Estates and Trusts Commons^™

Mutual Funds-Trusts And Trustees-Capital Gains Distributions From Mutual Funds: Income Or Principal?, Michigan Law Review

Michigan Law Review

The growing prevalence of mutual fund shares in the assets of small and medium-sized estates has made the problem of allocating capital gains distributions between income and principal a matter of great concern to the trustees of such estates. A "capital gains" distribution represents a gain resulting from the profitable sale of securities held by the mutual fund. The uncertain state of the law regarding capital gains distributions from mutual funds presents a serious dilemma to the trustee: if he distributes the capital gains to the life beneficiary, the remainderman may claim that such distributions represent a partial liquidation of …

Retention Of Control Over Stock Constitutes "Ownership" Under Section 1239 Of The Internal Revenue Code-Harry Trotz, Michigan Law Review

Michigan Law Review

Petitioner set up a corporation, retaining seventy-nine per cent of the stock and -distributing the remainder to a third party. The third party borrowed from petitioner, pledging his stock as security and executing an option agreement under which the petitioner could recover the stock at any time. Subsequently, the newly organized corporation purchased all the depreciable assets of petitioner's proprietorship at a price in excess of their adjusted basis; petitioner reported the difference as a capital gain. The Commissioner declared a deficiency, relying on section 1239 of the Internal Revenue Code, which treats as ordinary income the gain recognized from …

Trusts - Principal And Income - Apportionment Under Pennsylvania Rule Of Stock Dividends Based On Capital Surplus, James H. Devries

Michigan Law Review

Under the terms of a trust established in New York in 1915 income was to be paid to a beneficiary for life and upon his death the principal was to be distributed to certain descendants of the settlor. Two extraordinary stock distributions were received by the trust during the life of the income beneficiary. In issuing the additional shares each of the corporations had transferred to capital stock account its entire capital surplus and sufficient earned surplus to support the additional shares at their par value. At the time of creation of the trust New York applied the Pennsylvania rule …

Constitutional Law - Due Process - Retroactive Application Of Uniform Principal And Income Act, Thomas E. Kauper S.Ed.

Michigan Law Review

The trustee of a trust created prior to the 1957 enactment of the Uniform Principal and Income Act petitioned for instructions as to whether a stock dividend received by it subsequent to the passage of the act should be allocated to principal or income. The Uniform Act provides a rule for the treatment of stock dividends contrary to the judicial rule previously adopted in Wisconsin, and is expressly made applicable to trusts existing on its date of enactment. The county court, finding the act could not be constitutionally applied to trusts created prior to its enactment, ordered the allocation of …

Trusts - Construction - Distinction Between "Stock Dividends" And "Stock Spit" For Allocation Purposes, Roger W. Findley S.Ed.

Michigan Law Review

In 1918 a settlor created two identical trusts, the corpus of each consisting of 300 shares of General Electric no-par common stock. The income was to go to life beneficiaries, and at their deaths the principal was to revert to the settlor or his residuary estate. The trust instrument directed the trustee to transfer to the settlor or his executor, "free of all trusts hereby created, any and all stock dividends .... " In 1954 the corpus of each trust included 1200 shares of G.E. no-par stock with a stated value of $6.25 per share, there having been two stock …

Fiduciary Administration - Nominee Statutes - Transfer Of Securities Held For The Benefit Of Another, Joseph T. De Nicola

Michigan Law Review

Michigan is the forty-second jurisdiction to enact a nominee statute. Nominee statutes authorize a fiduciary to nominate a third person to hold stock or securities in the third person's name without giving notice on the stock certificate or on the transfer books of the corporation of his qualified ownership. For the most part it has been assumed that these statutes would facilitate a more rapid transfer of securities. It is the purpose of this comment to compare and analyze these statutes and to determine whether they are the most effective means of accomplishing the end they are intended to serve.

Corporations - Shareholders - Delegation Of Director's Principal Duties Insufficient To Invalidate A Voting Trust, Gerald D. Rapp

Michigan Law Review

The directors of an intermediate unit in a string of holding companies caused the corporation's sole substantial asset, the stock representing control of a subordinate holding company, to be deposited in a voting trust. Most of these directors, serving one-year terms, comprised the majority of the trustees who were to serve for the life of the ten-year trust. This act served to insulate the lower companies from the control of plaintiffs who were majority shareholders of the top holding company. The plaintiffs sought an injunction restraining the use by the trustees of the stock controlled by the trust to effect …

Securities - Inter Vivos Gifts To Minors, Stephen C. Bransdorfer S.Ed.

