Taxation — Inheritance Tax — Property Subject to Tax The designation of a beneficiary to receive death benefits under an annuity contract qualifies as a "gift" made by the annuitant and is considered a transfer made during the lifetime of the donor to take effect after the death of the donor; as such, the benefits are subject to the inheritance tax. RSA 86:6, I. 2. Taxation — Inheritance Tax — Property Subject to Tax Garos v. State, 99 N.H. 319 (1954), wherein the supreme court held that the designation of a beneficiary to receive death benefits under an annuity contract qualifies as a "gift" made by the annuitant for inheritance tax purposes, would control the result and subject the benefits to tax if the transfer was found to have been voluntarily made. 3. Taxation — Inheritance Tax — Property Subject to Tax Where former husband, who died in 1979, had purchased two annuity contracts in 1955 voluntarily naming his former wife as the primary beneficiary, and never changed that designation though he had the right to do so until 1979, when a divorce decree was entered which incorporated a stipulation by the parties that his former wife be designated as beneficiary under the policies, the former wife's argument that the designation of herself as primary beneficiary was not a transfer under the inheritance tax statute because it was not voluntarily made in that it was mandated by the divorce decree was without merit, since the stipul

There are undoubtedly many real differences between a life insurance policy and an annuity contract. See Garos v. State, 99 N.H. 319, 320-22, 109 A.2d 844, 846-47 (1954). Nonetheless, the distinction that the estate advances runs counter to a long history of cases which have determined the status of annuity beneficiaries under the same analysis used in the life insurance context.

A refund annuity, such as we have in the instant situation, is a contract whereby the annuitant protects himself, during his life, by making an investment to assure annual payments to himself during his life. If he dies prematurely, his beneficiaries receive the undistributed portion of the investment. ( In re Atkins' Estate, 129 N.J. Eq. 186, 18 A.2d 45; Garos v. State Tax Com. 99 N.H. 319.) The monies refunded to the beneficiaries in each of these refund annuity situations are only that undistributed portion of the decedent's original investment or deposit plus accruals, monies belonging to decedent during his lifetime and not acquired by virtue of the occurrence of a stated risk.

An annuity contract, in general, is one by which an annuitant makes an investment which will assure his receipt of a specified annual or quarterly sum during his life and if he should die prematurely, his estate or those whom he designates will receive the payments he has not yet received. See, e.g., Garos v. State Tax Commission, 99 N.H. 319, 321, 109 A.2d 844, 847 (1954). A fundamental characteristic of an "annuity" is a periodic payment made unconditionally without any contingency.

On page 1292 of the same annotation the subject of employee's retirement funds is considered and it is shown that payments made to designated beneficiaries under death benefit clauses of such retirement contracts, in all except one of the cited cases, have been held to be subject to succession tax and that the only case holding otherwise was later overruled. The reader's attention is also directed to the following additional citations: Garos v. State Tax Commissioner, 99 N.H. 319, 109 A.2d 844; Dolak v. Sullivan, 145 Conn. 497, 144 A.2d 312; In re Daniels Estate, 159 Ohio St. 109, 111 N.E. 252; In re Simpson's Estate, 43 Cal.2d 594, 275 P.2d 467, 47 A.L.R.2d 991; 28 Am.J. Revised Inheritance, Estate Gift Taxes, Sec. 256; 6 Utah Law Review 57 (1958). Based upon the foregoing reasons and authorities we hold that the proceeds received by the beneficiary under the annuity contract herein involved cannot be considered to be "proceeds of life insurance" and that they are subject to tax under the inheritance tax statute.