Opinion ID: 1567095
Heading Depth: 1
Heading Rank: 4

Heading: Separability of the Invalid from the Valid Gifts

Text: We have then, a common situation where some of the future interests created by the trust are valid and some violate the rule against perpetuities. Recapitulating, the gift to the children of the life tenant, the members of Class One is valid. The future interests of the various subclasses of the children of members of Class One living at the time the trust was created are also valid. The future estates, however, to the subclasses comprised of children of members of Class One born after the trust was created are invalid. Does the invalidity of the latter render invalid the other future interests which do not violate the rule against perpetuities? We do not think so. Not so many years ago one writer characterized the decisions of the Pennsylvania court on this general question as reflecting a punitive spirit which invalidates many entire wills and trusts which would be given partial effect in other states. [7] However, recent decisions fail to show any such punitive spirit and the older precedents, as cited and rationalized, make a strong case for innocence under the commentator's indictment. The modern leading case in Pennsylvania on the effect of partial invalidity of a trust, because of the rule against perpetuities, on the valid interests is Quigley's Estate, 1938, 329 Pa. 281, 198 A. 85, 89. Mr. Justice Stern there collects Pennsylvania authorities and after reviewing them states that the inquiry, in such cases, should be whether `the striking down of the void gifts would, in vital matters, so emasculate his (the testator's) plan of distribution as to render it reasonably certain he would not have made the will in the way he did had he known it could not be sustained in the respects in which it must be set aside'. or in the alternative Would the testator have intended that all the limitations of the trust should stand or fall together? Applying this test to the instant case, [8] the answer is apparent. At the time the settlor created the trust, her daughter and three children of the daughter were living. The settlor's immediate solicitude was for the welfare of her daughter and her grandchildren. There is no apparent ulterior motive to defer distribution to some too remote fixed time as an end in itself. The life estate for the daughter, and the provisions for the daughter's children were the primary objects of the settlor. The provisions for her daughter's grandchildren, not then even living, were but substitutional provisions. We do not hesitate to conclude that, if the settlor knew that the trust would be held void as to the children of her daughter's children who would be born after the trust was executed, she would have nevertheless intended the valid portions of the trust should remain intact. See In re Yewdall's Estate, 1942, 343 Pa. 478, 23 A.2d 460. [9] The interests created by the trust of Abby R. Smith which do not violate the rule against perpetuities are not therefore vitiated by those which do violate the rule. Upon the first question, then, our conclusion is that all the future interests created by the trust agreement are not includible in the gross estate of the decedent under § 302(a). However, it is to be noted that interests given to children of the life tenant's children born after the trust was created, which are invalid, would be includible under § 302(a). The trust was originally executed in 1919. The life tenant then had three children living. Her fourth and last child was born in 1921. The trust was amended and made irrevocable by the settlor in 1925. Whether the Commissioner, if he should fail in his alternative ground, would claim that the invalid portion should be included in the decedent's gross estate and whether he would succeed, need not be determined now. The case must go back to the Tax Court and the Commissioner will no doubt press that point if he desires, then. The Tax Court, having sustained the Commissioner on his first point, did not decide the second theory urged by him. It is, as stated, that the future interests are includible in the gross estate under § 302 (c) as a transfer intended to take effect in possession or enjoyment at or after the decedent's death. See Helvering v. Hallock, 1940, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368. We believe, in view of the recent decisions of the Supreme Court in Dobson v. Commissioner of Internal Revenue, supra, and Commissioner of Internal Revenue v. Heininger, 1943, 64 S. Ct. 249, that the Tax Court must initially determine this question. The decision of the Tax Court is reversed and the case remanded for further proceedings consistent with this opinion.