Michigan Law Review

A statute recently enacted in twelve states and expected to be considered by seven other states this year, authorizes a new method for making gifts of securities to minors and for administering such gifts. The statute provides: (1) that irrevocable gifts of securities may be made to minors by use of statutory registration or deed of gift forms; (2) for the creation of a new type of fiduciary termed a custodian; (3) that the custodian shall have powers and duties over the minor's securities including authority to manage, sell, reinvest the proceeds from the sale and administer the securities for …

Descent And Distribution - Distribution To A Nonresident Alien Prevented By State Staute, Eugene Alkema S.Ed.

Michigan Law Review

Decedent's sole heirs were residents of Poland. By virtue of a power of attorney executed and authenticated in Poland, the Polish consul general intervened to receive their distributive shares. A Massachusetts statute provided that a court may order the distributive share to be deposited for the benefit of nonresidents when it appears that they "may not receive or have opportunity to obtain" such money. Held, the distributive shares must be kept in Massachusetts as it is uncertain that residents of Poland presently could have full benefit of the funds if transmitted. Petition of Mazurowski, (Mass. 1954) 116 N.E. …

Securities - Application Of Antideficiency Judgment Statute To Second Purchase Money Trust Deed Where Security Is Exhausted By Foreclosure Of First Deed, John Houck S.Ed.

Michigan Law Review

To secure the purchase price of land, defendant executed a promissory note and first deed of trust in favor of a savings and loan association, and a second note and deed in favor of plaintiff-vendor. On default of both obligations, the savings and loan association foreclosed upon the land. The resulting sale completely exhausted the security, and plaintiff brought the present action upon his note. Defendant interposed section 580b of the California Code of Civil Procedure, which specifies that "no deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete …

Trustor As Sole Trustee And Only Ascertainable Beneficiary, William F. Fratche

Michigan Law Review

The Circuit Court of Appeals for the Eighth Circuit, one judge dissenting, affirmed a decision of the Board of Tax Appeals holding that a profit arising from sale of the stock was taxable to the settlor individually because the declaration did not create a trust. The majority opinion argued that, although a trust may be created solely for the benefit of unborn or unascertained beneficiaries by a transfer to a third party as trustee, it cannot be done by a declaration of trust. The opinion suggested that a transfer in trust for unborn or unascertained beneficiaries creates only a resulting …

Wills--Specific Bequest Of Capital Stock--Disposition Of Stock Dividends Declared Before Testator's Death, E. M. Deal

Michigan Law Review

In her will, testatrix made several specific gifts to Miss Dorothy Spencer, including "20 shares of stock of the Times-Picayune Publishing Company," the extent of her holding at the time the will was executed. Later, the company declared a 100 per cent stock dividend and issued testatrix a certificate for an additional 20 shares. When she died, testatrix had in her possession certificates for 40 shares of the corporation's stock. Ten legatees objected to a provisional account filed by her executor which listed the 40 shares as belonging to Dorothy Spencer, claiming that the additional shares should be converted into …

Key Problems In The Apportionment Of Increase Between Successive Interests In Personalty, Erwin Esser Nemmers

Michigan Law Review

It has been said with some amount of truth that "Perhaps no other question in the law of future interests has called forth such a voluminous literature as the question of the allocation of dividends and the other accruing benefits as between the life tenant and the remainderman of shares of corporate stock."

The present writer's purpose in adding to the material on the subject is to show the relation to the case law of the rules set forth in the Restatement of Trusts and the Uniform Principal and Income Act. While difficult problems of apportionment arise in regard to …

Trusts - Division Of Proceeds From United States Savings Bonds Between Life Tenant And Remainderman, William H. Shipley

Michigan Law Review

Testator devised the residue of his estate in trust to pay the income to his wife for life and on her death to distribute the corpus to the children of the testator. The trustee bought ten-year bonds of the United· States Government known as United States Savings Bonds. The bonds did not bear interest payable at stated intervals, but were sold at a price sufficiently below their maturity value to yield a return equal to 2.9 per cent per annum, compounded semi-annually, it the bonds were held for the full ten years. The holder of such bonds may present them …

