In 1920, decedent, a resident of Illinois, made a transfer in
trust of certain stocks to himself and another. He died in 1940.
During his life, the trust income was to be divided among his three
children; if they did not survive him, to any of their surviving
children. On his death, the corpus was to be distributed in the
same manner. But no provision was made for distribution of the
corpus and its accumulated income should the decedent survive all
of his children and grandchildren. The Tax Court determined that
the value of the corpus of the trust was not includible in the
gross estate of the decedent under § 811(c) of the Internal Revenue
Code. The Court of Appeals for the Seventh Circuit reversed,
holding that, under Illinois law, there was a possibility of
reverter to the decedent, and that this made the corpus of the
trust includible in his gross estate under § 811(c).
Held:
1. This Court accepts the determination of the Court of Appeals
that, under Illinois law, the settlor had a right of reverter; this
renders the trust one "intended to take effect in possession or
enjoyment at or after his death," within the meaning of § 811(c) of
the Internal Revenue Code, and the value of the corpus of the trust
at the settlor's death was includible in his gross estate for
purposes of the federal estate tax. Pp.
335 U. S.
705-707.
(a) The taxability of a trust corpus under the "possession or
enjoyment" provision of § 811(c) does not hinge on a settlor's
motives, but depends on the nature and operative effect of the
trust transfer. P.
335 U. S.
705.
(b) A trust transaction cannot be held to alienate all of a
settlor's "possession or enjoyment" under § 811(c) unless it
effects a
bona fide transfer in which the settlor,
absolutely, unequivocally, irrevocably, and without possible
reservations parts with all of his title and all of his possession
and all of his enjoyment of the transferred property. After such a
transfer has been made, the settlor must be left with no present
legal title in the property, no possible reversionary interest in
that title, and no right to possess
Page 335 U. S. 702
or to enjoy the property then or thereafter.
Commissioner v.
Estate of Church, ante, p.
335 U. S. 632. P.
335 U. S.
705.
(c) It is immaterial whether a present or future interest,
absolute or contingent, remains in the settlor because he
deliberately reserves it or because, without considering the
consequences, he conveys away less than all of his property
ownership and attributes, present or prospective. P.
335 U. S.
705.
(d) The Tax Court having found that the trust contained no
provision for disposition of the corpus should the settlor outlive
the beneficiaries, and petitioner not having contended that it was
denied an opportunity to present any relevant evidence concerning
ownership, possession, or enjoyment, remand of the case to the Tax
Court for further findings of fact is unnecessary. Pp.
335 U. S.
706-707.
2. The fact that the monetary value of the settlor's contingent
reversionary interest is small in comparison with the total value
of the corpus does not render the "possession or enjoyment"
provision of § 811(c) inapplicable. P.
335 U. S.
707.
3. The ruling of the Court of Appeals for the Seventh Circuit,
which circuit embraces Illinois, that, under Illinois law, when all
trust beneficiaries die, the trust corpus reverts to the donor, is
not plainly wrong, and this Court does not disturb it. Pp.
335 U. S.
707-708.
159 F.2d 257, affirmed.
The Commissioner determined that the corpus and certain
accumulated income of the trust in question was includible in the
gross estate of the decedent for purposes of the federal estate
tax. The Tax Court reversed. The Court of Appeals reversed. 159
F.2d 257. This Court granted certiorari. 331 U.S. 798.
Affirmed, p.
335 U. S.
708.
Page 335 U. S. 703
MR. JUSTICE BLACK delivered the opinion of the Court.
This is a federal estate tax controversy. Here, as in
Commissioner v. Church, ante, p.
335 U. S. 632, we
granted certiorari to consider questions dependent upon the meaning
and application of a provision of § 811(c) of the Internal Revenue
Code. 47 Stat. 169, 279, 26 U.S.C. § 811(c). The particular
provision requires including in a decedent's gross estate the value
at his death of all property
"[t]o the extent of any interest therein of which the decedent
has at any time made a transfer, by trust or otherwise . . .
intended to take effect in possession or enjoyment at or after his
death. . . ."
In 1920, Sidney M. Spiegel, a resident of Illinois, made a
transfer by trust of certain stocks to himself and another. He died
in 1940. During his life, the trust income was to be divided among
his three children; if they did not survive him, to any of their
surviving children. On his death, the trust provided that the
corpus was to be distributed in the same manner. But no provision
was made for distribution of the corpus and its accumulated income
should Mr. Spiegel survive all of his children and grandchildren.
For this reason, the Government has contended that, under
controlling state law, the property would have reverted to Mr.
Spiegel had he survived his designated beneficiaries.
The value of the corpus of this trust was not included in the
Spiegel estate tax return. The Commissioner concluded that its
value with accumulated income, about $1,140,000 should have been
included in the gross estate under § 811(c). The Tax Court held
otherwise in an unreported opinion. The Court of Appeals for the
Seventh Circuit reversed. 159 F.2d 257. It held that the possession
or enjoyment provision of § 811(c) required inclusion of the value
of the trust property and accumulated income under the rule
declared in
Helvering v. Hallock, 309 U.
S. 106, because, under state law, the trust
Page 335 U. S. 704
agreement left the way open for the property to revert to Mr.
Spiegel in case he outlived all the beneficiaries. This holding
rested on the agreement of parties that whether there was a right
of reverter depended on Illinois law, and the court's conclusion
that, under Illinois law, a right of reverter did exist. [
Footnote 1]
The
Hallock case on which the Court of Appeals relied
held that the value of trust properties should have been included
in a settlor's gross estate under the "possession or enjoyment"
provision where trust agreements had expressly provided that the
corpus should revert to the settlor in the event he outlived the
beneficiaries. The taxpayer has contended here, as in the Tax Court
and the Court of Appeals, that the
Hallock rule is not
applicable to this trust, where the settlor's chance to get back
his property depended on state law, and not on an express
reservation by the settlor. This contention of the taxpayer rests
in part on the argument that § 811(c) imposes a tax only where it
can be shown that the settlor's intent was to reserve for himself a
contingent reversionary interest in the property. Another
contention is that the value of this contingent reversionary
interest was so small in comparison with the total value of the
corpus that the
Hallock rule should not be applied. A
third contention is that the Court of Appeals holding was erroneous
in that, under Illinois law, the corpus of this trust would not
have reverted to the settlor had all the beneficiaries died while
the settlor was still living. Petitioners urge that, in that event,
the Illinois courts would have held that the corpus passed to the
heirs of the last surviving beneficiary.
Page 335 U. S. 705
We hold that the
Hallock rule was rightly applied by
the Court of Appeals and we accept its holding as to the applicable
Illinois law.
First. In
Commissioner v. Church, ante, p.
335 U. S. 632, we
have discussed the
Hallock holding in relation to the
scope of the "possession or enjoyment" provision of § 811(c) and
need not elaborate what we said there. What we said demonstrates
that the taxability of a trust corpus under this provision of §
811(c) does not hinge on a settlor's motives, but depends on the
nature and operative effect of the trust transfer. In the
Church case we stated that a trust transaction cannot be
held to alienate all of a settlor's "possession or enjoyment" under
§ 811(c) unless it effects
"a
bona fide transfer in which the settlor, absolutely,
unequivocally, irrevocably, and without possible reservations,
parts with all of his title and all of his possession and all of
his enjoyment of the transferred property. After such a transfer
has been made, the settlor must be left with no present legal title
in the property, no possible reversionary interest in that title,
and no right to possess or to enjoy the property then or
thereafter. In other words, such a transfer must be immediate and
out and out, and must be unaffected by whether the grantor lives or
dies."
We add to that statement, if it can be conceived of as an
addition, that it is immaterial whether such a present or future
interest, absolute or contingent, remains in the grantor because he
deliberately reserves it or because, without considering the
consequences, he conveys away less than all of his property
ownership and attributes, present or prospective. In either event,
the settlor has not parted with all of his presently existing or
future contingent interests in the property transferred. He has
therefore not made that "complete" kind of trust transfer that §
811(c) commands as a prerequisite to a showing that he has
certainly and irrevocably parted with his "possession or
enjoyment." Any requirement
Page 335 U. S. 706
less than that which we have outlined, such as a post-death
attempt to probe the settlor's thoughts in regard to the transfer,
would partially impair the effectiveness of the "possession or
enjoyment" provision as an instrument to frustrate estate tax
evasions. To this extent, it would defeat the precise purpose for
which the provision was originated and which prompted Congress to
include it in § 811(c).
Determination of such issues as ownership, possession,
enjoyment, whether transfers have been made and the reach of those
transfers, may involve many questions of fact. And we have held in
many cases that, to the extent the determination of such issues
depends upon factfinding, many different facts may be relevant.
These fact issues in federal tax cases are for the Tax Court to
decide in cases brought before it.
In this case, the Tax Court made findings of fact, and then
decided against the Government. It did so, however, by holding as a
matter of law that those facts did not require inclusion of the
value of this corpus in the settlor's estate. [
Footnote 2] But the Tax Court's findings of fact
showed that the trust contained no provision for disposition of the
corpus should the settlor outlive the beneficiaries. This finding
of fact, which we accept, plus the Court of Appeals determination
of controlling Illinois law,
Page 335 U. S. 707
without more, brings this trust transaction within the scope of
the possession or enjoyment provision of § 811(c) as we have
interpreted that section in the
Hallock and
Church cases. And petitioner has not contended that it was
denied an opportunity to present any relevant evidence concerning
ownership, possession, or enjoyment. It is therefore not necessary
to remand the case to the Tax Court for any further findings of
facts.
See Hormel v. Helvering, 312 U.
