Court Opinion

ID: 4479751
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:50.37167+00
Date Added: 2024-06-11T15:03:33.019261
License: Public Domain

Arundell, J., dissenting: I find myself in disagreement with the conclusion reached by the majority. We are dealing here with taxable income from two identical trusts created by petitioner’s husband for the benefit of their minor children. These trusts were created in 1984 and are irrevocable. Paragraph No. 1 of each trust instrument states that the trustee is to pay or apply the net income for the use of the particular child. The father has been taxed on so much of this income as was derived from the securities placed in the trust by him and this action, undoubtedly, was taken on the ground that this money served to defray an obligation imposed upon the father to support his minor children. Douglas v. Willcuts, 296 U. S. 1. During 1935, 1936, and 1938 petitioner, the mother of the children, turned over to the trustee of the two trusts theretofore created certain securities, with the instruction that they be held on the same terms and conditions as the funds placed in the trusts by the father. But, the mother, under New Jersey law, is under no obligation to support the children and the income from the mother’s securities was reported by the trusts for tax purposes. The majority would tax the petitioner-mother on this income on the ground that by reason of section 3 of the trust instruments the income was paid to her without restrictions as to its use. In other words, it was her income and she was under no obligation to spend it for the use of the children. This conclusion is reached even though the income was, in fact, used by the mother for the use of her children. In my opinion such a conclusion does violence to the plain terms of the trust instruments. It seems clear to me that when petitioner received the entire income of the trusts she was charged with the duty to spend it for the use of the children and an arbitrary exercise of the power would be subject to judicial control. Lambeck v. Lambeck, 73 N. J. Eq. 427; 68 Atl. 337; Plummer v. Gibson, 59 N. Y. Eq. 68; 45 Atl. 284. The rule is well stated in Scott on Trusts, sec. 185, p. 975: Where the person upon whom the power of control is conferred is neither a co-trustee nor a beneficiary but is a third person otherwise unconnected with the administration of the trust, the power is ordinarily conferred upon him as a fiduciary, and not for his own benefit. In such a case, although the holder of the power is not a trustee of the estate, he owes duties to the beneficiaries with respect to the exercise of the power. * * * Sternhagen, Black, and Mellott, JJ., agree with this dissent.