1926 BTA LEXIS 2616 | B.T.A. | 1926
Lead Opinion
The only question presented for determination by this appeal is whether or not Charles B. Lafferty had, at the time of his death, a vested interest in the estate of his grandfather, Charles Lafferty. It is conceded by the parties to this appeal that, if he had such an interest, it is properly to be included as a part of the gross estate subject to the Federal estate tax. It is also agreed by the taxpayer and the Commissioner that the interest, if any, was a one-eighth interest. The parties are in accord as to the value thereof.
By item 7 of his will, Charles Lafferty gave to each of his children, among other .things, the right of disposal by will or writing in the nature thereof “ of such share in the residuary estate * * * of which * * * he or she was at the time of his or her death, entitled to the rents or income, to and among his or her children or issue, * * * absolutely or upon trust,” and it is contended by the Commissioner that this right of disposal or appointment was exercised by Francis Lafferty in his last will and testament, thereby vesting in his children, of whom Charles B. Lafferty was one, an interest in the estate of Charles Lafferty.
From a reading of item 7 of the will of Charles Lafferty, we are of opinion that the right of disposal or appointment given his children was not limited to the income to which each child was entitled, but extended to an interest in the estate itself, that is, “ such share of the residuary estate of which ” the child “ was at the time of his or her death entitled to the rents or income,” the shares of the residuary estates so disposed of not to take effect in possession, however, until the termination of the trust provided by the will of Charles Lafferty. Therefore, if Francis Lafferty validly exercised the power of appointment or disposal given to him, his children, upon his death, became the owners of a vested interest in the estate of their grandfather and entitled to the income thereof during the continuance of the original trust and to the possession of such interest upon the termination of the trust. If the power of disposal or appointment was not validly exercised by Francis Lafferty, then it will be necessary for us to examine and ascertain the legal effect of item 8 of the will of Charles Lafferty, which provided for the disposition of his estate in the event his children failed to exercise the power of appointment or disposal provided by item 7 of his will.
We think that the share of income belonging to the estate of Rose E. Carr should be awarded to her executor, and not to the guardian of her children. Under the will of her father, exercising the power of appointment given to him by the will of his father — the present testator — she acquired the absolute ownership of the share appointed to her, though possession of the legal estate cannot be had until the termination of the trust created by the grandfather’s will. But in the meantime her share of the income must go as she had directed by her will, viz, to her executors-, who are charged with the payment of the annuities there provided for; the residue only, after such payment, passing to the guardian of her children. The error has probably arisen from reading the will of the original testator as if the limitations attached to the powers of appointment given by him to his children extended to the estates given by them to their children, although the power is to appoint “ to and among his or her children or issue in such shares, proportions, and estates, absolutely or upon trusts, as he or she may so will or appoint.” The donees of the power could not exercise it in favor of person® not belonging to the designated class of objects, but their appointees acquired all rights of ownership, unlimited in power of disposition.
The decree of the Orphans’ Court was affirmed, and that portion of the opinion quoted above was approved by the Supreme Court of
1. Testator left his property in trust, which trust was not to terminate until his youngest grandchild living at the death of his last surviving child arrived at full age. The will gave to each of the testator’s children power to appoint to his or her children absolute estates or on trust, as he or she might determine. A son left his estate to his three children absolutely. One of them died, directing certain annuities to be paid out of her estate, and gave the residue to her children. At the time of her death the trust under her grandfather’s will had not terminated. Held, that the income thereof was payable not to the guardian of the granddaughter’s children, but to her executor.
After a lapse of six years, the same question was again presented to the Supreme Court of Pennsylvania, on appeal from a decree of the Orphans’ Court of Philadelphia, concerning the disposition of the income to which Rose E. Carr was entitled under the will of her grandfather, Charles Lafferty. The income in question was again awarded to the executors of the estate of Rose E. Carr. Appeal of Philadelphia Trust, Safe Deposit & Ins. Co., In re Lafferty’s Estate, 230 Pa. 496; 79 Atl. 711. The court, at page 712, said:
In Lafferty’s Estate, 209 Pa. 44, 57 Atl. 1112, this court affirmed the decree of the orphans’ court, by which the share of the annuity to which, under the will of her grandfather, Rose E. Carr would have been entitled, if living, was awarded to her executor. That decision necessarily involved the determination of the question whether or not the will of Francis Lafferty was a valid exercise of the power of appointment given to him in the will of his father. After the lapse of some six years, precisely the same question, in the same estates, under the same wills, is again presented by the decree from which the present appeal is taken.
The decision in Lafferty’s Estate, 209 Pa. 44, 57 Atl. 1112, became the law of the case, and stands as such. It must be accepted as a final adjudication of the question involved.
From the foregoing decisions of the Supreme Court of Pennsylvania, it is apparent that, under the laws of the Commonwealth of Pennsylvania, Rose E. Carr had a vested interest in the estate of her grandfather, Charles Lafferty, and that the court regards the validity of the exercise of the power of appointment by Francis Lafferty as a closed question. It is obvious that the interest of Charles B. Lafferty in the estate of his grandfather was an interest exactly similar to that of Rose E. Carr. If the power of appointment exercised by Francis Lafferty was valid as to Rose E. Carr and vested in her an interest in the estate of Charles Lafferty, it was valid as to Charles B. Lafferty, and likewise vested in him an equal interest in the same estate. It is difficult to conceive that the Supreme Court of Pennsylvania would hold otherwise. We are, therefore, of the opinion that Charles B. Lafferty, at the time of
Several decisions of the lower courts of Pennsylvania have been cited to us, in which it was held that, where a child of Charles Lafferty died without having exercised the power of appointment or disposal provided by item 7 of the will of Charles Lafferty, his issue then living took a vested interest in the estate of Charles Lafferty under paragraph 8 of his will. It is not necessary, however, to discuss these decisions here, since we are of the opinion that the interest in the estate of Charles Lafferty involved herein came to Charles B. Lafferty under paragraph 7 of his grandfather’s will and not under paragraph 8 thereof.