S. 552,
312 U. S.
559-560.
Second. It is contended that, since the monetary value
of the settlor's contingent reversionary interest is small in
comparison with the total value of the corpus, the possession or
enjoyment provision of § 811(c) should not be applied. But
inclusion of a trust corpus under that provision is not dependent
upon the value of the reversionary interest.
Fidelity-Philadelphia Trust Co. v. Rothensies,
324 U. S. 108,
324 U. S. 112;
Commissioner v. Estate of Field, 324 U.
S. 113,
324 U. S. 116;
see Goldstone v. United States, 325 U.
S. 687,
325 U. S. 691.
The question is not how much is the value of a reservation, but
whether after a trust transfer, considered by Congress to be a
potentially dangerous tax evasion transaction, some present or
contingent right or interest in the property still remains in the
settlor so that full and complete title, possession, or enjoyment
does not absolutely pass to the beneficiaries until at or after the
settlor's death.
See Smith v. Shaughnessy, 318 U.
S. 176,
318 U. S.
181.
Third. It is contended that, under Illinois law the
corpus of this trust would not have reverted to the settlor had he
outlived the beneficiaries. The record reveals that the state law
problem here is not an easy one, but, under this Court's decision
in
Meredith v. Winter Haven, 320 U.
S. 228, the difficulty involved did not relieve the
Court of Appeals of its duty to make a decision. The questioned
ruling was made by three judges who are constantly required to pass
upon Illinois law questions. One
Page 335 U. S. 708
of the three judges has long been a resident and lawyer of
Illinois. Examination of the Illinois state court opinions pressed
upon us leaves us unable to say with any degree of certainty that
the Court of Appeals holding was wrong. It is certainly neither
novel nor unreasonable for state law to provide that, when all
trust beneficiaries die the trust corpus should revert to the
donor. It would be wholly unprofitable for us to analyze Illinois
cases on the point here urged. It is sufficient for us to say that
we think reasonable arguments can be made based on Illinois cases
to support a determination of this question either for or against
the petitioner's contention. Under these circumstances, we will
follow our general policy and leave undisturbed this Court of
Appeals holding on a question of state law. [
Footnote 3]
All other arguments of the petitioners have been noted and we
find them without merit.
Affirmed.
MR. JUSTICE JACKSON dissents.
[For concurring opinion of MR. JUSTICE REED, concurring in this
decision but dissenting from that in
Commissioner v. Estate of
Church, ante, p.
335 U. S. 632,
see ante, p.
335 U. S.
651.].
[For dissenting opinion of MR. JUSTICE FRANKFURTER, dissenting
from this decision and also that in
Commissioner v. Estate of
Church, ante, p.
335 U. S. 632,
see ante, p.
335 U. S.
667.]
[
Footnote 1]
This Court of Appeals interpretation and application of § 811(c)
was in conflict with the holding of the Third Circuit in
Commissioner v. Church's Estate, 161 F.2d 11. We granted
certiorari in both cases, arguments have been heard together, and
we have today reversed the
Church case,
ante, p.
335 U. S. 632.
[
Footnote 2]
The Tax Court's conclusion of law that the "possession or
enjoyment" clause of § 811(c) was inapplicable to the facts of this
trust rested in part on its belief that
Reinecke v. Northern
Trust Co., 278 U. S. 339, had
decided the issue. But the
Hallock case was decided after
Reinecke, and the question here involved was not
specifically raised in the
Reinecke case. Nor did the
Court's opinion in that case, written by the late Chief Justice
Stone, indicate that a transfer of bare legal title in a transfer
must always be accepted as a conclusive showing that the possession
and enjoyment provision of § 811(c) cannot be applied to the trust
corpus.
Cf. Court's opinion in
Harrison v.
Schaffner, 312 U. S. 579,
written by Chief Justice Stone.
[
Footnote 3]
Helvering v. Stuart, 317 U. S. 154,
317 U. S.
162-165;
cf. Steele v. General Mills,
329 U. S. 433.
MR. JUSTICE BURTON, dissenting.
Today's decision adds to the difficulties in this troubled field
of estate tax law. It may, however, serve a good purpose if it
leads to a simultaneous consideration by
Page 335 U. S. 709
Congress of the related fields of income, gift, and estate
taxation in connection with the creation or transfer of future
interests.
FIVE ALTERNATIVES
At least five alternative proposals have been presented to us
for the solution of this case. The first calls for the reversal of
Reinecke v. Northern Trust Co., 278 U.
S. 339, and a decision against the taxpayers. The second
calls for the extension to this case of the doctrine of
Helvering v. Clifford, 309 U. S. 331, and
a remand to determine further facts. The third, fourth, and fifth
follow existing precedents more closely. Each recognizes that, if
no possibility of a reverter [
Footnote
2/1] arose in favor of the settlor by operation of law, under
the trust instrument before us, the property thereby placed in
trust is not required by § 811(c) of the Internal Revenue Code to
be included in the gross estate of the settlor for federal estate
tax purposes. The third proposal finds that the law to be applied
for the above purpose is that of Illinois. It calls for a decision
in favor of the taxpayers because, under a correct application of
that law, the required
Page 335 U. S. 710
reverter could not arise. The fourth proposal claims or assumes
that a possibility of a reverter did arise under this trust by
operation of the law of Illinois in favor of the settlor. It,
however, declines to apply the rule of
de minimis non curat
lex. and, by declining to look further, it reaches a decision
against the taxpayers. This is the alternative which has been
adopted in the opinion of the Court. The fifth proposal is like the
fourth except that it does look further, and it recognizes that §
811(c) requires a finding of the settlor's actual intent in order
to make that Section applicable. It then concludes that, in the
instant case, the required intent is absent. The fifth proposal
therefore calls for a decision in favor of the taxpayers, or at
least calls for a remand to determine the existence, if any, of the
settlor's required intent. I believe that only the third and fifth
proposals present a sound solution. Each of those two is founded
upon existing precedents, reaches an equitable result, and
contributes to the certainty, rather than to the uncertainty, of
the application of the tax, pending legislative reconsideration of
the entire subject. I prefer the fifth, because it avoids complete
dependence upon the law of a state. If the fifth proposal is not
accepted, I believe that the present status of the law of Illinois
requires acceptance of the third.
I
. THE FIRST PROPOSAL IS THAT THE
REINECKE CASE
BE OVERRULED
The lack of judicial support for overruling
Reinecke v.
Northern Trust Co., supra, at this late day makes it
unnecessary to consider this proposal at length. It has been,
however, strongly urged upon us. The Spiegel trust instrument is so
simple and complete in its terms [
Footnote 2/2] that to apply the federal estate tax to
its corpus merely on the strength of those terms would require a
reversal
Page 335 U. S. 711
of the
Reinecke case. Accordingly, on the reargument of
this case, we asked the following question:
"1. Assuming that, under the applicable state law, there was no
possibility of reverter and no interest of any other kind retained
or arising in favor of the settlor or his estate under the transfer
made in trust,
inter vivos, did section 811(c) of the
Internal Revenue Code require that the value of the corpus of the
trust be included in the settlor's gross estate for federal estate
tax purposes? That is, did section 811(c) require the inclusion in
the gross estate of the settlor of the value of the corpus of a
trust, created
inter vivos, merely because the settlor had
provided in it that, upon his death, the trust should terminate and
the corpus be distributed to designated beneficiaries then
surviving?"
Journal Supreme Court, Oct. Term, 1947, pp. 296-297.
In response, counsel for the Commissioner argued in the
affirmative, and counsel for the petitioners in the negative. The
interpretation of the statute urged on behalf of the Commissioner,
however, had been long ago rejected unanimously by this Court in
passing upon the so-called "five trusts" in the
Reinecke
case. Accordingly, if that precedent stands, the answer to the
above question remains "No," and that issue should be at rest.
The reasoning of the
Reinecke case requires that, for a
transfer to be taxable in a case like this, the settlor must have
intended that the transfer come
from the settlor, and that
it take effect in possession or enjoyment at or after the settlor's
death. It must be from the dead to the living. That requirement
calls for the existence of an interest, right, or control in the
settlor, or at least the existence of some possibility of a
reverters to the settlor or to his estate, amounting to a string or
tie to the trust property, in order to make § 811(c) applicable.
Such interest, string, or tie must also be one that was
Page 335 U. S. 712
transferred, cut off, or obliterated by the terms of the trust
at or after the death of the settlor.
Accordingly, there now should be said about § 811 of the
Internal Revenue Code, 53 Stat. 120, 26 U.S.C. (1940 Ed.), § 811,
what Mr. Justice Stone, in 1929, said in the
Reinecke case
about the corresponding § 402 of the Revenue Act of 1921, c. 136,
42 Stat. 227, 278:
"In its plan and scope, the tax is one imposed on transfers at
death or made in contemplation of death, and is measured by the
value at death of the interest which is transferred.
Cf. YMCA
v. Davis, 264 U. S. 47,
264 U. S.
50;
Edwards v. Slocum, 264 U. S.
61,
264 U. S. 62;
New York
Trust Co. v. Eisner, 256 U. S. 345,
256 U. S.
349. It is not a gift tax, and the tax on gifts once
imposed by the Revenue Act of 1924, c. 234, 43 Stat. 313, has been
repealed, 44 Stat. 126. One may freely give his property to another
by absolute gift without subjecting himself or his estate to a tax,
but we are asked to say that this statute means that he may not
make a gift
inter vivos, equally absolute and complete,
without subjecting it to a tax if the gift takes the form of a life
estate in one with remainder over to another at or after the
donor's death. It would require plain and compelling language to
justify so incongruous a result, and we think it is wanting in the
present statute."