Trusts - Rights Of Successive Beneficiaries To Corporate Stock Dividends - Ordinary And Extraordinary Dividends, John C. Johnston

Michigan Law Review

Testatrix died in March, 1935 leaving 5,471 shares of N corporation stock in two trusts with directions that a portion of the income therefrom should be paid to her son during his life with remainder over to another. At the time of testatrix' death the N corporation had a large surplus, and had been paying regular quarterly dividends from current income. From April, 1935 to December, 1937 these quarterly dividends were continued at one dollar per share less than was customary, but because of business conditions they were paid partly from the surplus which had accumulated prior to the death …

Trusts - Investment Of Trust Funds In The Securities Of Private Corporations, Felicia I. Hmiel

Michigan Law Review

The trustees of a charitable trust established for the erection and maintenance of a hospital sued the state attorney general as a representative of an unnamed class of beneficiaries to secure the approval of certain investments of the trust fund. The transactions in question were investments in the common and preferred stocks of private corporations. Held, the trustees had authority to invest in the common and preferred stocks of private corporations provided they exercised a reasonable degree of care under the circumstances. Rand v. McKittrick, (Mo. 1940) 142 S. W. (2d) 29.

Corporations - Transfer Of Stock - Liability To Remainderman For Absolute Transfer At Instance Of Life Tenant, James D. Ritchie

Michigan Law Review

X, life tenant of certain stock of defendant company under a will, endorsed the certificates as life tenant; Y Company guaranteed his signature and itself endorsed in blank. Defendant, with knowledge of X's limited interest, transferred the stock on the books and issued new certificates to Y Company absolutely. Learning of their interests after X's death, plaintiff-remaindermen demanded certificates for the stock from defendant, which refused. In their action for conversion, held, that defendant breached its fiduciary duty to plaintiffs in making an absolute transfer with knowledge that the transferee had only a life interest and …

Trusts - Validity - Subject Matter - Profits To Be Acquired In The Future, Paul R. Trigg

Michigan Law Review

The plaintiff contemplated trading in the stock market and in 1927 declared a trust of the proceeds of his stock trading for the year 1928 in favor of various members of his immediate family, agreeing to assume all losses personally and to distribute all profits equally among the beneficiaries after deducting a reasonable compensation for his services. At the expiration of the year 1928, plaintiff deducted $10,000 as compensation, which he reported in his tax return for that year, and credited the named beneficiaries with the remainder on his books, these amount being reported in their respective tax returns for …

Trusts - For Employees - Definiteness Of Cestui

Michigan Law Review

The testator by his last will and testament devised a saw mill owned by him to certain trustees, the will reading, "I suggest that my said trustees sell the mill" for a specified price about half the estimated value of the property to a corporation to be organized by "my employees." There was a further provision reading, "I suggest that all the employees who have been in my employment for five years or longer should hold stock in such corporation, should they so desire in such proportions as my trustees shall presence." After the corporation had been organized, the incorporators …

Trusts-Apportionment Of Dividends Between Life Beneficiaries And Remaindermen - Depletion Of Oil Reserve

Michigan Law Review

Stock in an oil company was left in trust to pay the income to life beneficiaries with remainder over. For income-tax purposes the company deducted from income a figure for depletion of oil reserve, but at the close of each year it added directly to surplus account the same amount which had been deducted for depletion. Since the books of the company thus indicated that its management did not regard the drawing of oil from its wells as reducing the value of its property the court held that dividends, so far as they are made out of this amount, should …

Trusts-Duty Of The Trustee To Sell Stock In A Falling Market

Michigan Law Review

Securities were turned over to defendant as trustee, among which were issues of common stock in two sugar companies, under the direction that the trustees were authorized to continue all investments of the testator without any personal liability in doing so. In the executor's accounting the stocks were valued per share at $22 and $12.25 respectively. In the present accounting, instituted by the beneficiary on becoming entitled to the corpus of the trust estate, the stocks had fallen to $7 and $.50 respectively. The trust company was experienced in the handling of securities and its officers were advised not to …

Trusts-Stock Dividends-Apportionment Between Life Estate And Corpus

Michigan Law Review

The will of the testator gave his widow a life estate in all his property. The estate contained, inter alia, shares of the capital stock of a corporation. After several years the corporation was dissolved, and a "dissolution dividend" was declared which distributed to each stockholder a pro rata share of the proceeds of the sale of all the assets of the corporation. The question in the case was whether any, and if so, how much, of this dividend was to go to the life tenant. It was shown that the earnings of the corporation had been paid out regularly …

