Orr v. Gilman

Background

David Dows Senior died in 1890 leaving a will that gave his son, David Dows Junior, the power to appoint property by will. The son exercised that power in 1899, dividing the property among his three sons, who challenge a New York transfer tax. New York enacted a transfer-tax law in 1897 treating appointments or failures to appoint as taxable transfers, and the heirs argued this later law impaired rights that they say vested at the elder Dows’s death.

Reasoning

The Court accepted the New York courts’ interpretation of the will and the statute and declined to overturn that construction. The Justices explained that property passing under a power of appointment is taxed as a transfer tied to the privilege of taking under a will, not as a direct confiscatory tax on property. Relying on prior decisions, the Court held the tax did not violate the Fourteenth Amendment’s guarantees of equal protection and due process, nor did it unlawfully impair contracts where parts of the fund consisted of securities.

Real world impact

The ruling upholds New York’s ability to tax transfers made under powers of appointment and affirms that state rules about wills and estate taxation determine when such taxes apply. People inheriting through similar arrangements may face state transfer taxes even if the original will was made years earlier. The Supreme Court affirmed the state court and surrogate’s judgments.

Dissents or concurrances

Justice Harlan concurred in the result.