Misc.] Surrogate's Court, Westchester County, November, 1921.

intention of the donor, we must look, not to the argument of the respondent, but to the language of the deeds of trust, the relations which existed between the parties, and the fact of the beneficial enjoyment of the avails of the trust."

The trust deeds in the Masury case each reserved the right to revoke and annul the same during the lifetime of the maker. No other right was reserved. Referring to this right, at page 585, the court said: "There is nothing to indicate that the grantor had any intention of making use of this right except to protect the beneficiary should such action become necessary during his lifetime; and the fact that he did not make use of it up to the time of his death precludes the presumption that he would have done so at any time. At least, the presumption cannot be raised to show an intention directly contrary The Masury opinion by Mr. Justice Woodward was adopted as its own by the Court of Appeals.

Surrogate Crosby of Chautauqua county, in Matter of Patterson, 127 N. Y. Supp. 284, speaking of the Masury decision and its legal effect, says: "All that the court in the Masury Case decided was that the reservation of the power of revocation at any time during life did not mark the transfer as one intended to take effect at death. The court was clearly right.'

In Matter of Bostwick, supra, the facts were these: The donor had made deeds of trust, in some reserving the payment of the income to himself, or to such other persons as he might designate; the power to alter, or amend the trust; to withdraw, or to exchange any securities; and to control the acts of the trustee in disposing of the securities, and the right to terminate the same at any time. They are more extensive reserved powers and are entirely different from the right reserved in the instant case. The court held

Surrogate's Court, Westchester County, November, 1921. [Vol. 117.

that all these reserved powers indicated an intention on the donor's part to retain a dominion over the properties transferred, and did not consider that the donor intended to vest the absolute right to present enjoyment in the beneficiaries. He retained practical control of the trust property and left the question of its beneficial enjoyment and eventual possession open until his death. The court in this case referred to the Masury case, and said: "The powers reserved in those deeds to revoke, or to annul, the trust during the donor's lifetime were considered, of themselves, not to affect the present vesting of the property, or to make its beneficial enjoyment contingent upon the death of the donor ***. The reserved power to revoke would enable him, of course, to put an end to the trust; but that was not enough to effect the possession of the trustee, or the beneficial enjoyment of the object of the donor's bounty, while the trust was in force, and such a power carried with it no control over the property, or its management." The court further said: "In the present case, however, (Bostwick) the donor has reserved, during his life, such numerous and extensive powers as to preclude the legitimate inference of an intention on his part that they were to take effect in absolute possession or enjoyment before his death."

Matter of Bowers, 195 App. Div. 548; affd., 231 N. Y. 613, without opinion, is the recent case upon the subject. There the donor in certain deeds of trust had made two reservations. First, the right to approve of the reinvestments of stock; second, the power to alter, or amend, or extend all, or any of the terms of the instrument with the consent of either one of the parties of the second part. Mr. Justice Page, writing for the Appellate Division, said as to the first reservation, which is similar to to one of the reservations in

Misc.] Surrogate's Court, Westchester County, November, 1921.

*

the instant case, that there is nothing in this clause to qualify or cut down the absolute character of the gift, and that the provision is not for the benefit of the grantor, but insures the preservation of the fund in the interest of the beneficiary of the trust. As to the other reservation, the court, while doubtful, was willing to assume that the right to "alter, amend or extend " permitted the donor to revoke the deed, and said that " he (the donor) did not exercise that right in his lifetime, and as was said in Matter of Masury (28 App. Div. 584; affd., 159 N. Y. 532): 'If we are to get at the intention of the grantor from the language used in raising the trust, then there can be no doubt that John W. Masury intended this deed of trust to become of full effect whether he lived or died, and the detail with which he provided for the disposal of the property in the event of the death of his grandson precludes the idea that he had any other motive in retaining the right to annul the deed than a prudent caution would suggest. It had no bearing upon the intention. * There is nothing to indicate that the grantor had any intention of making use of this right except to protect the beneficiary should such action become necessary during his lifetime; and the fact that he did not make use of it up to the time of his death precludes the presumption that he would have done so at any time. At least the presumption cannot be raised to show an intention directly contrary to that expressed in the deed of trust.'"

Judge O'Brien, in Matter of Green, 153 N. Y. 223, 227, in holding that the remainders transferred were intended to take effect at or after the death of the donor, said: "Until her death, (meaning the donor) they (meaning the nieces) had no actual possession, or right to the possession, of the property. Since they could not receive any part of the principal or of the

Surrogate's Court, Westchester County, November, 1921. [Vol. 117.

income till after her death, their right of enjoyment was postponed till the happening of that event. Whatever interest they may have had before, the right to the possession and enjoyment depended upon the death of the donor." This language clearly implies that the court had in mind and gave particular consideration to the possession of the property and the enjoyment of the income thereof.

Each case must be determined by its own peculiar facts. The aim of the law is to reach property, where by reasonable deduction the donor intended to retain its enjoyment.

66

The important words in the taxable transfer law are the words intended to take effect in possession, or enjoyment." What did the donor intend as to the possession or the enjoyment of the avails of the gift in the instant case? Did he intend the gifts to take effect in possession or enjoyment at or after death? Did the donees have such possession or enjoyment from the creation of the trusts? Possession of the securities passed to the trustee, it had the legal title, managed and controlled the property, and the enjoyment, which means the use, passed to the beneficiaries. They have had the yield of the securities since the creation of the trusts. The deeds were unrevoked at the time of the donor's death. Neither did the will of the donor revoke them.

The courts have decided what constitutes " possession or enjoyment" by holding that the retention by the grantor of the income of a trust fund is so distinctly a characteristic of possession and enjoyment of an estate as to constitute convincing evidence of an intent, that the deed shall not "take effect in enjoyment" until the grantor's death. Consequently, the avails of a trust fund in a donee, without reserving numerous or extensive powers or con

Misc.] Surrogate's Court, Westchester County, November, 1921. trol in the donor constitute enjoyment and is presumptive evidence of the intent of the donor. Under our deeds of trust the possession and avails passed to the donee. One of the tests to be applied to ascertain the donor's intention is, who gets the possession or enjoyment of the funds? Matter of Green, 153 N. Y. 223; Matter of Masury, supra, as to one deed of trust; Matter of Dana Co., 215 N. Y. 461; 214 id. 710.

It is significant, that in every reported case in the Court of Appeals where the gift was taxed, the enjoyment of the income was retained by the donor.

The right to these life interests took place when the deeds were executed and delivered, not at death, because the donor had parted with a life estate in the funds; both possession and enjoyment passed; he retained no control; no further beneficial interest passed to the beneficiaries at the death of the donor. Nothing was expectant. The right was vested in possession and enjoyment. Complete possession and enjoyment was intended, and it existed. No greater beneficial enjoyment was had after Mrs. Cochrane died. Her death only made the enjoyment absolute. The donor did not reserve an estate of a beneficial character. Within the meaning of the Tax Law, the intent of the donor shall be ascertained by what he does with the possession or enjoyment of the funds of the trust. The law assumes to tax a life estate given at death. Such an estate is the right to enjoy property for the life of the donee, or of some other named person. If the enjoyment of it commences at the death of the donor, it is taxable. If, however, it is received, possessed and enjoyed before the donor's death, and not given in contemplation of death, it is not taxable.

The donor created a tentative trust, revocable.