Note And Comment, John R. Rood, Henry M. Bates, Werner W. Schroeder, Robert E. Richardson, Hollace M. Reid

Michigan Law Review

Can a Manufacturer be Compelled to Sell? - The fight for price maintenance is not yet completely settled, despite, the decisions in Dr. Miles Medical Company v. Parks & Sois Company, and Baiter & Cie v. O'Donnell, which held invalid contracts, whether nominally of agency, or of sale, between manufacturer and wholesaler or jobber whereby the latter in purchasing agreed himself to maintain and to sell only to others who would maintain a schedule of prices established by the manufacturer. But there are more ways than one of maintaining prices. One of these is to refuse to sell to persons …

Recent Important Decisions

Michigan Law Review

A collection of recent important court decisions.

Recent Important Decisions

Michigan Law Review

A collection of recent important court decisions.

Recent Important Decisions

Michigan Law Review

A collection of recent important court decisions.

Note And Comment, George E. Kennedy, Louis P. Lackey, John R. Rood, Gordon Stoner, Ralph W. Aigler

Michigan Law Review

The Law School -As a result of the increased requirements for admission, which are now in their second year of operation, the attendance at the Law School is less than that of last year, though the decrease is less than was anticipated at the time of the adoption of the higher requirements. The entering class (the second, under the new standard) is about thirty larger than that of last year. There are no changes in the teaching staff, and none of great importance in the curriculum.

Recent Important Decisions

Michigan Law Review

Bankruptcy - Judgment for Breach of Promis, Aggravated by Seduction, Not Dischargeable - Petitioner 'had secured a judgment against the bankrupt for the breach of a promise to marry, seduction under such promise having been pleaded in aggravation of damages; the common law rule prevails in New York and a woman may not maintain an action for her own seduction. The District Court (196 Fed. 571), viewing this as a judgment grounded solely in contract, and not in tort as "for -will-ful and malicious injury to the person or property of another," or for "seduction of an unmarried female," held …

Recent Important Decisions, Michigan Law Review

Michigan Law Review

Animals--Abuse--Malice Toward the Owner; Assault and Battery--Apparent Ability; Bankruptcy--marshaling Assets of Partnership and of Constituent Firm; Banks and Banking--Checks--Fictitious Payee; Bills and Notes--Bona Fide Holder; Carrier--duty to Protect Passengers; Constitutional law--Division of Powers--Infringement on Executive; Constitutional law--Eminent Domain--Supersedure of Ordinance of 1787; Constitutional law--Special Legislation--Automobiles; Corporations--Issue of Stock--Corporation of Two States; Courts--Jurisdiction--Damage to Real Property Without the State--Negligence; Damage--Personal Injuries Contributing to Disease; Deeds--Assignment o fright of Entry Between Heirs; Deeds--Restrictive Covenant--"building" Defined; Equity--Infringement of Trade Marks--"Clean Hands"--Husband and Wife--Estate by Entirety--Conveyance of Husband's Interest; Judgment--Effect of the Transcript of a Justice's Judgement Filed in the District Court; Judgment--Estoppel--Homestead; Marriage--What …

Recent Important Decisions, Michigan Law Review

Michigan Law Review

Adverse Possession--Hostile Character--Possession Under Executory Contract for Sale; Bills and Notes--Bona Fide Purchase--Effect of Taking After Maturity; Bills and Notes--Bona Fide Purchase--Payment of Forged Check--Recovery of Payment; Bills and Notes--Invalidity of Note--Recovery Upon Original Consideration; Constitutional law--Due Process of Law--Situs of Ship for Purposes of Taxation; contracts--Sufficiency of Typewritten Signature; Copyright--Moving Pictures as Dramatization of Book; Corporations--Stockholder's Meetings--Effect of Withdrawal of Stockholders; Courts--The New Commerce Court--Jurisdiction--First Decision; Covenants Running with the Land--Building Restrictions; Damages--Excessiveness--Personal Injuries--Remittitur; Dead Bodies--Burial Determination of Place; Easements--Merger--Use by Owner of Servient Estate--Adverse Possession; Homicide--Burden of Proof When Insanity is a Defense; Intoxicating Liquors--Illegal Sale--"Dispensing"; Judgment--Collateral Attack--Defective …