But if he does not get any benefit from it there are two sets of taxation. If he derives pecuniary benefits then I do not think there can be great Objection to his being taxed, but if he merely takes it in a fiduciary capacity and derives no personal benefit, there should not be double taxation.
I am not clear about this; I was not able to hear all that was said. I should like to state a specific case and find out just what the answer will be. I mentioned this the last time we were discussing this matter. If a man by his will leaves his property to his wife for life with power of appointment and in the event that she fails to exercise that power, to a son or some children or somebody else, and the wife exercises that power, does she have to pay succession duty on the full estate and will the children or the persons to whom she leaves the property have to pay duty on the full estate on her death?
be given further consideration because it is not fair. It amounts to double taxation. A man may have made that kind of will some time ago. He leaves his estate to his wife for life with a general power of appointment, and to his children if the wife fails to exercise that appointment. He lives for many years after his will is made, and dies, we will say, when he is seventy or seventy-two years of age. His wife is about the same age and survives him only for a year or two, having exercised her power of appointment. The result is that there would be two taxes on the whole estate within two or three years. The wife would have a life interest in the estate for two, three or four years and yet she would be taxed on the full estate. Then after that time her children, or whoever received the property, would be taxed again on the full estate. I think if the parliamentary assistant considers that matter he will come to the conclusion that it is not fair. I suggest that the section should not be passed in this form, that further consideration be given to the point. I protest against the section going through in its present form. Surely there should be some way of working this thing out so that it would be more equitable. The wife has had a life interest for only two or three years and she is taxed on the full value of the estate. Then there is a tax on the full value of the estate upon her death. That is not quite right. There should be some change made in this section to provide for a case of that kind.
This is not really a change in the law. It is a qualifying provision in the definition section. Section 31 is quite clear with respect to the effect, from a succession duty point of view, of providing for a general power of appointment. Under section 31 that would appear to be clear. The case my hon.. friend has cited may appear, on the surface, to be a hard case. But the answer really is that a will should not be drawn in that way. It is all very well to say that the widow is given a life interest. But in fact she is given complete and1 free distribution of the corpus of the estate, because there is no restriction on her right of disposition. The testator has indicated, it is true, to whom he would like the property to go if she does not see fit to exercise her power of disposition.
But she is perfectly free to leave it to a complete stranger. I should not think my hon. friend would suggest that under those circumstances there should not be a tax imposed, if she did exercise that power of appointment. What he is suggesting is that if she fails to exercise it there should not be a tax. The point is as to whether the testator has absolute freedom in exercising the power of appointment. That is the test. It seems to me it is a reasonable test; and if the legal profession or testators are aware of the law they will be governed accordingly in drawing wills.
A testator may provide this: "I leave my wife a life interest in the residue of my estate, and on her death to go to my children in such proportion as she may determine"-or even just "to my children". In that case the . widow would be taxed only on her life interest, based on her life expectancy; and the duty would1 be assessed on the children who received the ownership of the residue on the death of their mother, in accordance with the rules applicable generally. That is exactly what would happen if a testator did not give to his wife a general power of appointment. In effect, it is almost surplusage to say it is giving her life interest, and it is giving her complete freedom to dispose of the property.
Well, as a matter of fact, is it? I do not think it is the same as giving her the estate outright, by any means. She cannot do as she likes with it. In a sense she is a trustee; she cannot go and spend the money. She only has the use of the income to that extent for her life.