The opinion of the court was delivered by
Swayze, J.
The real controversy in this case is between the life tenant of the residue and the remaindermen. The court below held that the gift to Mrs. Cook should be paid wholly out of the income of the residue; the appellant contends that it should be paid out *407of the estate generally, thus reducing from year to year the life tenant’s income by the amount of the income on the $400 paid Mrs. Cook, and, in effect, therefore, making it payable in part out of the corpus — in part out of the income. The argument to sustain the decree rests upon the theory that annuities must necessarily be paid out of income. Stephens’ Executors v. Milnor, 24. N. J. Eq. 358, is relied on as authority. It is not in point. In that case the testator directed his executors and trustees to set apart so much of his real and personal estate as should be sufficient to constitute a fund, the income of which should be appropriated to the payment of the annuities; and there was a subsequent bequest of the residue. In this case there is no fund directed to be set aside to produce the amount of the annual payments. All that is given to Mrs. Cook is $400 per annum. The residue of the estate is given to the widow for life. This residue necessarily is what remains after paying the legacies immediately payable ($2,200) and the legacy or annuity to Mrs. Cook. It makes no difference by what name the gift to Mrs. Cook is called. The testator calls it in one place an annuity and in another place a legacy. The result is the same. All that can be deducted on this account, in order to ascertain the residue on which the widow is entitled to income, is the value of the legacy to Mrs. Cook. The courts below have deducted more; they have, in effect, deducted not only the payments directed to be made to Mrs. Cook, but a capital sum necessary to produce such an income forever. In other words, they have deducted not merely the present value of $400 per year, but its capitalized value. The difference is illustrated by the table adopted by the court of chancery (Corbin’s Rules 258) showing the present value of one dollar per annum with interest at four per cent. At age fifty, for instance, $400 per annum is worth $5,143.32, little' more than half the amount required to produce $400 per annum at four per cent. No matter what Mrs. Cook’s age, her legacy could by no possibility be worth $10,000. The error has arisen from the failure to distinguish between an annual sum charged on the general estate and the income of a trust fund sufficient to produce the amount. Where, as in the *408present case, the testator omits to direct that a fund be set apart to produce the amount needed, the legacy is chargeable on the general estate (3 Pom. Eq. Jur. 1134) — that is, on the whole estate, corpus and income, not on income alone. This rule is to the advantage of the annuitant, since she must be paid, whether there is any residue left or not, and cannot be limited to the income of the estate for the satisfaction of her annuity. So well settled is this- that the only question raised in the books is whether the annuitant is limited to a satisfaction out of the income of a fund expressly created for the payment of the annuity. Ordinarily, where the annuity is given, as here, in general terms, the annuitant is not thus limited. In re Mason (Jessel, M. R.), 47 L. J. Ch. 660. The executors and trustees have followed the rale and paid this annuity out of general assets. In any event, the life tenant necessarily contributes to the payment. In the twenty j^ears that elapsed between the account of 1894 and the account of 1914, the corpus was reduced $8,000, and the income of the life tenant was necessarily less by the income on that amount. The loss would increase as time went on; with a smaller estate, the principal might easily be exhausted and the widow left without income unless she had saved out of her interest in the earlier dáys to make good the gradually-wasting principal. Uo question is made in the authorities that the burden must be apportioned between life tenant and remaindermen — -that is, between income and corpus.
In the English courts four different rules have been suggested for this apportionment. Strac. Law Tr. Accts. 109, á recent excellent English work. The third rule is the one adopted by the trustees in the present ease. It has the authority of Re Henry (1907), 1 Ch. 80; Re Bacon, 62 L. J. Ch. 445. Mr. Strachan points out that it may work injustice to the life tenant and prefers the rule of Re Perkins (1907), 2 Ch. 596, by which there is calculated “what sum with simple interest to the day of payment would have met the particular installment, and charge that sum to capital, the balance to income.” This rule is certainly more in harmony with the view expressed by Sir William Page Wood (afterward Lord Hatherley) in the *409leading ease of Allhusen v. Whittell, L. R. 4 Eq. 295; 36 L. J. Ch. 929. -We need not now decide between these rules. It is enough that the method adopted by the trustees, of whom the widow herself was one, did no injustice to the remaindermen. The decrees of December 9th, 1914, and of April 9th, 1915, must be reversed. The decree of July 17th, 1913, on the account of 1911 is open to the same objection, but has not been appealed from. With the reversal of the decrees on the main question, it becomes unnecessary to pass on those parts of the decrees which provides for the payment of counsel fees out of the “funds to be added to the corpus of the estate.”
Let the record be remitted for further proceeding in accordance with this opinion.
For affirmance — None,
For reversal — -The Chief-Justice, Garrison, Swayze, Parker, Bergen, Minturn, Kalisoh, Black, White, Heppenheimeu, Williams, Gardner — 12.