciled in Connecticut. The dispute arose over whether Connecticut’s 1923 succession tax law applied to this transfer that shifted enjoyment of the property at or after death.

Reasoning

The Court considered whether the state law taxed gifts or transfers intended to take effect in enjoyment at or after the donor’s death and whether applying that law violated the federal Constitution. The state supreme court had construed the 1923 act to reach a shifting of enjoyment that follows from an earlier inter vivos transfer, held the deed of trust taxable, and found no violation of the Fourteenth Amendment or other federal provisions. The appellant argued the state court had effectively relied on a later 1929 act and that such reliance impaired contracts, but the Supreme Court rejected that claim, accepted the state court’s explicit construction of the 1923 law, and affirmed the judgment. The Court noted precedent stating that a State may tax property that passes after a taxing act takes effect.

Real world impact

The ruling confirms that similar trust arrangements that shift possession or enjoyment at death can be subject to state succession tax. Trustees, beneficiaries, and estate planners in Connecticut are directly affected. The decision also limits successful challenges based on later statutes or contract-impairment claims in cases like this.