An Indispensable Book to Every Bank and Trust Company The New Fifth and Enlarged Edition THE MODERN By FRANKLIN B. KIRKBRIDE Now ready for distribution. Price $6.75 postage prepaid Address: Trust Companies Publishing Association, 55 Liberty St., New York is Edition is of value every Tnized as the Standard and Lead- National and State Bank as well as to ing Authority on the Functions and Organization of a Modern Trust Company, embracing every phase and latest development in Banking Operation and Fiduciary Finance. Comprising over 550 pages, the new Trust Companies. In scope it covers every department and phase of Banking and Fiduciary Finance, including the most approved forms of accounting, advanced standards and principles of practice. TRUST COMPANIES Magazine, Book Department 55 Liberty Street, New York. ..1923 Gentlemen:-Enclosed please find $6.75 (check or money order) for which kindly send me copy of the new Fifth Edition of "The Modern Trust Company," or you may send me copy on approval. Name..... Address..... Make check or draft payable to TRUST COMPANIES Publishing Association, 55 Liberty Street, New York. Out-of-town Occasionally a friend or a client For more than 40 years we have specialized in investment banking (having already served over 6900 banks and bankers) and we feel that this experience particularly qualifies us to solve any of the many problems that may be submitted to a trust company, whether administering an estate, managing a trust fund, or merely giving advice on financial ques tions. Whenever you send any clients to us, you can be confident that their interests and yours will be thoroughly protected. TRUST DEPARTMENT Harris Trust and Savings Bank Organized as N. W. Harris & Co., 1882. Incorporated 1907 HARRIS TRUST BUILDING, CHICAGO TRANSFERS MADE IN CONTEMPLATION OF DEATH A SERVICE WHICH TRUST COMPANIES AND LAWYERS MAY RENDER IN CONNECTION WITH THE FEDERAL ESTATE TAX LEE V. CLEARY S INCE the enactment of the Revenue Acts of 1916 and as amended in 1917, the Revenue Acts of 1918 and 1921 and the promulgation of the regulations thereunder, important questions relating to transfers made in contemplation of death or to take effect and enjoyment at or after death are constantly arising. The two questions of transfer are so closely related that they are herein treated as one. The question therefore always before the representatives of any estate subject to Federal Estate tax may be summarized as follows: Did the deceased make any transfers during his lifetime within the contemplation and construction of the various Estate Tax Acts and regulations? The United States Supreme Court in the case of Schwab vs. Doyle decided that the Federal Estate Tax Act of 1916 did not contain words sufficient to make the provision of the Act relative to transfers made in contemplation of death retroactive. Hence it will be necessary for all taxpayers coming within the provision of this Act to file a claim for refund of taxes so paid. These claims for refund under advantage of the Supreme Court decision relative to the 1916 Federal Estate Tax law. Regulations 63-Article 17. Nature and Time of Transfer-A transfer made by the decedent at any time, and in any manner, is taxable when made in contemplation of or intended to take effect in possession or enjoyment at or after his death, provided it was not a bona fide sale for a fair consideration in money or money's worth. To constitute such a sale it must have been made in good faith, and the price must have been a fair equivalent, and reducible to a money value. The value of property, where title was so transferred by the decedent before September 9, 1916, is to be included in his gross estate if his death occurred after the effective date of the Revenue Act of 1918, but is not to be included if he died prior thereto. Under the foregoing Regulation, it is plainly evident that transfer made by decedents dying since February 25, 1919, are taxable provided they are made two years prior to his death, while they are not taxable under the prior Acts of 1916 and 1917 if the transfer was made prior to the effective date of those Acts. The Revenue Acts of 1918 and 1921 do contain words which made the Acts relating to transfers made in contemplation of death retroactive, in that, these two laws specifically stated whether such transfer or trust is made or created before or after the passage of this Act. The Supreme Court of the United States has settled the question of the retroactive effect of the 1916 Act and also the 1917 Act. We now come to this all important question under the Acts of 1918 and 1921. As above stated they contain words that are, retroactive and hence it is the belief that they would be held to be retroactive. However, the taxpayer still has the same questions to solve under the Acts of 1918 and 1921; namely: Was the transfer made by the decedent during his lifetime, one which comes within the provisions of the Internal Revenue Acts of 1918 and 1921? It would appear that the answer to the foregoing question was very simple, but upon investigating the surrounding facts relative to transfers, you will probably find that the facts contain so many ramifications and variations that your inquiry will resolve itself into a court of inquiry to determine the taxability or non-taxability of the particular case. The Internal Revenue Acts and Regulations relative to Estate Tax do not lay down for us clear and concise tests which may be applied in order to determine the taxability of a transfer made in contemplation of death. However, it would appear from the law and regulations that cer First: What was the age of the decedent at the time of the transfer and on the day of death? Second: What was the condition of the decedent's health at the time of the transfer? (This would necessarily mean whether he was suffering from any serious physical ailment.) Third: Was the transfer complete? Did the decedent reserve any income for himself? Fourth: Was the transfer colorable? Fifth: Was the transfer made for the purpose of defeating the Federal Estate and Inheritance taxes? Sixth: What was the motive for making the transfer? Seventh: Was the transfer made at the time of the marriage of a son or daughter or upon some other specific occasion? Eighth: What did the Local Inheritance Tax officer decide as to its taxability? When transfers are made more than two years prior to the day of death of the decedent, the burden of proof is upon the Government and the Department to show that . they come within