Court Opinion

ID: 9757534
Source: CourtListenerOpinion
Date Created: 2023-08-28 22:45:12.674384+00
Date Added: 2024-06-11T07:28:40.625269
License: Public Domain

Dissenting Opinion
by Mr. Justice Roberts:
I am compelled to dissent. The majority reaches its result by completely ignoring the controlling and undisputed facts found by the orphans’ court and fully supported by the record. It is conceded that Edward Schwartz, the father, was both the donor and self-appointed custodian of the bond for his minor son which *121he registered under the Uniform Gifts to Minors Act.1 It is also unchallenged that the orphans’ court specifically found that Edward Schwartz had a legal obligation to support his son. Schwarts Estate, 94 Mont. 168, 170 (1971).2 Furthermore, Schwartz as father-donor-custodian, retained the power as custodian to “pay over ... so much of or all the custodial property as the custodian [here the father] deems advisable for the support, maintenance, education and benefit of the minor.”3
Having ignored these dispositive facts and statutory powers, the majority concludes that for the purposes of Section 11 of the Estates Act,4 Edward Schwartz as father-donor-custodian with a support obligation to his son did not “. . . [retain] a power of . . . consumption over the principal thereof. . . ,”5 The majority deprives the widow of her statutory right created by Section 11 to elect a one-half testamentary share6 of the |37,000 bond which decedent purchased and “conveyed” to himself as custodian.
*122The Uniform. Gifts to Minors Act empowers the custodian to: “pay over to the minor for expenditure by him or expend for the minor’s benefit so much of or all the custodial property as the custodian deems advisable for the support, maintenance, education and benefit of the minor, in the manner, at the time or times, and to the extent that the custodian [here the father], in his discretion, deems suitable and proper . . . with or without regard to the duty of himself or of any other person to support the minor, or his ability to do so, and with or without regard to any other income or property of the minor, which may be applicable or available for any such purpose.” Act of June 21, 1957, P. L. 358, §5, as amended, 20 P.S. §3605(b) (emphasis added).
I would conclude, as the trial court did, that the father-donor, by naming himself custodian of the property he “conveyed” to himself, retained by this device the statutory authority to utilize the proceeds of the bond for the support of his son. To the extent that the property is subject to being used for support, the father retains precisely the same right over the property which he held prior to the conveyance to himself as custodian. Section 11 of course would not apply if the custodian were someone other than the father-donor or if the donor-custodian had no parental support obligations to the donee of the bond under the act. Although neither of these situations is here involved, the majority nevertheless reaches its result as though they were.
Upon designating himself as custodian the father placed himself in the position where in his “discretion, as he deems suitable and proper”7 he could utilize the custodial proceeds, instead of his personal assets, to *123satisfy his parental obligation to support Ms minor son. By means of Ms self-appointment as custodian, the father created for himself the exclusive right to decide whether to satisfy his support obligation from his personal assets or from the custodial assets. It is this exclusive power of decision—whether to satisfy his support obligation from custodial assets or from personal funds—which constitutes the statutory “power ... of consumption” over the custodial assets under Section 11 and thereby subjects those assets to the widow’s right of election.
By refusing to recognize the applicability of Section 11 to the decedent’s conveyance into custodial assets here, the majority judicially sanctions that which the Legislature clearly and so expressly sought to prevent by Section .13.—device and opportunity to diminish and deny statutorily granted marital property rights. The Uniform Gifts to Minors Act certainly was not enacted to provide a refuge from Section 11 for this $37,000 conveyance which was subject to be recalled at the will of the father-donor at any time to satisfy his parental support obligation.
The Joint State Government Commission Avhich drafted the Estates Act of 1947 explained the purpose of Section 11: “This section preserves for the surviving spouse the right to share in the decedent’s assets where the decedent has retained important rights of ownership at death. Rights of the surviving spouse in such circumstances have been recognized in other states.... However, Pennsylvania has given little opportunity to the surviving spouse to share when legal title has passed from the decedent prior to death. . . . Indeed, the situation in Pennsylvania has been such that it was stated correctly that ‘It is only the stupid husband, who, against his wishes, would be forced to allow his wife to share in Ms personalty’. . . Act of April 24, *1241947, P. L. 100, §11, as amended, 20 P.S. §301.11 (Commissions’ Comment) (citations omitted).
