Why is it that such a transfer was held taxable in one instance and exempt in the other? The explanation given by Matter of Voorhees (1922), 200 App. Div. 259, 263, 193 N.Y. Supp. 168, 171, is that when the proceeds of the policy come to the estate or its representative they are distributed to heirs in accordance with the laws of inheritance and the taxes imposed on inheritance come into operation; while if they are paid by the insurer to some other named beneficiary they do not come into the estate at all and are not affected by the laws, including tax laws, to which inheritances are subject. The explanation given by Matter of Haedrich, supra, is different.

Minrath v. Gifford, 137 App. Div. 919, 122 N.Y. S. 1137; Gritz v. Gritz, 336 Pa. 161, 7 A.2d 1. The author continues: "The reservation of a power to revoke does not affect the result, ( Beirne v. Continental-Equitable Title Trust Co., 307 Pa. 570, 161 A. 721; In re Voorhees' Estate, 200 App. Div. 259, 193 N.Y. S. 168) nor does a power to alter the cestuis' interests, (Beirne v. Continental-Equitable Title Trust Co., supra) or to change the beneficiary of the policy. ( Fidelity Trust Co. v. Union Nat'l Bank, 313 Pa. 467, 169 A. 209, cert. den., 291 U.S. 680, 54 S.Ct. 530, 78 L. ed. 1068) * * * (E)ven though it is designed as a substitute for a testamentary disposition and the person named as trustee is also named executor of the settlor's will. Fidelity Columbia Trust Co. v. Glenn (D.C., W. D. Ky. 1941), 39 F. Supp. 822, n.45; Sacred Heart Church v. Fidelity Trust Co., 16 Pa. D. C. 661 (Pa. 1932)).

" Other cases bearing upon this subject are Bose v. Meury, 112 N.J. Eq. 62, 163 A. 276; Beirne v. Continental-Equitable T. T. Co. 307 Pa. 570, 161 A. 721; In re Voorhees' Estate, 200 App. Div. 259, 193 N.Y. S. 168; In re Haldrich's Estate, 134 Misc. 741, 236 N Y S. 395; Fidelity Trust Co. v. Union Nat. Bank, 313 Pa. 467, 169 A. 209. Even if it be conceded that this was not an insurance trust, the authorities generally seem to hold that such arrangements, even if not involving the trust aspect, are valid as inter vivos transactions because they are contractual in nature.

But a life insurance policy payable to a named beneficiary is not a will because it does not operate upon any property of the insured owned by him at his death. In re Koss, 106 N.J. Eq. 323, 150 A. 360; In re Wheatley's Estate, 184 Cal. 399, 193 P. 934; Bose v. Meury, 112 N.J. Eq. 62, 163 A. 276; In re Voorhees' Estate, 200 App.Div. 259, 193 N.Y.S. 168; Johnston v. Scott, 137 N.Y.S. 243, 247. Indeed, when a beneficiary has been properly named and the insured dies while that designation is effective, he cannot destroy the rights of the beneficiary by will, unless that will can operate as a change of beneficiary. Gould v. Emerson, 99 Mass. 154, 157; McClure v. Johnson, 56 Iowa 620, 10 N.W. 217; Wilmaser v. Continental Life Ins. Co., 66 Iowa 417, 23 N.W. 903; Ricker v. Charter OakLife Ins. Co., 27 Minn. 193, 6 N.W. 771; see Farmers' Loan Trust Co. v. McCarty, 100 Conn. 367, 372, 124 A. 40. The policy is a contract to pay a sum of money to a third party, performance of which is postponed until the death of the insured.

"The policy simply designates the executors, administrators, or assigns as some one to whom the payment can be made; but it is clearly not for them to say what shall be done with it, but they are the medium only to pass the money to the widow and children, who are alone entitled to its proceeds. . . . This policy, to my mind, is merely a contract between the decedent and the company for the benefit of his wife and children, and no one else is or can be interested therein, and the same does not pass by reason of the provisions of this will, but by reason of the clause in the policy itself." In In re Voorhees' Estate, 193 N.Y. Supp. 168, 200 App. Div. 259, where the insured's policies were payable to his estate and he assigned them to a trustee, reserving the right to revoke the trust, it was held the assignment was not made in contemplation of death, within the meaning of the statute, and was not, therefore, subject to a transfer tax; that, if a policy of insurance is payable to the insured's estate, and is not assigned by him, so that at his death it becomes an asset of his estate, the proceeds of the policy are subject to a succession tax. The court said:

We find no provision in our inheritance or succession tax law designed to impose a tax upon the insurance payable to the beneficiaries named in such policies, and assume, without so deciding, that the legislature did not intend to reach them. New York courts also construe their inheritance tax statute as not intended to cover the proceeds received by beneficiaries named in the ordinary life insurance policies. In re Voorhees' Estate, 103 Misc. 515, 171 N.Y. S. 859, affirmed in 200 App. Div. 259, 193 N.Y. S. 168; In re Einstein's Estate, 114 Misc. 452, 186 N.Y. S. 931, affirmed in 201 App. Div. 848, 193 N.Y. S. 931. The attorney general insists that Chase Nat. Bank v. U.S. 278 U.S. 327, 49 S.Ct. 126, 73 L. ed. 405, 63 A.L.R. 388, and In re Will of Allis, 174 Wis. 527, 184 N.W. 381, are decisive of this case. To this we cannot assent.

Therefore, both possession and enjoyment of the property passed to others during the lifetime of the grantor and did not pass to them upon his death. ( Matter of Masury, supra; Matter of Bowers, supra; Matter of Voorhees, 200 App. Div. 259.) The learned surrogate, therefore, properly held these pensions not taxable. ( 117 Misc. Rep. 806.)