## Facts

- Warren G. Horton, Charles F. Musk, and Mary Ann Musk, Connecticut domiciliaries, died in 1965 in an automobile explosion following a collision on the Chesapeake Bay Bridge–Tunnel in Virginia.
- The Connecticut Bank and Trust Company was appointed executor of each decedent’s estate.
- The executor filed wrongful-death actions against the trucking company responsible for the collision; the cases were removed to federal court.
- The actions settled before trial for a total of $320,000 on the assumption of instantaneous death.
- The settlement allocation expressly included no amounts for ante-mortem pain and suffering.
- The executor excluded the settlement proceeds from the federal gross estates; the IRS assessed estate-tax deficiencies, which the executor paid and then sought to recover via refund suits.

## Issues

1. Whether wrongful-death settlement proceeds received by an executor are includable in a decedent’s gross estate under I.R.C. § 2033 as “property” in which the decedent had an interest “at the time of his death.”
2. Whether, under the governing wrongful-death statutes, the decedent possessed any property interest in the wrongful-death cause of action or its proceeds, as opposed to a right belonging from inception to statutory beneficiaries.

## Decision

- The Second Circuit reversed the district court.
- The court held the wrongful-death settlement proceeds were not includable in the decedents’ gross estates under I.R.C. § 2033.
- The court directed that refunds be allowed because the proceeds were not “property” of the decedents at death.

## Legal Principles

- I.R.C. § 2033 includes in the gross estate only property interests held by the decedent “at the time of his death.”
- State law determines whether a decedent possessed a property interest at death in a claim or recovery for federal estate-tax inclusion purposes.
- A wrongful-death claim that arises only upon death and is created for the benefit of statutory beneficiaries is not a property interest owned by the decedent at death, even if the executor is the statutory plaintiff and initially receives the funds.
- Survival-type claims (e.g., ante-mortem pain and suffering) are assets of the decedent/estate; wrongful-death recoveries are distinct and cannot be recharacterized as survival damages when the recovery is limited to wrongful-death damages by settlement structure and assumptions.

## Conclusion

The court concluded that, because the wrongful-death cause of action arose only upon death and belonged to statutory beneficiaries rather than the decedents, the settlement proceeds were not “property” interests of the decedents at the moment of death and therefore were excluded from the gross estates under I.R.C. § 2033.


Connecticut Bank & Tr. Co. v. United States, 465 F.2d 760 (2d Cir. 1972)