Id. at pp.
278 U. S.
347-348.
See also Helvering v. Hallock, 309 U.
S. 106; dissenting opinion in
Becker v. St. Louis
Union Trust Co., 296 U. S. 48,
296 U. S. 53, and
Helvering v. St. Louis Union Trust Co., 296 U. S.
39,
296 U. S. 46;
Klein v. United States, 283 U. S. 231, and
Shukert v. Allen, 273 U. S. 545.
II
. THE SECOND PROPOSAL IS FOR THE APPLICATION
OF THE DOCTRINE OF THE CLIFFORD CASE
To apply the doctrine of
Helvering v. Clifford, supra,
to the case before us is, in effect, to substitute that
doctrine
Page 335 U. S. 713
for the doctrine of the
Reinecke case. Heretofore, this
Court has made no application of the doctrine of the
Clifford case to § 811(c) or to any of its predecessor
Sections. That doctrine has been reserved largely for income tax
cases. All the facts appropriate for a decision in this case under
the doctrine of the
Clifford case have not been presented.
The absence of those facts from the record and the absence of this
issue from the arguments made below emphasize the inappropriateness
of a remand to introduce such facts at this late point in this
proceeding. Nothing suggests that this trustee has practiced fraud,
or tax evasion, or has violated his obligations as a trustee. The
trust became irrevocable at its inception. It thus contrasts
sharply with any testamentary instrument which the settlor might
have executed. There is nothing in it to suggest that the settlor,
even as a sole surviving trustee, would be free from strict
accountability to the beneficiaries of the trust or from an
obligation to use his discretion in their interest rather than in
his own. There is no more of an express provision in this trust for
the possibility of a reverter to the settlor than there was in the
Reinecke case. The countless uncertainties which would
arise in other cases from a retroactive application to this statute
of the doctrine of the
Clifford case might be nearly as
great as those which would flow from a reversal of the
Reinecke case.
Furthermore, there is a sharp contrast between § 22(a) [
Footnote 2/3] and § 811(c) of the Internal
Revenue Code as a starting point for the application of the
doctrine of the
Clifford case. Section 22(a), upon which
the
Clifford
Page 335 U. S. 714
case rests its expansion of the traditionally taxable income of
the taxpayer, invites, or at least permits, the broad
interpretation given to it. Section 811, on the other hand,
contains no sweeping inclusions. Whatever breadth of language it
contains is in § 811(a), whereas § 811(c) is in the nature of a
special exception from the broad field of transfers
inter
vivos. Section 811(c) seeks to apply the estate tax to certain
identifiable classifications of such transfers where experience has
indicated that, in spite of their form, Congress believes they
should be subjected to estate tax. The historical development of §
811(c) bears out this interpretation. It has been extended only by
the addition of specifically described classifications. The same is
true of the revocable transfer described in § 811(d), of joint and
community interests in § 811(e), of powers of appointment in §
811(f), of proceeds of life insurance in § 811(g), of transfers of
prior interests in § 811(h), and of transfers for insufficient
consideration in § 811(i). If Congress had intended to sweep into
the gross estate of the decedent broad classifications of transfers
inter vivos, contrary to the limitations upheld in
Reinecke v. Northern Trust Co., supra, or as would result
from the application of the doctrine of
Helvering v.
Clifford, many of the foregoing specific extensions would not
have been necessary. The very specificity of the terms of § 811(c)
and of its related subsections emphatically negative any broad
interpretation of their language. No language of a breadth
comparable to that used in § 22(a) appears anywhere in the
Section.
To apply the doctrine of the
Clifford case to the
Spiegel trust because of the powers which the Spiegel trust
vested
Page 335 U. S. 715
in the settlor as a trustee conflicts with the position taken by
this Court as to the "five trusts" in the
Reinecke case,
supra. For example, the powers reserved directly to the
settlor under Trust No. 4477 in the
Reinecke case not only
are equal to, but, in some ways, are broader than, those vested in
the settlor, as a trustee, in the Spiegel trust. The very fact
that, in Trust No. 4477, the reservations were made directly to the
settlor in his personal capacity, rather than to him as a trustee,
removes from them the traditional limitations which equity places
upon a trustee in the exercise of powers which he holds for the
benefit of his
cestui que trust. In
335
U.S. 701appii|>Appendix II,
infra, Trust No. 4477
is quoted in full from the record in the
Reinecke case and
a number of the especially material clauses have been italicized.
While the terms of that trust were not quoted verbatim in the
opinion of this Court in the
Reinecke case, this Court
there summarized several of them, [
Footnote 2/4] and said:
"Nor did the reserved powers of management of the trusts save to
decedent any control over the economic benefits or the enjoyment of
the property. He would equally have reserved all these powers and
others had he made himself the trustee, but the transfer would not
for that reason have been incomplete. The shifting of the economic
interest in the trust property which was the subject of the tax was
thus
Page 335 U. S. 716
complete as soon as the trust was made. His power to recall the
property and of control over it for his own benefit then ceased,
and, as the trusts were not made in contemplation of death, the
reserved powers do not serve to distinguish them from any other
gift
inter vivos not subject to the tax."
278 U.S. at
278 U. S.
346-347.
This Court thus showed that all of the powers reserved directly
to the settlor, even if coupled with the "others" of the trustee,
would not subject that trust to the estate tax. This is especially
significant because the issue now presented had been brought
squarely before this Court in the
Reinecke case by the
following question in the Government's brief:
"1. Do the words of Section 402(c) of the Revenue Act of 1921,
which provide that, for the purpose of measuring the estate tax,
there shall be included in the value of decedent's gross estate
trusts intended to 'take effect in possession or enjoyment at or
after his death,' embrace:"
"
* * * *"
"(b) Trusts created after the effective date of a similar and
earlier Act where the settlor reserved the power to sell and
reinvest the trust property; vote the stock; control leases;
reappoint trustees; and, jointly with the beneficiaries, to alter,
amend, or modify the trust. (This applies to Trusts Nos. 4477,
4478, 4479, 4480, and 4481, respectively, appearing in the record
at pp. 3, 17, 25, 32, 40.) [
Footnote
2/5] "
Page 335 U. S. 717
For us to hold that § 811(c) applies here because of the powers
which have been vested in the settlor-trustee under the Spiegel
trust would therefore amount to overruling
Page 335 U. S. 718
the decision of this Court in the
Reinecke case which
held that the corresponding language of § 402(c) of the Revenue Act
of 1921 did not apply in that case. [
Footnote 2/6]
The failure to remand this case for the determination of further
facts which would be material under the tests of the
Clifford case does not settle the question that has been
argued as to the application of those tests under § 811(c). It
does, however, show that this Court has not been willing to rest
its decision upon the application of the doctrine of the
Clifford case on the basis of the terms of this trust and
of the facts shown by the present record.
COMMON BASIS FOR THE THIRD, FOURTH, AND FIFTH
PROPOSALS
THE MATERIAL FACTS
The important facts in this case are the terms of the trust
instrument and the intent of the settlor. The terms of the
instrument are those to which the law of Illinois must be applied
to determine whether there arose, by operation
Page 335 U. S. 719
of law, any possibility of a reverter in favor of the settlor
which might have been transferred, cut off, or obliterated by the
settlor's death. In 1920, the settlor made an irrevocable transfer,
in Illinois, by trust, of certain corporate securities, with
directions to the trustees to pay the income of the trust, during
the life of the settlor, to his three named children, but, if any
of such children predeceased the settlor, the payments were to go
to the children of such deceased child or children per stirpes. If
there were no surviving child of a deceased child of the settlor,
the payments were to go to the other children of the settlor and to
their descendants per stirpes. Similarly, upon the settlor's death,
the trust fund and any accumulated income thereon were to be
divided among the settlor's three children. It was provided with
obvious care that, if any of the settlor's children had by that
time died, leaving any child or children surviving, then the child
or children of such deceased child of the settlor was or were to
receive the share of the trust fund to which its or their parent
would have been entitled. Furthermore, if any of the settlor's
three children died without leaving any child or children
surviving, then the share of such deceased child was to go to the
settlor's remaining children, and to the descendants of any
deceased child of the settlor per stirpes. No further express
provision was made for the disposition of the income or of the
corpus of the trust in the event, for example, that none of the
settlor's three children and no descendants of such children
survived the settlor. The instrument contained no further
intimation of any intent or even thought on the part of the settlor
that in any manner there might arise in favor of the settlor or of
his estate, any beneficial interest, or right to, or control over
the possession or enjoyment of the income or corpus of, the
trust.
The gift was not made in contemplation of death. At that date,
there was no law prescribing a federal gift
Page 335 U. S. 720
tax applicable to it. The trustees named in the trust were the
settlor himself and one other person whose relationship, if any, to
the settlor does not appear in the record. Both were residents of
Illinois. Their powers of management were comparable to those
commonly granted to trustees to handle a trust estate consisting
originally of such securities as were transferred here. The trust
mentioned no power of appointment and no power to alter, amend,
revoke, or terminate the trust. At the creation of the trust, the
age of the settlor was 47, and he was a widower. His three only
children were, respectively, about 22, 15, and 12 years old. He
then had no grandchildren. In 1940, when he died, he was 68 and his
children were, respectively, 43, 36, and 33. He then had three
grandchildren, aged, respectively, ten, four and two. Throughout
his life, the income of the trust was distributed to and for the
benefit of his three children, and, upon his death, the entire fund
was distributed equally among them.
THE POSSIBILITY OF A REVERTER TO THE SETTLOR.
