Source: https://case-law.vlex.com/vid/335-u-s-632-606500614
Timestamp: 2019-04-20 15:06:02+00:00

Document:
Held: the decedent having reserved the income from the trust property for life, the transfer was 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 was properly included in the gross estate of decedent for purposes of the federal estate tax. Pp. 633-651.
2. 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. P. 645.
3. Helvering v. Hallock, 309 U.S. 106, reaffirmed; May v. Heiner, 281 U.S. 238, held no longer controlling on the interpretation of the "possession or enjoyment" provision of § 811(c). Pp. 636-646.
4. Reaffirmance of May v. Heiner is not required by the doctrine of stare decisis nor by the Joint Resolution of March 3, 1931, nor by the decisions of this Court in Hassett v. Welch and Helvering v. Marshall, 303 U.S. 303. Pp. 646-651.
At Church's death (which occurred in 1939), the trust was to terminate, and the trust agreement contained some directions for distribution of the trust assets when he died. These directions as to final distribution did not, however, provide for all possible contingencies. If Church died without children and without any of his brothers or sisters, or their children, surviving him, the trust instrument made no provision for disposal of the trust assets. Had this unlikely possibility come to pass (at his death, there were living five brothers, one sister, and ten of their children), the distribution of the trust assets would have been controlled by New York law. It has been the government's contention that, under New York law, had there been no such surviving trust beneficiaries, the corpus would have reverted to the decedent's estate. This possibility of reverter, plus the retention by the settlor of the trust income for life, the Government has argued, requires inclusion of the value of the trust property in the decedent's gross estate under our holding in Helvering v. Hallock, 309 U.S. 106.
The mere possibility of reverter by operation of law upon a failure of the trust, due to the death of all the remaindermen prior to the death of decedent, is not such a possibility as to come within the Hallock case.
Counsel for the two estates have strongly contended in both arguments of these cases that the law of neither New York nor Illinois provides for a possibility of reverter under the circumstances presented. They argue further that, even if, under the law of those states, a possibility of reverter did exist, it would be an unjustifiable extension of the Hallock rule to hold that such a possibility requires inclusion of the value of a trust corpus in a decedent's estate. The respondent in this case pointed out the extreme improbability that the decedent would have outlived all his brothers, his sister, and their ten children. He argues that the happening of such a contingency was so remote, the money value of such a reversionary interest was so infinitesimal, that it would be entirely unreasonable to hold that the Hallock rule requires an estate tax because of such a contingency. But see Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U.S. 108, 112.

References: § 811
 § 811
 v. 
 v. 
 § 811
 v. 
 v. 
 v. 
 v. 
 v.