In Re the Transfer Tax Upon the Estate of Miller ( 1923 )

Andreas M. Miller died a resident of this state on May 22, 1917. On December 26th, 1914, he made a deed of trust to the United States Trust Company wherein and whereby he gave to it bonds of the value of $336,373.32, to hold and to pay the interest and income thereon, one-half to Helen S. Miller, widow of a deceased son, and the remaining one-half to Atheline Morton Miller, the daughter of said son. After the death of these parties the principal was disposed of in a manner not here important to relate.

No part of the income under this trust deed was to be paid to the donor, Andreas M. Miller. He did, however, reserve the right, at any time, during his life, to revoke the deed of trust and terminate the trust by an instrument in writing under his hand and seal duly acknowledged.

By another trust deed, dated January 9, 1917, Andreas M. Miller created another trust for his daughter, Marion Louise Miller Phillips.

He gave to the United States Trust Company stocks and bonds of the value of $700,000 to hold and to pay the income thereof to his said daughter during her life, and upon her death to distribute the principal among her surviving issue. The donor reserved to himself a power of revocation similar to that in the other trust deed, but made no provision for the payment to himself of any part of the income during his life.

The surrogate was of the opinion that the transfers by these trust deeds were made to take effect in possession and enjoyment at the death of the grantor, and, therefore, subject to the transfer tax as provided by section 220, article X, of the Tax Law (Cons. Laws, ch. 60). With this conclusion the Appellate Division disagreed, holding that the mere reservation of the power to revoke did not render the transfers taxable, citingMatter of Carnegie (203 App. Div. 91), since affirmed by this court (236 N.Y. 517). We think in this the Appellate Division was right, and we affirm this part of the order appealed from.

There was, however, another deed of trust or disposition of property by the deceased made through a deed of trust which renders the transfer of this portion of his estate taxable. In this particular we disagree with the Appellate Division.

On March 11th, 1907, Athol Morton Miller, a son of Andreas M. Miller, made a deed of trust to the Van Norden Trust Company of the city of New York, now merged with the Equitable Trust Company. By this deed of trust the alleged donor gave to the trust company bonds of the value of $408,000 to have and to hold for the following purposes, namely, "to collect and receive the interest, income and profit thereof; and to pay said interest, income and profit as and when received to Andreas M. Miller, father of said first party, during his life, and upon his death to Annie E. Miller, mother of said first party, during her life, if surviving him; and upon their death the principal of said trust fund shall be assigned, transferred and set over to said first party, if he is then living, or if he is not then living, to his issue then living and to the issue of his issue dying before him perstirpes and not per capita, and if no issue or issue of any of his deceased issue be then living, the second party shall divide the principal of said trust fund among the following corporations, share and share alike:" Then follow the names of four charitable corporations of Minnesota.

The trust agreement contains also the following provision: "Said first party hereby reserves the right to amend this agreement, subject to the approval of such amendment by said second party, or to revoke and terminate this agreement at any time, by an instrument in writing signed and acknowledged by said party of the first part, and said Andreas M. Miller if living, or in case of his death by said Annie E. Miller if living."

Where did the alleged donor and creator of this trust, Athol Morton Miller, get these bonds thus disposed of by this deed of trust? He got them from his father almost at the very time of the execution of the trust deed and the delivery of the bonds to the trust company. It is quite clear from the evidence that the father did not intend to part with any present interest in these bonds or with all control over them. The delivery of the bonds to the son was not an absolute gift divesting the father of all beneficial enjoyment.

Edward S. Avery was the trust officer of the Van Norden Trust Company through whom this transaction was effected. He testified as follows: "Q. Did Mr. Miller or the son inform you whose securities they were that were being placed there? A. Yes, they were very positive about that. Q. What information did they give you? A. The father said that he had given to his son certain securities absolutely without any qualification or condition, that they were his absolutely. And he said that the son would be in the next day to turn over those securities annexed to the certificate of trust. And the son came in and delivered the securities to us, and we received them as the property of the son. Q. What had Mr. Andreas M. Miller previously said to you about the disposition of his property in this way in addition to what you have said? A. Well, he said that he wanted the income to go to him during his life because he thought that was safer: If he gave it to them and they supported him, they might get tired of supporting him. He was a man of considerable humor. And he said, `I want to have the income while I am alive, but when I am through with it I want it to go to the people for whom it was intended.' Q. Did he mention his wife and his desire to provide for her, anything in that connection? A. Yes, he said very specifically that he was providing for his wife, that he wanted us to get the — that this was a trust practically for her, but he wanted the income reserved for himself while he lived, but that on his death he wanted everything to go to her that he personally did not get."

The purpose and intention of the testator was carried out. He did not give the property absolutely to his son. The bonds received by the son were almost immediately delivered to the trust company under an agreement to pay his father from whom he had received them the income thereof for life. The father had said that he wanted the income to go to him during his life because he thought that was safer. The deed of trust protected him in this particular. In our judgment the only conclusion to be drawn from this evidence is that the father desired the income on these bonds during his lifetime and at his death the interest or principal to be disposed of as directed by him in the deed of trust. This he accomplished through his son who was a mere intermediary or instrument to effectuate the purpose.

The intention, therefore, of the testator was to give effect to this disposition and the enjoyment of his property at his death. Unless this be so a very easy way would be opened for donors to evade the Tax Law.

For these reasons that part of the order appealed from which exempted from taxation the property transferred under the deed of trust of March 11th, 1907, should be reversed and the matter remitted to the surrogate for appropriate proceedings in accordance with this opinion, with costs in this court and in the Appellate Division.

HISCOCK, Ch. J., HOGAN, CARDOZO, POUND, McLAUGHLIN and ANDREWS, JJ., concur.

Ordered accordingly.