In addition to his broader claims discussed under the first and
second proposals, the Commissioner has presented a narrow claim.
This is a claim that, if, by operation of law, there arises from
the trust a reversionary interest in the settlor or in his estate,
or if there exists even a gossamer thread of a possibility of a
reverter to the settlor or to his estate, and if such interest,
"string, or tie" were, by the terms of the trust, to be
transferred, cut off, or obliterated by his death, then, under
existing precedents, the entire trust property should be included
in the gross estate of the settlor for federal estate tax purposes.
There is no issue made here as to the amount of the tax, if any is
due. The petitioners' claim is simply that no estate tax is
applicable to the trust fund.
Page 335 U. S. 721
III
. THE THIRD PROPOSAL
I
LLINOIS LAW PRECLUDES THE POSSIBILITY OF A REVERTER
On this branch of the case, the first inquiry must be as to the
law of Illinois, and the second as to its application to this
trust. A determination of the Illinois law and of its application
adversely to the taxpayers would be conclusive against them unless
relieved by the rule of
de minimis under the fourth
proposal, or by a finding favorable to them on the issue of the
settlor's factual intent under the fifth proposal. On the other
hand, a finding favorable to the taxpayers upon either the
principle or the application of the law of Illinois would dispose
of this case in their favor. This very conclusiveness of the state
law under this proposal is a weighty consideration in favor of the
interpretation of the statute presented by the fifth proposal. A
federal policy of complete dependence upon state laws for the
application of any nationwide tax cannot fairly be attributed to
Congress without a much clearer expression of such a policy than
appears in § 811(c). The inherent difficulty of administration and
the resulting inequality of taxation as between instruments
governed by the laws of different states argue strongly against
such a policy.
This Court, as a settled practice, places much reliance upon
announcements by Courts of Appeals as to the law of the states
within their respective Circuits. [
Footnote 2/7] The weight to which such announcements are
entitled will vary with the circumstances under which they are
made. In this case, we have an announcement by the Court of Appeals
for the Seventh Circuit on the law of Illinois as to the effect of
contingent remainders contained in
Page 335 U. S. 722
a trust and pointing out that, under the law of Illinois, they
create reversionary interests in the settlor. Our difficulty here
is not with the law as thus stated, but with the application made
of it to this case. The trouble is that the trust in this case
contains not contingent remainders, but vested remainders, and it
is clear that, under the law of Illinois, no reversions,
reversionary interests, resulting trusts or "possibilities of a
reverter" of any kind can arise by operation of law from a vested
remainder. This is due to the essential difference between a
contingent remainder and a vested remainder. If the law of Illinois
is to control the situation, there is no escape from the
determination of this clear-cut issue under the law of that
State.
The failure of a condition precedent upon which a contingent
remainder depends under a trust results naturally enough in a
reversion of the undisposed-of beneficial interest to the settlor
of the trust. On the other hand, the failure of a condition
subsequent attached to a vested remainder under a trust results
equally naturally only in a failure of the divestiture contemplated
by the condition. The effect of such a failure of a condition
subsequent attached to a vested remainder is not a reversion of an
undisposed-of beneficial interest to the settlor of the trust. It
merely relieves the holder of the vested remainder and his legatees
and next of kin from the possibility of the divestiture to which
the remainder originally had been subjected.
The Court of Appeals in the instant case has made no
announcement of Illinois law contrary to that just stated. In fact,
it made no announcement whatever on the subject of vested
remainders, because it treated the Spiegel remainders as
contingent. [
Footnote 2/8] The
foregoing elemental
Page 335 U. S. 723
statement as to the legal effect of contingent remainders and of
vested remainders subject to conditions subsequent conforms to the
generally accepted law of trusts [
Footnote 2/9] and to the law of Illinois. [
Footnote 2/10]
This brings us near to the decisive question whether the
remainder interests written into the Spiegel trust were contingent
or vested. The Commissioner has suggested that it makes little
substantial difference whether a condition is a condition precedent
or a condition subsequent, as long as it is a condition. That is so
for many purposes, but where, as here, a tax, by hypothesis,
can
Page 335 U. S. 724
attach only if some possibility of a reverter can arise in favor
of the settlor before his death, then it is inescapably necessary
to determine whether or not, by operation of the law of Illinois,
such a possibility of reverter can arise under this trust. To say
in such a situation that the language of the conveyance makes no
difference is to beg the question. The possibility is not expressly
spelled out or denied. Its existence, like the existence of any
other beneficial interest in the trust, must depend upon the effect
given by Illinois law to the words of art in the conveyance. In the
last analysis, the problem is to determine whether or not the
settlor intended by his language that the possession and enjoyment
of his property were to return to him upon failure of the express
dispositions of the beneficial interests in it. If the settlor had
wished to express himself in detail, he could have done so. Here,
however, he used only the customary language of conveyancing, and
it remains to see what effect the Illinois law gives to that
language.
In the helpful light of
Lachenmyer v. Gehlbach, 266
Ill. 11, 107 N.E. 202, the remainders in the Spiegel trust are
shown to be vested remainders, carrying conditions subsequent.
See also Stombaugh v. Morey, 388 Ill. 392, 58 N.E.2d 545;
Murphy v. Westhoff, 836 Ill. 136, 53 N.E.2d 931;
Danz
v. Danz, 373 Ill. 482, 26 N.E.2d 872;
Smith v.
Shepard, 370 Ill. 491, 19 N.E.2d 368;
Hoblit v.
Howser, 338 Ill. 328, 170 N.E. 257;
Boye v. Boye, 300
Ill. 508, 133 N.E. 382;
McBride v. Clemons, 294 Ill. 251,
128 N.E. 383;
Hickox v. Klaholt, 291 Ill. 544, 126 N.E.
166;
Welch v. Crowe, 278 Ill. 244, 115 N.E. 859.
Cf.
Freudenstein v. Braden, 397 Ill. 29, 72 N.E.2d 832. No
distinction has been drawn in the Illinois cases between interests
created by
inter vivos deeds and like interests created by
testamentary documents.
See Smith v. Dugger, 310 Ill. 624,
625, 142 N.E.
Page 335 U. S. 725
243, 244, where the Illinois Supreme Court relied upon
Lachenmyer v. Gehlbach, supra, in construing an
inter
vivos deed.
See also Harder v. Matthews, 309 Ill.
548, 141 N.E. 442. [
Footnote
2/11]
Page 335 U. S. 726
For these reasons, by operation of the law of Illinois, there
here existed no possibility of a reverter to the settlor, and
therefore the federal estate tax cannot attach to it. To the extent
that the Commissioner relies upon the law of Illinois to establish
in this case the possibility of a reverter to the settlor, by
operation of the Illinois law, he has been "hoist with his own
petard."
IV
. THE FOURTH PROPOSAL ASSUMES THAT A POSSIBILITY OF A
REVERTER EXISTS AND THAT THE FACTUAL INTENT OF THE
SETTLOR MAY BE DISREGARDED.
This proposal is reached only if the foregoing conclusions as to
the law of Illinois are disregarded. It is the solution adopted in
the opinion of the Court. If it is assumed that he possibility of
reverter in favor of the settlor may be said to have arisen under
the law of Illinois,
Page 335 U. S. 727
then, under existing precedents, if we look no further, the
federal estate tax would be applicable here, and a decision is
called for against the taxpayers. The fifth proposal presents the
view that the statute requires us to look further, and to determine
the issue in reliance upon the factual intent of the settlor.
However, even without going that far, a substantial case can be
made in favor of the taxpayers even under this fourth proposal.
That case is based upon the extreme remoteness of the possibility
of reverter which is relied upon by the Commissioner. The
remoteness of it is obvious from the fact that, even at the time of
the execution of the trust when the chances of its realization were
at their highest point, the possible reverter to the settlor was
conceivable only if all three of the children of the settlor were
to die before he did, and were to die without descendants of their
own. Disregarding the possibility of descendants of his children,
the record shows an actuarial computation of the likelihood that
the settlor would survive all three of his children of only about 1
1/2 chances out of 100. On the basis of such a chance of
realization, the computation gave a value of about $4,000 to a
trust corpus of $1,000,000. To tax the settlor's estate more than
$450,000, as is here proposed, because of the existence of this
$4,000 worth of a possible reverter is not the kind of taxation
that a court can readily imagine that Congress meant to impose. A
proportion of 1 1/2 to 100 suggests the appropriate application
here of the maximum of
de minimis non curat lex. The
difficulty of applying that test as the sole basis of exemption is,
however, obvious. On the other hand, this element of remoteness
provides a thoroughly reasonable consideration which may be
combined with other evidence to determine the presence or absence
of the factual intent on the part of the settlor which is discussed
in the fifth and final proposal.
Page 335 U. S. 728
V
. THE FIFTH PROPOSAL
THE STATUTORY INTENT OF THE SETTLOR REQUIRED TO
MAKE THE ESTATE TAX APPLICABLE IS ABSENT,
AND A CONTRARY INTENT IS PRESENT
The undisputed evidence shows that, at the time of the transfer
by trust, there was an absence of conscious intent on the part of
the settlor that the trust property, or any part of it, should ever
return to him or to his estate. In fact, there is strong evidence
showing that he intended affirmatively to make a complete and
irrevocable transfer which would exclude all possibility of a
reverter to him. The trust recited as complete a transfer as any
outright deed of gift would have recited if made directly to his
children, except for the natural feature that, at their immature
age, the transfer was made to trustees, and these trustees were
required by the irrevocable terms of the trust to deliver complete
title to the settlor's children, or to their descendants, at a
future date. The settlor's intent and the completeness of the
transfer would have been no more complete if, instead of fixing the
date for the future distribution of the trust property at the date
of his own death, he had fixed it arbitrarily at December 19, 1940,
which later proved to be the date of his death. The intent and
completeness of the transfer, similarly, would have been no more
complete if he had fixed the date of termination of the trust to
coincide with the death of a third person, instead of with his own
death.
