Estate of Schley

The question presented is whether a widow’s pension benefits are subject to state inheritance tax.

Lewis D. Schley was vice president and general manager of Pacific Fruit Express Company when he retired on December 31, 1973, with 47 years and 11 months of service credited towards his retirement benefits. Upon his retirement, the company approved a pension of $1,742.80 a month and also approved a widow’s allowance of $871.40 a month for his wife, Fay Schley, effective with the death of Mr. Schley should he predecease her, such widow’s allowance to continue during her life or until she remarried.

Mr. Schley died on May 17, 1976, and the company began making payments to respondent. The inheritance tax referee included the value of the widow’s allowance in the estate for inheritance tax purposes, valuing it $82,853. Half of this amount was excluded from tax as representing Mrs. Schley’s community interest in the pension benefits; the other half was taxed as a transfer to her from the decedent.

Fay Schley filed objections to the report of the inheritance tax referee, contending that the widow’s allowance was not subject to the tax. The trial court agreed and the Controller…