Binney v. Long

1936-12-14

Headline: State succession tax provision struck down for discriminating against heirs under pre-1907 trusts, reducing or eliminating estate taxes for beneficiaries of certain long‑standing family trusts in Massachusetts.

Holding: The Court held that Massachusetts statutes arbitrarily discriminated by taxing beneficiaries under powers created before September 1, 1907, violating equal protection and invalidating those tax assessments on certain pre‑1907 trust successions.

Real World Impact:

Makes beneficiaries under some pre‑1907 trusts exempt from disputed succession tax aggregation.
May require Massachusetts to recalculate or abate taxes already paid.
Protects heirs of old trusts from higher graduated tax rates caused by aggregation.

Topics: inheritance taxes, trusts and estates, equal protection, state tax law

Summary

Background

Mrs. Hetty S. L. Cunningham died in 1931 leaving four children as her heirs and life interests in three trusts. The children and trustees paid succession taxes on property they received and then asked the probate court to abate taxes on trust property. Massachusetts had adopted succession tax laws in 1907, 1909, and later, which treated various transfers, wills, and powers of appointment differently depending on when the controlling instrument was created.

Reasoning

The Court examined whether the tax laws treated similarly situated beneficiaries differently based only on the date the trust or power was created. It held that the 1877 trust interests were contingent and taxable at the intestate’s death, so that tax stood. But the statutes taxed beneficiaries under the 1862 and 1891 instruments while leaving similar beneficiaries under later instruments untaxed. The Court found that this time-based classification was arbitrary and hostile in effect and denied equal protection under the Fourteenth Amendment. The Court therefore reversed the lower court’s denial of abatement for those taxable assessments and sent the case back for further proceedings consistent with that ruling.

Real world impact

People who inherit under certain trusts made before September 1, 1907, may not be taxed in the way Massachusetts applied the law. The State will need to reassess or abate the challenged taxes and may owe adjustments or refunds. The decision distinguishes which trusts remain taxable and which must be relieved from the challenged aggregation rule.

Dissents or concurrances

Justice Cardozo, joined by Justice Brandeis, dissented in part. He argued the date-based distinction was a reasonable legislative response to collection and fairness problems and would have upheld the taxes on the 1862 and 1891 interests.