THE STATUTE REQUIRES A FINDING OF THE SETTLOR'S
INTENT.
Section 811(c) requires us to find the settlor's intent as a
condition of the application of that Section to this case.
Accordingly, if the settlor had used language in his trust
instrument which expressly, or even impliedly, had created or
recognized a possible reverter in favor of the
Page 335 U. S. 729
settlor, that language, in itself, would have been evidence that
the settlor had intended the trust to include a reverter in his
favor, and that he had intended the trust property, in the event of
a realization of that reverter, to pass from him to his estate,
under the 1920 trust, upon the expiration of that trust at his
death.
It is, however, in the complete absence of such language in the
trust instrument that the Government now claims that a possible
reverter has arisen by operation of law. The existence of such a
reverter, accordingly, may or may not have been intended in fact,
and may not have been even thought about by the settlor. To say
that the settlor must have intended all the legal consequences of
his acts begs the question. So construed, the Section would have
the same meaning as if the word "intended" had been omitted.
"Intended" should be given its normal, factual meaning. To
intend means to "have in mind as a design or purpose." [
Footnote 2/12] The question of intent is
one of fact, difficult to determine, but determinable,
nevertheless. Section 811(c) involves more than merely determining
whether a transfer took effect, as a matter of law at or after
death or whether a "string or tie," as a matter of law, was
retained until death. There remains for determination the fact
whether the settlor did actually intend that the 1920 transfer take
effect in possession or enjoyment upon the expiration of the trust
at his death.
Section 811(c) expressly covers transfers either "
in
contemplation of or intended to take effect in possession or
enjoyment at or after . . . death." (Italics supplied.) We
have held that the settlor-decedent's motive must be determined
before it can be held that a transfer was in contemplation of
death.
United States v. Wells, 283 U.
S. 102. That case included a transfer in trust,
Page 335 U. S. 730
inter vivos, which was held not to have been made in
"contemplation of . . . death." Similarly, factual intent should be
found in order to determine whether a transfer was "intended to
take effect in possession or enjoyment at or after . . . death." In
United States v. Wells, Chief Justice Hughes, speaking for
the Court, said (pp.
283 U. S.
116-117):
"The quality which brings the transfer within the statute is
indicated by the context and manifest purpose. Transfers in
contemplation of death are included within the same category, for
the purpose of taxation, with transfers intended to take effect at
or after the death of the transferor. The dominant purpose is to
reach substitutes for testamentary dispositions, and thus to
prevent the evasion of the estate tax. . . . As the transfer may
otherwise have all the indicia of a valid gift
inter
vivos, the differentiating factor must be found in the
transferor's motive."
In cases involving "contemplation of . . . death" under § 811(c)
the required motive impelling a transfer "
is a question of fact
in each case." (Italics supplied.)
See Allen v. Trust Co.
of Georgia, 326 U. S. 630,
326 U. S. 636.
So also, in each case under § 811(c), the question whether
"the decedent has at any time made a transfer, by trust or
otherwise, . . . intended to take effect in possession or enjoyment
at or after his death . . ."
should be one of fact.
In determining the issue as to the settlor's intent in making
his 1920 transfer,
inter vivos, in the present case, the
following considerations are material and persuasive:
1.
Language of the trust instrument. -- There was no
language in this instrument which expressed or even affirmatively
implied an intent to make a transfer to take effect in possession
or enjoyment at or after the death of
Page 335 U. S. 731
the settlor, rather than
in praesenti. If the trust
instrument had contained such an express or affirmatively implied
declaration of the settlor's intent, it might have been conclusive
of the issue. If there had been even a description of, or reference
to, a possible reverter to the settlor, that would have been strong
evidence of the intent required by § 811(c). The absence of any
such description or reference was consistent with a lack of intent
that there be such a reverter. It was negative evidence to the
effect that such a reverter was not intended and not desired by the
settlor.
In an instrument of this kind, it is natural for the settlor to
give affirmative expression to each beneficial use to which he
intends or desires the trust property to be put. It cannot be
argued effectively in this case that the complete silence of the
trust instrument on the subject of a possible reverter of the trust
property to the settlor or to his estate amounted to an expression
of intent by the settlor that such a reverter be permitted to arise
by operation of law. As a matter of fact, the extrinsic evidence
presented in this case tended to establish an opposite intent and
desire.
In the present case, the overwhelming improbability of a
complete failure of beneficiaries was so complete that it supplied
a natural reason for omitting further provisions for distribution
of the trust property. The likelihood that a 47-year-old settlor
would outlive his three children and also his prospective
grandchildren obviously was small. As it turned out, none of the
settlor's three children predeceased him, and the distribution of
the trust property was made to them without reaching his
grandchildren. The facts of this case as they existed in 1920
presented to the settlor quite a different problem from that which
would have been presented if, at that time, he had named as the
only beneficiary of the trust a person with a life expectancy
obviously shorter than his own.
Page 335 U. S. 732
Standing alone, the instrument evidences a simple transfer
in praesenti, comparable to that in
Reinecke v.
Northern Trust Co., supra. The language of the instrument
therefore certainly did not, in itself, require the property which
was transferred, in 1920, to be included, in 1940, in the settlor's
gross estate for federal estate tax purposes. If anything, the
language itself, read in the light of Illinois law as stated above
in the discussion of the third proposal and as regarded by the
settlor in the light of the advice of his legal counsel, is
expressive of an intent that there be no possibility of a reverter,
and of an intent to make an absolute and complete transfer to the
trustees
in praesenti.
2.
Remoteness of the possible reverter. -- The
remoteness of the possible realization of a suggested reverter
(whether arising from express provision of a trust or by operation
of law) is an important factor in establishing the probable intent
of the settlor of any trust to make thereby a transfer to take
effect in possession or enjoyment at or after his death. If the
1920 trust instrument had named as its sole beneficiary a person
having a comparatively short life expectancy, then, assuming a
reversion in favor of the settlor under Illinois law, the
possibility of its occurrence would have been substantial. It would
have been so great that, if the settlor had expressly mentioned
such a reversion in the trust instrument, that mention of it would
have substantially demonstrated the existence of the intent
required by § 811(c). Even if the settlor had made no express
mention of such a reversion, and thus had left its effectiveness
wholly to the operation of the law of Illinois, the circumstances
themselves, including the high probability of the realization of
the reversion, would have supplied important evidence upon which to
base a finding of the required intent on the part of the settlor.
However, with the inclusion
Page 335 U. S. 733
of each additional youthful beneficiary of the trust, the basis
for a conclusion that the settlor intended to establish a reversion
to himself or to his estate and to postpone the transfer of the
possession or enjoyment of the property until at or after his death
was weakened.
The Tax Court, upon undisputed evidence, reduced to a
mathematical basis the possibility presented by the suggested
reverter in this case. The computations were stated to have been
based upon a mortality table and an assumed rate of interest
prescribed in Treasury Regulations as applicable to federal estate
taxes. The computations also were stated to have been based upon
assumed ages of a settlor and of beneficiaries corresponding
substantially with those stated in the facts of this case. The
computations showed that the probability that a person of the age
of this settlor would survive three persons of the respective ages
of the primary beneficiaries who were living at the date of the
creation of this trust was only O.01612, or about 1 1/2 chances out
of 100. Similarly, the value of the right of a person, of the age
of the settlor in 1920, to receive $1 on the death of the last of
three persons of the ages of the primary beneficiaries was
$0.00390.
In 1920, the most favorable computation would thus have placed a
value of less than $4,000 upon the settlor's interest in the
suggested reverter relating to a $1,000,000 trust fund. These
computations do not take into consideration the additional
possibility that many grandchildren might have been born in time to
qualify as beneficiaries of this trust, and thus further reduce the
possibility of reverter. In fact, three such grandchildren were
born in time to qualify -- thus reducing the value to the settlor,
in 1940, of the suggested reverter, on a $1,000,000 trust fund, to
about $70. The relation of $70 to $1,000,000 ordinarily would be
de minimis, and certainly
Page 335 U. S. 734
not one which would induce Congress to permit the assessment of
a tax of over $450,000 because of its existence.
This demonstration of the remoteness of the possible reverter,
if any, in this case is persuasive at least in showing the fact to
have been that the settlor, in establishing this trust, probably
intended it to be nothing other than a completed gift to those of
his children or their descendants who might survive him.
In 1920, the gift, as such, was tax-free. Such a gift today
would be subject to a gift tax. The assessment of a gift tax upon
such a transaction emphasizes the impropriety, rather than the
propriety, of also applying to it an estate tax at the death of the
settlor. In 1920, the character of the gift was the same as it
would be today, and the fact that it was not subject to a gift tax
then does not make it any more subject to the 1940 estate tax than
if a gift tax had been paid upon it.
3.
Direct evidence of the intent of the settlor. --
Substantial evidence confirmed the absence of the factual intent
necessary in order to make § 811(c) applicable. There was no direct
evidence indicating the existence of an actual intent on the part
of the settlor to provide for a reverter to himself or to his
estate or, in any other manner, to cause his 1920 transfer to
trustees for the benefit of his descendants to take effect in
possession or enjoyment at or after his death.
