UNITED STATES SUPREME COURT DECISIONS ON-LINE

Petitioner's husband owned four life insurance policies which named petitioner, his wife, as beneficiary. He pledged them to a bank as collateral security for a loan. Subsequently, the Commissioner of Internal Revenue assessed against the insured deficiencies covering income taxes due by him and filed notice of a tax lien for such deficiencies, plus interest. After the death of the insured, the insurance company paid the full amount of the loan to the bank and the remaining proceeds of the policies to petitioner. The United States sued petitioner individually and as executrix of her husband's estate for the full amount of the taxes due. Petitioner tendered the difference between the cash surrender value of the policies and the amount paid to the bank, but claimed the remainder as exempt under a state law which exempted the proceeds of life insurance policies from levy by creditors of the insured.

Held: The tax lien could not be satisfied out of that portion of the proceeds of the life insurance policies that represented the cash surrender value by marshaling the funds and paying the bank's claim from the remainder of the proceeds, since the equitable doctrine of marshaling of assets is not applicable to assets exempted by state law from levy by creditors. Pp. 375 U. S. 233-240.

309 F.2d 131 reversed. clubjuris

Page 375 U. S. 234