Summary
In Matter of Slosson, 216 N.Y. 79, the exercise of the power took away more than it restored to those who would have taken in case of default in the exercise of the power.
Summary of this case from Matter of ChaunceyOpinion
Argued September 29, 1915
Decided October 12, 1915
Hugo Kohlmann, Carroll H. Brewster and A. Henry Mosle for appellants. Schuyler C. Carlton, Alexander Otis and Lafayette B. Gleason for respondent.
The will of Peter Naylor, which was probated before there was any statute in force which imposed an inheritance or transfer tax, created a trust estate for the benefit of Josephine Slosson and gave her the power to dispose of it by her will. It provided further that in default of such last will and testament of Josephine the trustees should pay the trust estate to those who would receive it had Josephine died intestate and its owner. The will of Josephine disposed of about two-thirds of it in equal shares to her children, who would have so taken it under the will of Naylor in default of the disposition of it by the will of Josephine, and of about one-third to persons who would not have so taken. The children elected to take the two-thirds under the will of Naylor and not under that of Josephine. The surrogate held that the will of Josephine was a valid and effective disposition of the trust estate, because of the diversion of the one-third thereof to persons who would not be entitled to any of the fund if the power had not been exercised by her, and the shares of the children were subject to the transfer tax. The Appellate Division approved that conclusion.
In Matter of Lansing ( 182 N.Y. 238) we decided that (a) legislation subsequent to the probate of a will could not authorize a tax upon the transfer of property effected solely by means of the will, with no aid from the power of appointment; (b) disposition under the power of appointment of the entire trust estate to the persons who would have taken it in default of the exercise of the power and as they would have then taken it did not force those persons to take under the exercise of the appointment and left them free to elect to take thereunder or under the original provision; (c) that the acceptance by those persons of a bequest by the appointee of the power of his own property did not constitute an acceptance under the appointment; and (d) it is immaterial whether the remainder under the original provision or bequest is vested or contingent. In the present case there remains unanswered by the Lansing case the one question, did the valid disposition by Josephine of a part of the trust estate to persons entitled solely through such disposition destroy the right of the children to elect to take the balance of the trust estate under the will of Naylor?
This question is answered in the negative by the principle declared in Matter of Ripley ( 192 N.Y. 536). While the power of appointment in that case was expressly limited by the language creating it, our decision established the principle that the valid exercise of the power of appointment as to a part of the trust estate with an ineffectual attempt or a failure to exercise it as to the balance of the trust estate does not preclude the taking, by those entitled, under the will of the grantor of the power of their shares as diminished by the exercise of the power. It is immaterial whether there is a neglect or failure to exercise the power as to the balance of the trust estate, or an attempt to exercise it ineffectual because of the refusal of the donees to accept the disposition. In either of such cases, there is a failure of disposition under the appointment and the original will effects the transfer of the part of the trust estate undisposed of.
The order of the Appellate Division should be reversed, with costs in the Appellate Division and this court. The proceeding should be remitted to the Surrogate's Court of New York county with direction to modify its order by deducting from the value of the estate the value of the shares of the children of Josephine Slosson, and fixing the tax upon its remaining value.
WILLARD BARTLETT, Ch. J., CHASE, CUDDEBACK, HOGAN, SEABURY and POUND, JJ., concur.
Order reversed, etc.