On the other hand, there was undisputed evidence indicating the
absence of such an intent. In fact, it indicated the probable
existence of a contrary intent. The Illinois attorney who drew the
trust instrument testified that, prior to the drafting of the
instrument, the settlor had stated that he desired and intended the
trust property to be transferred to trustees for the benefit of his
children, and that he wanted at no time to retain any interest in
it. The attorney added that, in drafting the trust, he had
Page 335 U. S. 735
endeavored to carry out the instructions of his client, and that
he believed he had done so. That attorney is a member of the firm
representing the estate of the settlor-decedent in the instant
case. As attorneys for the estate of the 1940 decedent, they argue
that, under the law of Illinois, as they understood it and as they
advised their client in 1920, there has not arisen any possibility
of a reverter to the settlor under this trust, by operation of law
or otherwise. The receipt of that opinion by the settlor at the
time of executing the trust instrument supports the petitioners'
contention that the settlor then intended to translate into this
Illinois trust his purpose to make an absolute and complete
transfer of the subject matter of the trust, and thereby to make
irrevocable provision for its future distribution.
In view of the uncontroverted and convincing evidence of the
absence of any such factual intent on the part of the settlor as is
required to bring his 1920 transfer within the terms of § 811(c),
and in view of the judgment of the Tax Court in favor of the
settlor-decedent's executors, there is no need to remand the case
to that court for a further finding in support of its judgment.
For the reasons stated in the foregoing discussion of the fifth
proposal, and also for the reasons stated in the discussion of the
third proposal to the effect that no possibility of a reverter
arose in favor of the settlor by operation of the law of Illinois,
I believe that the judgment of the United States Court of Appeals
should have been reversed.
[
Footnote 2/1]
The terms "reverter" and "the possibility of a reverter" have
been used frequently and freely in opinions and discussions of this
general subject. They are used here to refer to the return or
possible return to the settlor or to his estate, under conditions
comparable to those here suggested, of property previously placed
in trust by the settlor. They are not used in any strict or
technical sense peculiar to the law of property.
See also
I Paul, Federal Estate and Gift Taxation § 7.21, n. 1 (1942). They
may refer, for example, to a reversionary interest, or a beneficial
interest under a resulting trust, or merely some right to or
control over a beneficial interest in the trust property, and, in
that sense, they include the "string or tie" to the trust property
that also has been referred to frequently in discussions of this
subject. The term "reversion" is used in its usual technical
meaning in the law of property.
[
Footnote 2/2]
The Spiegel trust instrument is set forth in full in
335
U.S. 701appi|>Appendix I,
infra.
[
Footnote 2/3]
"SEC. 22. GROSS INCOME."
"(a) GENERAL INCOME. 'Gross income' includes gains, profits, and
income derived from salaries, wages, or compensation for personal
service, of whatever kind and in whatever form paid, or from
professions, vocations, trades, businesses, commerce, or sales, or
dealings in property, whether real or personal, growing out of the
ownership or use of or interest in such property; also from
interest, rent, dividends, securities, or the transaction of any
business carried on for gain or profit, or gains or profits and
income derived from any source whatever. . . ."
53 Stat. 9, 26 U.S.C. (1940 ed.) § 22(a).
[
Footnote 2/4]
". . . The settlor reserved to himself power to supervise the
reinvestment of trust funds, to require the trustee to execute
proxies, to his nominee, to vote any shares of stock held by the
trustee, to control all leases executed by the trustee, and to
appoint successor trustees. With respect to each of these five
trusts, a power was also reserved 'to alter, change or modify the
trust,' which was to be exercised in the case of four of them by
the settlor and the single beneficiary of each trust, acting
jointly, and, in the case of one of the trusts, by the settlor and
a majority of the beneficiaries named, acting jointly."
278 U.S. at
278 U. S.
344.
[
Footnote 2/5]
Upon the reargument of the instant case and the
Church
case, we requested counsel to discuss particularly nine questions
insofar as those questions were relevant to the respective cases.
The first question has been quoted
supra, at p.
335 U. S. 711.
The rest are quoted below and, of these, numbers 2, 6, 8, and 9
bore upon this alternative solution:
"2. Assuming that, under the applicable state law, there arose
by operation of law a possible reverter in favor of the settlor's
estate, did section 811(c) require that the value of the corpus, in
view of the record in the case, be included in the settlor's gross
estate for federal estate tax purposes?"
"3. Did section 811(c) of the Internal Revenue Code, in 1939,
require the inclusion in the settlor's gross estate of the value of
the corpus of a trust because the settlor, by its terms, had, in
1924, reserved to himself a right to the income of the trust until
his death, the reservation thus being made before the March 3,
1931, amendment of that section?"
"4. Were the joint congressional resolution of 1931 (46 Stat.
1516-1517), and subsequent related estate tax statutes, intended to
be a repudiation of this Court's
May v.
Heiner (281 U.S. 238) interpretation of the estate
tax statute?"
"5. Did the
May v. Heiner estate tax interpretation
survive the congressional resolution and this Court's holding and
opinion in
Helvering v. Hallock (309
U.S. 106)?"
"6. Under section 811(c), is the 'possession and enjoyment' of
the corpus of an
inter vivos trust 'intended to take
effect . . . at or after' the settlor's death where he names
himself as co-trustee with the broad control and administrative
powers over the corpus and income here vested, and where the corpus
is withheld from the beneficiaries until the settlor's death?"
"7. In the light of this Court's opinion in
Helvering v.
Hallock, does the
Hassett v. Welch (303 U.S.
303) interpretation of the 1931 congressional resolution have
controlling relevance in determining whether the estate tax shall
be applied to the Church properties transferred to beneficiaries
under a trust created before 1931, but in which Church retained the
net income from the trust properties during his life?"
"8. Assuming that, under the 'refined technicalities of the law
of property,' the 'possession and enjoyment' of the trust
properties here be deemed to have passed to the beneficiaries when
the trust was created, are the transfers so much 'akin to
testamentary dispositions' as to make them subject to the estate
tax statutes? (
See Helvering v. Hallock, p.
309 U. S.
112.)"
"9. What is the effect of the rulings of
Helvering v.
Clifford (309 U.S. 331) upon these trusts?"
Journal Supreme Court, Oct. Term, 1947, pp. 297-298.
[
Footnote 2/6]
A somewhat comparable but less direct conflict is presented by
Goldstone v. United States, 325 U.
S. 687. There, substantially complete control over the
disposition of the proceeds of insurance contracts was placed by
the insured in the discretion of his wife, who also was the primary
beneficiary. A minority of this Court sought to apply the doctrines
of the
Hallock case and the rationale which inheres in the
Clifford case to the extent of recognizing the transaction
as, in substance, a completed gift to the wife of the insured, and
therefore not subject to the estate tax. This Court, however, did
not, in that case, apply the
Clifford doctrine to the
estate tax.
But see Richardson v. Commissioner, 121 F.2d
1,
cert. denied, 314 U.S. 684, where it was held that,
under the
Clifford case, a trustee, with a broad power of
revocation which might at any time be exercised for his own
benefit, was himself liable for the income tax on the income of the
trust.
See also Bunting v. Commissioner, 164 F.2d 443,
cert. denied, 333 U.S. 856; 47 Mich.L.Rev. 137 (1948).
[
Footnote 2/7]
See Helvering v. Stuart, 317 U.
S. 154,
317 U. S.
163-164;
MacGregor v. State Mutual Life Assur.
Co., 315 U. S. 280.
[
Footnote 2/8]
"Applying this law to the instant case, we think it follows that
the interests under this trust did not vest upon the execution of
the trust, as contended by the taxpayer, and could only vest upon
the happening of the condition precedent, namely, that the
beneficiaries or some of them survive the settlor, and this was the
'event which brought the larger estate into being for the'
beneficiaries."
Commissioner v. Spiegel's Estate, 159 F.2d 257,
259.
[
Footnote 2/9]
"Where property is given in trust for one beneficiary for life
and to another beneficiary in remainder and, before the termination
of the trust, the latter beneficiary dies intestate and without
heirs or next of kin, it would seem that his interest passes to the
state, and that a resulting trust will not arise in favor of the
settlor or his estate. In such a case, since the entire beneficial
interest, subject to the preceding life estate in the other
beneficiary, vested in the beneficiary entitled in remainder
absolutely at the time of the creation of the trust, it would seem
that the trust does not fail on his death, so as to give rise to a
resulting trust, but his interest passes to the state as
ultimus haeres. On the other hand, if the beneficial gift
over is contingent and the contingency does not occur, a resulting
trust will arise in favor of the settlor or his estate."
3 Scott On Trusts, § 411.5 (1939).
[
Footnote 2/10]
The Illinois cases establish the rule that, when a vested estate
in remainder has been created, the divestment of that estate in
favor of some other beneficiary can take place only in literal
compliance with the divesting conditions set forth by the settlor.
Henderson v. Harness, 176 Ill. 302, 52 N.E. 68.
See
Illinois Land & Loan Co. v. Bonner, 75 Ill. 315;
McFarland v. McFarland, 177 Ill. 208, 217, 52 N.E. 281,
284, and
Continental Illinois Nat. Bank & Trust Co. v.
Kane, 308 Ill.App. 110, 31 N.E.2d 351.
See also 42
Ill.L.Rev. 561, 564. This does not leave room for reversion to the
settlor by operation of law.
[
Footnote 2/11]
The basis of distinction necessarily rests with the form of the
statement employed. A classic definition of the distinction between
contingent and vested remainders is that in Gray, The Rule Against
Perpetuities, § 108, quoted as follows in
Lachenmyer v.