In Pengelly Estate, 374 Pa. 358, 97 A. 2d 844 (1953), this Court observed that “the Act [Section 11] is confirmatory of a long existing public policy of the Commonwealth to protect the rights of widows.” Id. at 369, 97 A. 2d at 849. In Behan Estate, 399 Pa. 314, 160 A. 2d 209 (1960), we held that an inter vivos trust which retains for the husband a special testamentary power of appointment is subject to Section 11, and there fully explored and explained the legislative purpose of Section 11: “The mischief to be remedied and the reason for the new law are clear. Wives are being unfairly deprived of a share in their husband’s personal property by a transparent trust device which permitted a husband to retain control of his property, and at the same time legally deprive his wife of her just marital rights therein.” Id. at 318-19, 160 A. 2d at 213 (emphasis added). In addition, we also observed: “It is clear that Section 11 was passed to prevent a husband, intentionally or otherwise, from defrauding his surviving wife of her marital rights by an inter vivos trust which contained a power of revocation or consumption or a power of general or special appointment by will. For centuries the law has sought to protect a wife and preserve for her some share in her husband’s property—the ancient right of dower, and more recently intestate Acts and Wills Acts. Pennsylvania has been a laggard in this field. However, in the field of Wills, Trusts and Decedents’ Estates, a wife’s rights have always been recognised as higher than rights of children, or relatives or friends or charities or legatees.” Id. at 321, 160 A. 2d at 214 (emphasis added); cf. Montague Estate, 403 Pa. 558, 560-61, 170 A. 2d 103, 105 (1961).
It is pertinent to note that the Tax Court of the United States has ruled on the very issue presented by *125this appeal and has decided the same contrary to the majority. That Court has held that where the decedent-donor, in transferring property to a minor child under the Uniform Gift to Minors Act, names himself custodian and dies prior to the minor-donee’s majority, the property constituting the gift is includible in the decedent’s gross estate and accordingly subject to Federal Estate Tax. See, Estate of Harry Prudowsky, deceased, etc. v. Commissioner, 55 T.C. 890 (1971); Dorothy Stuit v. Commissioner, 54 T.C. 580 (1970); Estate of Jack F. Chrysler v. Commissioner, 44 T.C. 55 (1965).
In all three cases, the Tax Court has indicated that it is immaterial whether the power to expend the income or the principal for the support of the child-donee was actually ever exercised. The Tax Court reasoned that the decedent-donor, acting in the capacity of custodian, at all times, by the very terms of the Gift to Minors Act, retained the power to alter or amend the transaction by using either the gift property itself or the income derived therefrom to fulfill his legal obligation to support his child-donee. It is the retention of these powers to pay the income or principal of the gift to the donor-custodian’s child in furtherance of the donor-custodian’s support obligation, and to conceivably consume the gift in the process, that renders the gift incomplete, and subsequently taxable to the donor-custodian upon his death.
Moreover, for income tax purposes, the Internal Revenue Service has ruled that income derived from property transferred under the Uniform Gift to Minors Act and other similar statutes is taxable to the donor where the income is used in whole or in part to discharge his legal obligation to support the child-donee. Rev. Rul. 56-484, 1956-2 Cum. Bull. 23. See also Rev. Rul. 59-357, 1959-2 Cum. Bull. 212; Newman, Tax and Substantive Aspects of Gifts to Minors, 50 Cornell L.Q. 446 (1965).
*126It is ironic, indeed, that while the majority finds that the decedent lacked sufficient control over the gift property to bring it within the ambit of Section 11 of the Estates Act of 1947, the federal decisions noted above unquestionably mandate a finding of sufficient control to incorporate it into the decedent’s estate for the purpose of computing the Federal Estate Tax due.
It is difficult to comprehend how the majority can ignore the effect of the conveyance and support obligation involved in this case. Under the majority’s holding, Edward Schwartz, as donor-custodian with a support obligation to his minor son, was able to shield permanently from his wife in violation of the clear mandate of Section 11 property over which he simultaneously retained controls—namely the power to use the custodial assets in place of his personal assets to satisfy his parental support obligation without subjecting the property to the concomitant right of the widow to elect to take her one-half share. It was precisely this type of conveyance depriving the widow of her right to enjoy her testamentary share of her husband’s property that Section 11 was designed to preclude.
I believe the decree of the orphans’ court should be affirmed.
Mr. Justice O’Brien joins in this dissent.

 Act of June 21, 1957, P. L. 358, §§1 et seq., 20 P.S. §§3601 et seq.

 Judge Taxis declared in liis opinion: “It is undenied that Edward Schwartz had a support obligation to his minor son, and the Uniform Act, supra, reveals that he, as custodian, could have discharged that obligation from the custodial property, wholly or partly. . . .” Schwartz Estate, 94 Mont 168, 170 (1971).

 Act of June 21, 1957, P. L. 358, §5, as amended, 20 P.S. §3605 (b) (Emphasis added).

 Act of April 24, 1947, P. D. 100, §11, as amended, 20 P.S. §301.11.

 Id. This section provides: “A conveyance of assets by a person who retains a power of appointment by will, or a power of revocation or consumption over the principal thereof, shall at the election of his surviving spouse, be treated as a testamentary disposition. . .

 Since appellee (Schwartz* first wife) had only one child, she was entitled to a one-half share of the conveyance. Act of April 24, 1947, P. D. .100, §11 (b), as amended, 20 P.S. §301.11.

 Act of June 21, 1957, P. L. 358, §5, as amended, 20 P.S. §3605 (b).