Court Opinion

ID: 4473017
Source: CourtListenerOpinion
Date Created: 2020-01-14 19:35:02.654795+00
Date Added: 2024-06-11T15:03:42.258659
License: Public Domain

Black, ¡7., dissenting: I dissent from the majority opinion wherein it includes as a part of decedent’s gross estate the value of the corpus in the children’s trust. This action of the majority opinion is taken on the authority of the Supreme Court’s decision in Commissioner v. Holmes Estate, 326 U. S. 480. The facts in the Holmes case were briefly summarized in the Supreme Court’s opinion as follows: Each, trust was to continue for a period of fifteen years, unless earlier terminated under power reserved to the grantor, or for a longer term on specified conditions summarized below. But the grantor reserved to himself during his. lifetime the power to terminate any or all of the trusts and distribute the principal, with accumulated income, to the beneficiaries then entitled to receive it. He retained no power to revest in himself or his estate any portion of the corpus or income. Unlike the Holmes case, in the instant case the decedent retained no power as grantor to terminate the trust and accelerate the enjoyment thereof to the beneficiaries. At the time of decedent’s death that power was vested alone in the trustee, the United States Trust Co. of New York, a corporate trustee. It is true that decedent reserved in the trust the right to require the resignation of the trustee, upon the giving of due notice, and upon receiving such resignation could have then appointed himself as trustee and, by doing so, would have thus acquired the right to terminate the trust. But I am unable to agree that these powers bring the instant case within the ambit of the Holmes case, where the decedent died possessed of the right as grantor-trustee to terminate the trusts. The transfer here involved was made prior to June 22,1936, and, consequently, the applicable subdivision of section 811 is subdivision (d) (2), as the majority opinion holds. However, it makes very little difference whether it be subdivision (1) or (2), because the decision of the Supreme Court in the Holmes case rendered those two subdivisions virtually synonymous so far as any issue in the case at bar is concerned. Section 811 (d) (2) provides for the inclusion within the decedent’s gross estate of property previously transferred “where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke * * *.” The issue, therefore, as to whether the value of the property comprising the children’s trust should be included in the gross estate of decedent is whether at the date of Ms death the decedent possessed any power to change the enjoyment of the trust property. The use by Congress of the phrase “at the date of his death” is significant, and its restrictive effect must, in my opinion, be kept in mind. The fact that the statute is thus intentionally restrictive as to time is further emphasized by the provisions of the next subdivision (section 811 (d) (3)) where a situation which might otherwise result in exclusion of the property is expressly brought under the terms of the definition, for the statute provides that the power “shall be considered to exist on the date of decedent’s death even though the exercise of the power is subject to a precedent giving of notice.” The inclusion of the limiting phrase “the date of his death” requires, therefore, a realistic analysis of the power reserved by decedent as it existed in the case at bar on February 26,1943, the date of the death of the decedent. That is the time certain fixed by statute. Under paragraph twelfth of the trust instrument, as amended December 27,1935, it was provided, The trustee, upon written notice from Paul Loughridge, shall, or may if it so desires, upon written notice addressed to him (or if he be not living, to Marjorie Mead Loughridge), resign as Trustee hereunder; such resignation shall become effective on the day specified in the notice from Paul Loughridge or that given by the Trustee, which shall be not less than thirty days subsequent to the delivery of such notice to the Trustee, or the mailing of such notice by the Trustee. On February 26; 1948, therefore, the decedent had only the power to cause the trustee to resign, which resignation could not become effective for 30 days; This 30-day period is a grace period so to speak; it is not a prerequisite precedent notice as spoken of in 811 (d) (3). An analysis of the reserve power, therefore, shows that at the date of his death the decedent, having only the reserved power to remove or force the resignation of the trustee, had at most the power to appoint himself trustee and in that manner to acquire the power to terminate, but he had no power to terminate at the date of death. Therefore, it seems to me that the Holmes case, supra, where the decedent unquestionably had such a power at the date of his death, is essentially different in its facts from the facts here and is not controlling. I think the majority opinion errs wherein it holds the corpus of the children’s trust includible in decedent’s estate. Van Foss an and Murdock, s//., agree with this dissent.