Gehlbach, 266 Ill. 11, 18, 19, 107 N.E. 202, 205:
"A test which is generally regarded as sufficient to determine
the question, and which has been generally adopted, is stated as
follows:"
"If the conditional element is incorporated into the description
of or into the gift to the remainderman, then the remainder is
contingent, but if, after words giving a vested interest, a clause
is added divesting it, the remainder is vested. Thus, on a devise
to A. for life, remainder to his children, but, if any child dies
in the lifetime of A., his share to go to those who survive, the
share of each child is vested, subject to be divested by its death.
But on a devise to A. for life, remainder to such of his children
as survive him, the remainder is contingent."
The language in the Spiegel and the Lachenmyer trusts is closely
comparable. In each case, the gift to children of the settlor is a
vested gift. In the Spiegel trust, the children's interest was a
vested primary interest (subject to conditions subsequent), and in
the Lachenmyer trust, the children's interest was a vested
remainder following a life interest in favor of the testator's wife
(and in turn subject to conditions subsequent). In both cases, the
language making the gifts over is in the form of a divestiture --
comparable to that in the classic example quoted above, "
but if
any child dies in the lifetime of A, his share to go to those
who survive. . . ." (Italics supplied.)
The material provision of the Spiegel trust, italics supplied,
is as follows:
"3. Upon my death, the said Trustees, and the survivor of them,
or any successor Trustee, shall divide said trust fund, and any
accumulated income thereon then in the hands of said Trustees,
equally among my said three (3) children, and if any of my said
children shall have died, leaving any child or children
surviving, then the child or children of such deceased child of
mine shall receive the share of said trust fund to which its or
their parent would have been entitled, and if any of my said three
(3) children shall have died without leaving any child or children
him or her surviving, then the share to which such deceased child
of mine would have been entitled shall go to my remaining children,
and the descendants of any deceased child of mine per stirpes, and
not per capita."
The corresponding provision of the Lachenmyer trust, italics
supplied, is as follows:
"
Third. After the death of my said wife, all of said
property and estate above mentioned and described to go to my
children, share and share alike,
and shall any of my children
die, then the children of such deceased child, should any
children be surviving such deceased child, to take the share of the
parent so deceased,
and should any of my children die leaving
no issue, then the share of such deceased child shall be
divided equally among my surviving children."
Lachenmyer v. Gehlbach, supra, 266 Ill. at 13, 107 N.E.
at 203.
Contrasting provisions, specifically recognized by the court
below as examples of contingent remainder in an
inter
vivos trust, are found in
Klein v. United States,
283 U. S. 231,
283 U. S.
232-233. The court below also cited
Haward v.
Peavey, 128 Ill. 430, 21 N.E. 503, and
Baley v.
Strahan, 314 Ill. 213, 145 N.E. 359, involving wills and
recognizing the contingent character of the remainders in the
Klein case.
[
Footnote 2/12]
Webster's New International Dictionary, 2d Ed. (1938).
|
335
U.S. 701appi|
Appendixes to MR. JUSTICE BURTON's dissent.
Appendix I
The trust instrument which is the subject of the decision in
Spiegel v. Commissioner, ante, p.
335 U. S. 701, is
as follows:
"Know All Men By These Presents, that I, Sidney M. Spiegel, of
the City of Chicago, County of Cook and Illinois, in
Page 335 U. S. 736
consideration of One Dollar ($1.00) and other good and valuable
considerations, have sold, transferred, assigned, set over and
delivered, and by these presents do sell, transfer, assign, set
over and deliver to Modie J. Spiegel and Sidney M. Spiegel, and the
survivor of them, as Trustees, six hundred twenty-five (625) shares
of the capital stock of Spiegel's House Furnishing Company and
seven hundred fifty (750) shares of the capital stock of Spiegel
May Stern Company, In Trust, nevertheless, for the following uses
and purposes, and upon the following terms and conditions:"
"1: The said Trustees, and the survivor of them, or any
successor trustee, shall have full, absolute and complete power to
hold, manage and control said shares and every part thereof; to
sell, exchange, transfer or otherwise dispose of the same, or any
part thereof, and to invest and reinvest the proceeds derived from
any such sale or sales, or other disposition of said shares, or any
part thereof, during the continuance of this trust. While said
shares of stock, or any substitutes therefor, are held by said
Trustees, or the survivor of them, or any successor Trustee, if any
corporation whose stock or other securities are held by said
Trustees should require any action of any kind to be taken, said
Trustees, and the survivor and any successor trustee, shall have
the same right to take any action which may be required of any
stockholder or holder of any securities of any such corporation as
if said Trustees, and the survivor and any successor held such
shares or said securities in their own individual names and were
the sole owners thereof."
"2: The Trustees, and the survivor of them, and any successor
trustee, shall collect and receive all income derived therefrom, or
from any substitutes, therefor, and shall during the life of
myself, said Sidney M. Spiegel, divide said net income into three
(3) equal parts, and pay or use one of said parts of said income to
or for the maintenance, support and education of my three (3)
children, Katherine J. Spiegel, Sidney M. Spiegel, Jr., and Julia
K. Spiegel -- such income to be distributed at convenient intervals
each year. In the event that any of my said three (3) children
shall die prior to my death, then the share of such income to which
such deceased one of said three (3) children would have been
entitled shall go the the child or children of such deceased child
of mine, in equal parts, and if there be no such child or children
of any such deceased child of mine, then such income shall be
divided equally among the survivors of said three (3) children of
mine, and their descendants, per stirpes and not per capita."
"3: Upon my death, the said Trustees, and the survivor of them,
or any successor Trustee, shall divide said trust fund, and any
accumulated
Page 335 U. S. 737
income thereon then in the hands of said Trustees, equally among
my said three (3) children, and if any of my said children shall
have died, leaving any child or children surviving, then the child
or children of such deceased child of mine shall receive the share
of said trust fund to which its or their parent would have been
entitled, and if any of my said three (3) children shall have died
without leaving any child or children him or her surviving, then
the share to which such deceased child of mine would have been
entitled shall go to my remaining children, and the descendants of
any deceased child of mine per stirpes, and not per capita."
"4: If, during the continuance of this trust, there shall be any
increase in the principal of said trust estate by reason of the
declaration of any stock dividends or other increases or
emoluments, all such increases shall be and remain a part of said
trust estate, and shall be held by said Trustees upon the same
terms and conditions as are herein set forth."
"5: In the event of the death, refusal, inability, or failure
for any reason to act of both said Trustees at any time during the
continuance of this trust, then The Chicago Title & Trust
Company shall become the successor, Trustee, with the same rights,
powers, duties, and obligations as are herein vested in and imposed
upon the Trustees, and the survivor thereof, hereinbefore
named."
"6: None of the beneficiaries of the trust estate shall at any
time be permitted to anticipate the payments to which any of them
may be entitled hereunder by any order, assignment, or
otherwise."
"In Witness Whereof I have hereunto set my hand and seal at
Chicago, Illinois, as of the 2nd day of January, 1920."
Sidney M. Spiegel. (Seal)
"We hereby accept the above-named shares of stock and agree to
hold the same subject to the terms above-mentioned, as of the 2nd
day of January, 1920."
Modie J. Spiegel. (Seal)
Sidney M. Spiegel. (Seal)
|
335
U.S. 701appii|
Appendix II.
The Northern Trust Company trust instrument No. 4477, which is
one of the "five trusts" considered in
Reinecke v. Northern
Trust Co., 278 U. S. 339, is
as follows (italics supplied):
"This indenture, made this first day of March in the year of our
Lord one thousand nine hundred and nineteen (A.D. 1919), by and
between Adolphus C. Bartlett, of the City of Chicago, County of
Cook, and Illinois, the party of the first part, and
Page 335 U. S. 738
the Northern Company (hereinafter termed the 'trustee'), of
Chicago, a corporation organized and doing business under the laws
of the Illinois, the party of the second part, witnesseth:"
Article First
"That the party of the first part, being desirous of
establishing and creating the trust hereinafter mentioned, for the
purposes and upon the terms set forth, in consideration of the
premises and influenced by love and affection for the beneficiaries
hereinafter named, does hereby sell, assign, transfer, and set over
unto the trustee the following securities, to-wit:"
"1,000 shares of the stock of the Northern Trust Company."
"784 shares of the stock of the Commonwealth Edison
Company."
"300 shares of the stock of the Illinois Central Railroad
Company."
"300 shares of the common stock of the Chicago &
Northwestern Railroad Company."
"200 shares of the preferred stock of the Chicago &
Northwestern Railroad Company."
"100 shares of the stock of the Pullman Company."
"5 bonds of Armour & Company, for $1,000 each."
"15 bonds of Morris & Company, for $1,000 each."
"Also the following-described notes secured by mortgage on real
estate in Phoenix, Arizona: "
Maker:
Amount
Rollin S. Howard $5,000.00
W. S. Dorman 5,000.00
Edgar O. Faucett 22,500.00
Elisha T. Waters 5,000.00
Roy S. Goodrich 40,000.00
Wilson W. Dobson 7,000.00
Redwell Music Company 20,000.00
Pauline M. O'Neil 25,000.00
Pauline M. O'Neil 5,000.00
"to be held and disposed of under and in pursuance of this
indenture."
Article Second
"The trustee shall have power and authority at any time, and
from time to time --"
"(1) To receive and collect all dividends declared and paid upon
any shares of stock at any time subject to the terms of this
agreement,
Page 335 U. S. 739
and the interest upon all moneys, bonds, and obligations at any
time held by it hereunder, and also all rents and other income
which shall accrue or become due and payable on or from any of the
trust estate hereunder."
