The opinion of the court was delivered by: WALKER
Edith E. Blunt died July 3, 1934, a resident of Morristown, New Jersey. Albert C. Blunt, Jr., her son, the executor of her will, filed a federal estate tax return and upon the audit of the same the Commissioner of Internal Revenue and the Collector determined, over the filed protest of the executor, that the value of certain securities transferred by Mrs. Blunt to the Morristown Trust Company and Albert C. Blunt, Jr., as trustees, by indenture dated April 21, 1925, constituted at the date of her death a part of her gross estate subject to federal estate tax. The value of said securities at the date of her death was assessed and paid on August 2, 1936 by reason of the inclusion of said securities in the gross estate. The executor filed a claim for refund with the Collector of Internal Revenue who allowed the same only to the extent of $266.04, being a credit for gift tax paid, and rejected the balance of the claim.It is this balance with interest which plaintiff is seeking to recover in this action.
Edith E. Blunt died July 3, 1934, at the age of seventy-five years.
On April 21, 1925, more than nine years prior to her death, she executed and delivered an indenture of trust to the Morristown Trust Company and Albert C. Blunt, Jr., trustees. At the same time she transferred to the said trustees the property covered thereby.
By the terms of said trust the trustees were directed to collect the income therefrom and pay the same to said Edith E. Blunt during her life, and upon her death to divide the corpus into six equal parts and to transfer the same to her children. The said Albert C. Blunt, Jr., trustee under the trust indenture, was one of the children of Edith E. Blunt and as such was entitled to receive one-sixth of the corpus of the trust estate upon his mother's death.
At the time of executing said trust indenture Edith E. Blunt was sixty-six years of age. She was in excellent health at that time and had been for a period of many years, and continued to be for a long period thereafter. She was an active individual, interested in her family and grandchildren and in her garden, which was extensive.
She participated extensively in the activities of the association which controlled the park in which her summer home was situated.
She entertained extensively.
She travelled widely, including trips to Cape Cod where she went out on rowboat trips, visits to a fishing camp in a remote part of Canada, and numerous trips to Florida.
Her death was eventually caused by a stroke which occurred only a month before her death.
Dr. Baldwin's deposition shows that prior to the time which she suffered this stroke Mrs. Blunt had required his services only for minor ailments and had been in good health.
Mrs. Blunt's husband died on April 17, 1925.
Prior to his death, which occurred suddenly, he had made arrangements with the family lawyer, who is now deceased, for the drafting of this trust agreement and its execution by Mrs. Blunt. As a matter of fact, the original appointment which had been made before Colonel Blunt's death for the execution of the trust agreement was kept by Mrs. Blunt after the funeral, and the agreement was executed in the form in which it had been drawn.
The trust indenture contained the following clause: "Should in their opinion the necessity arise, the Trustees are hereby empowered to use such portion of the principal of the trust fund as may seem proper for the support, care or benefit of the party of the first part."
After her husband's death Mrs. Blunt drew a will. It is dated April 28, 1925, one week after the execution of the trust agreement.
At no time from the date of the agreement to Mrs. Blunt's death did the necessity arise for the trustees to use any portion of the principal of the trust fund and no portion thereof was used.
Mrs. Blunt at all times during this period lived well within her income, in fact, she accumulated a savings account from her income,
and in addition made regular allowances for the assistance of certain of her adult children.
1. Was the transfer in trust by decedent on April 21, 1925, made in contemplation of death within the meaning of Section 302(c) of the Revenue Act of 1924, 26 U.S.C.A. Int.Rev.Acts, page 67?
2. Was the transfer here involved intended to take effect in possession or enjoyment at or after death within the meaning of Section ...