the provisions of the Internal Revenue Acts relating to transfers. On the other hand, if the transfer is made to take effect and does take effect less than two years prior to the decedent's death, the burden of proof is upon the representatives of the estate to show that the transfers were not made in contemplation of death. The words "contemplation of death" as interpreted in numerous court decisions are held to mean not death as contemplated in a common sense that all men look upon death as inevitable, but as restricted to contemplation of the event as imminent. That is, if you should transfer some property to your own son tomorrow when you were in a sound physical condition and you died of acute indigestion the following day, it could not be said that the transfer was made in contemplation of death because your death was not imminent. When you have applied the foregoing test to your particular statement of facts, and made your decision upon the taxability, you then come to the question, How are we going to prove these facts? The proof may be made in the following manner: First: By the family physician or the physician who attended the decedent during his last illness. Second: By the decedent's friends and neighbors. Third: By the decedent's servants. Fourth: By the decedent's beneficiaries. Fifth: By anyone familiar with the decedent's physical condition, his habits, his business, or his private affairs. The foregoing is a simple guide for the benefit of those who wish to determine the question of the taxability of transfers made in contemplation of death. Many taxpayers today are arranging their affairs in a businesslike manner, so that their heirs will not suffer untold hardships after their decease. This is exercising sound business discretion. All taxpayers should do the same, as far as possible, while they have the opportunity. It makes little difference whether one is young or old. The lawyer and trust company of today have a service to render. Are they rendering it? An inventory of the estates of the late William Rockefeller showed a total of $43,643,000 tax free securities out of total estate assets valued at $102,584,000. Deposits made by school children in the school savings systems maintained throughout the country aggregated $9,500,000 during the school year 1922-23. MUNIFICENT ENDOWMENTS TO CHARITIES CHARITIES UNDER T WILL OF LATE FRANK RUF PERPETUAL FUND FOR ST. LOUIS CHILDREN'S HOSPITAL HELD IN TRUST BY MERCANTILE TRUST COMPANY OF ST. LOUIS AS TRUSTEE HE will of the late Frank Ruf, president of the Antikamnia Remedy Company and a director of the Mercantile Trust Company of St. Louis, which is appointed trustee and executor under its provisions, contains a number of unusual testamentary features aside from the generous provisions for charitable institutions. The will creates an everlasting fund to be held in trust by the Mercantile Trust Company, for the St. Louis Children's Hospital, the amount of which after other dispositions, is estimated at over two million dollars. The document conveys to the Mercantile Trust Company broad powers as trustee and executor in regard to management of the estate and disposition of trust funds. After making a number of special bequests to a number of faithful employees in his personal service and in the employ of the Antikamnia Remedy Company the testator authorizes the sum of $500 to be paid to each employee who has been in his service or employ of the company for a period of five years at the time of his death. The executor is instructed to pay to the widow, Alpha H. Ruf, the sum of $10,000 within ten days after the death of the testator. After providing for various direct gifts and bequests to relatives and others, the trustee is instructed to hold the remainder of the trust estate and to pay to the widow the net income and revenue or such part of the corpus, as the widow may request, in writing, for her maintenance or comfort. After the death of the widow the trustee is instructed to distribute a number of direct bequests and set aside various trust funds, each of $10,000, the net income and revenue therefrom to be paid to charities and for other purposes including the Bethesda, The Little Sisters of the Poor, The St. Louis Altenheim, The German Protestant Orphans' Home, The German St. Vincent Orphan Association, The Missouri Association for the Blind, St. Joseph's Deaf Mute Institute, The St. Louis Symphony Society and the Shriners Hospital. After providing for the above mentioned trusts the Mercantile Trust Company is authorized to pay over and deliver all net income and revenue received from the trust estate remaining in its hands to the St. Louis Children's Hospital, to provide perpetually for free medical treatment and maintenance and support during treatment, of poor children, irrespective of consideration of nationality or religion; preference to be given to children residing in the city of St. Tonis and St. Louis County. The decision of the trustee concerning the manner of distribution and the kind of se curities distributed shall in every respect be final and not subject to question by any of the named legatees. The trusts shall be held in perpetuity by the Mercantile Trust Company as trustee and the principal of the trusts shall constitute a permanent endowment fund to be known as the "Frank A. and Alpha H. Ruf Endowment Fund," the income to be used perpetually for the support and maintenance and for the general objects of said institutions, either educational or charitable. In the event that any of the particular institutions or charities named in the will cease to operate or become obsolete the will provides that such legacy shall be added to and become part of the trust estate estab lished for the St. Louis Children's Hospital. In case the latter shall fail to administer to charity the fund is to be devoted to some other kind or similar charity, as nearly as may be. The testator states it as his desire that the fund shall be perpetually devoted to charities organized for the treatment and cure of children. The decision of the trustee in carrying out this provision shall be final. Provision is also made for appointment of substitute trustees by the Circuit Court in case of the dissolution or resigna- . tion of the Mercantile Trust Company as trustee. In the event that the trusts established in perpetuity are held to be invalid in a direct proceeding by the courts the trustee is directed to pay over certain specific bequests named in the will and to hold the |