"(2) To sell, transfer, assign, and convey any or all of the
stocks, bonds, obligations, securities, real estate, or other
property held at any time by said trustee under this instrument,
and to invest and reinvest the proceeds thereof in either real or
personal property, including dividend-paying stocks of
corporations;
provided, however, that, during the life of said
party of the first part said trustee shall be governed by any
instructions or directions in writing given to it by said party of
the first part in regard to the management, sale, or investment of
any part of the said trust estate, and said trustee shall be free
from any liability or responsibility for any action by it done
under or in pursuance of any such written direction or
instruction. In no event shall any purchaser from the trustee,
or any person or corporation dealing with the trustee, be required
to ascertain the authority and power of the trustee to make any
sale, conveyance, or transfer of any part of the trust estate held
hereunder, but every such purchaser and all other parties shall be
entitled to rely upon the delivery of the transfer, assignment, or
conveyance by the trustee of any or all of said trust estate as
having been in all respects fully authorized, and shall not be
affected by any notice to the contrary, or be required to see to
the application of the purchase money."
"(3) To exercise the voting power upon all shares of stock held
by the trustee hereunder, and to exercise every power, election,
and discretion, give every notice, make every demand, and do every
act and thing in respect of any shares of stock or bonds, or other
obligations and securities held by the trustee hereunder, which it
might or could do if it were the absolute owner thereof;
provided, however, that, upon the written request of said first
party, it shall be the duty of the trustee to execute, or cause to
be executed, to the person or persons named in such requests a
proxy, entitling him or them (with full power of substitution) to
vote in respect of any shares of stock in such written request or
proxy defined and mentioned, any meeting or meetings of the
stockholders of any corporation or corporations specified in such
request and proxy."
"(4) To receive any and all stock dividends declared, and any
other distribution which may be made by any corporation, any of
whose shares of stock at the time constitute a part of the
principal of the trust estate, and also all proceeds which may be
paid on or
Page 335 U. S. 740
in respect of any such shares of stock on the liquidation of the
company issuing the same, or upon the sale (whether voluntary or
involuntary) of its assets, or any part thereof, or which may be
otherwise paid out of capital or on account of the principal of any
bond, stock, or other security, and may in its discretion join in
any plan of reorganization or of readjustment of any corporation,
any of whose shares of stocks, bonds, or other securities or
obligations may at any time constitute a part of the principal of
the trust estate, and accept the substituted securities in and by
said plan allotted in respect to the securities and obligations so
held by the trustee."
"(5) To execute leases of any real estate which shall form a
part of the said trust at any time at such rental, and upon such
terms, and for such length of time (not exceeding two hundred (200)
years) as it may deem best; to erect buildings, or to change,
alter, or make additions to any existing buildings upon any real
estate which may form a part of said trust estate, and to do all
other acts in relation to the said real estate which, in the
judgment of said trustee, shall be needful or desirable to the
proper and advantageous management thereof, so as to protect the
same and make the same productive;
provided, however, that in
every case the said trustee shall observe and be governed by any
instructions or requests in relation thereto made by an instrument
in writing, signed by said first party."
Article Third -- Distribution and application of
income
"(1) During the joint lives of the said party of the first part
and his wife, Abby H. Bartlett, the said trustee shall pay to the
said Abby H. Bartlett the sum of two thousand dollars ($2,000.00)
on the last day of each month, and the residue of said net income
shall be accumulated in the hands of the said trustee and kept
invested in the same manner as said trustee is authorized to invest
the principal of said trust."
"The said payments to the said Abby H. Bartlett are in lieu of
the monthly payments now being made to her under an existing
agreements [
sic], and not in addition thereto."
"(2) From and after the death of the said party of the first
part, the said payment of two thousand dollars ($2,000.00) in each
month shall continue to be made to the said Abby H. Bartlett until
she shall either die or become entitled to a share of said first
party's estate otherwise than under his will, bearing even date
herewith, and the residue of said net income shall in each year be
paid by said trustee to the four (4) children of said party of the
first part,
Page 335 U. S. 741
viz., Maie Bartlett Heard, Frederic Clay Bartlett,
Florence Dibell Bartlett, and Eleanor Bartlett Perdue, or the
survivors of them, in equal shares; provided, however, that in the
event of the death of either of said children of said party of the
first part leaving issue surviving, such surviving issue shall
stand in the place of such deceased child and receive the share of
said net income which such deceased child would have received if
living; it being the intention of said party of the first part that
all payments to his wife, Abby H. Bartlett, under this trust shall
cease and be at an end upon her becoming entitled to any share or
portion of his estate otherwise than under his will, bearing even
date herewith, and that, subject to the payments hereinbefore
directed to be made to said Abby H. Bartlett, the net income of
said trust estate shall be paid to the children of said party of
the first part (and the issue of any deceased child) in the shares
above specified during the continuance of the trust hereby
created."
Article Fourth-Distribution of principal of trust
estate
"The trust hereby created shall terminate at the expiration of
five (5) years from the death of the party of the first part unless
the said Abby H. Bartlett shall then be living and be entitled to
receive monthly payments out of the net income of said trust estate
under the provisions of this indenture, in which case this trust
shall continue until the death of said Abby H. Bartlett, and shall
then terminate."
"Upon the termination or expiration of the trust hereby created,
the trust estate then in the hands of said trustee shall be paid
over and distributed as follows: "
"(a) One-fourth (1/4) thereof to each of the four (4) children
of said party of the first part hereinbefore named,
viz.,
Maie Bartlett Heard, Frederic Clay Bartlett, Florence Dibell
Bartlett, and Eleanor Bartlett Perdue;"
"(b) If either of said four (4) children shall not then be
living, his or her one-fourth (1/4) of said trust estate shall be
paid over and distributed to the then surviving issue of such
deceased child per stirpes, and in default of such surviving issue,
then to the surviving issue of said party of the first part per
stirpes."
Article Fifth -- Concerning the trustee
"The trustee hereby accepts the trust created by this indenture,
and agrees to act in accordance with its terms and provisions. The
trustee may consult with counsel, and shall be fully protected
in
Page 335 U. S. 742
any action or nonaction taken, permitted, or suffered by it in
good faith and in accordance with the opinion of counsel selected
or provided by it, and, in case of legal proceedings involving the
trustee or the principal of the trust estate, the trustee may
defend such proceedings or may, upon being advised by such counsel
that such action is necessary or advisable for the protection of
the interests of the trustee, or of the beneficiaries, institute
any legal proceedings."
"The trustee shall be reimbursed and indemnified against any and
all liability, loss, or expense because of the holding of any
shares of stock or other properties constituting a part of the
principal of the trust estate, either in its own name or in the
name of a nominee, and shall have a lien upon the principal of the
trust estate and the income therefrom for the amount of any
liability, loss, or expense which may be so incurred by it,
including the expense of defending any action or proceeding
instituted against it or such nominee by reason of any such
holding."
"Out of the income of the principal of the trust estate, the
trustee shall pay all taxes, assessments, or other governmental
charges which it may be required to pay or to retain because or in
respect of any part of the principal of the trust estate or the
income therefrom or the interest of the trustee therein, or the
interest of any beneficiary or other person therein, under any
present or future law of the United States, or of any State,
county, municipality, or other taxing authority therein, any and
all such taxes, assessments, or other governmental charges lawfully
imposed being charged as a lien upon the said income, and in case
of deficiency of said income upon the principal of the trust
estate."
"All payments or distribution of income to beneficiaries in this
indenture provided for shall be made out of net income, current or
accumulated, then in the hands of the trustee."
"The said trustee, or any successor in trust, may resign at any
time by giving notice in writing of such resignation to said first
party while he shall live, and after his death by giving notice in
writing of such resignation to either one of the beneficiaries
hereinbefore named."
"
In case of the resignation of any trustee acting hereunder,
or of its disability or incapacity to further act as trustee, the
said party of the first part, if living, and after his death a
majority of the five (5) beneficiaries hereinbefore named,
viz., the wife and four (4) children of said party of the
first part, or a majority of the survivors of them,
shall have
power to appoint a successor in trust by an instrument in
writing duly signed by him or them and delivered to said
trustee,
Page 335 U. S. 743
and, upon the appointment of such successor in trust, the said
trustee shall convey, assign, transfer, and deliver to such
successor in trust all of the trust estate then in its hands, and
thereupon and thereafter such successor in trust shall have all the
rights, powers, duties, and authority which are granted to or
imposed on said original trustee under the provisions of this
indenture."
Article Sixth -- miscellaneous provisions
"(1)
Said grantor has created the foregoing trusts to
provide for the support and maintenance of the beneficiaries
entitled to share in the income of said trust estate, and the said
beneficiaries shall have no power to anticipate, assign, or
otherwise dispose of or encumber their respective interests in said
trust estate, and the same shall not be subject to be taken from
them by process of law."
"(2)
Any of the provisions of this trust deed may be
altered, changed, or modified in any respect and to any extent at
any time during the life of said party of the first part by the
delivery to said trustee of an instrument in writing signed by said
party of the first part and by a majority of the five (5)
beneficiaries hereinbefore named, or by a majority of the survivors
of said five beneficiaries."
"(3) The beneficiaries, or any or either of them, may act
through an attorney in fact, in signing any and all instruments
delivered to the trustee under this indenture, with like effect as
though signed in person, and any or either of said beneficiaries
may act as such attorney in fact, when authorized so to do."
"In witness whereof the parties hereto have executed this
instrument, under seal, the day and year first above written."
ADOLPHUS C. BARTLETT [SEAL]
THE NORTHERN TRUST COMPANY
By SOLOMAN A. SMITH,
President
"Attest: "
"H. H. Rockwell,"
"
Assistant Secretary"