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In re Trust Under Will of Arens

Decided: January 19, 1962.

IN THE MATTER OF THE TRUST UNDER THE WILL OF OTTO ARENS FOR THE BENEFIT OF EDITH ARENS HAGEDORN


Barger, J.c.c.

Barger

[72 NJSuper Page 311] The plaintiff, Plainfield Trust State National Bank, formerly the Plainfield Trust Company of Plainfield, New Jersey, is the surviving substituted trustee of the trust for the benefit of Edith Arens Hagedorn, formerly Edith Mary Arens, under article "Third," subdivision "3d," of the last will and testament of Otto Arens, which was admitted to probate in the Union County Surrogate's Office on September 7, 1910, and as such trustee

files its fourth intermediate account covering the period from December 17, 1946 to September 29, 1959. The account has been generally approved by the court, reserving those questions raised by the instructions sought by the trustee as hereinafter mentioned.

Otto Arens, a resident of the City of Plainfield, died August 26, 1910, leaving a last will and testament dated May 5, 1891, and which was admitted to probate on the date indicated. Under the article of the will referred to, after the termination of the initial life estate established for his wife, who died on November 25, 1920, the testator created a trust for his daughter, Edith Arens Hagedorn, entitling her to the income from one-half of the corpus of the trust fund mentioned for life, one-half on the death of his widow being distributed to a son. Upon the death of the last life beneficiary mentioned, the testator provided that the one-half of the corpus of the trust fund comprising this life estate should go to his daughter's issue, if any, and if there should be no issue then the testator gave the corpus mentioned to his son, Siegfried H. Arens, if living, and if not, to the son's issue. Mrs. Hagedorn is now 80 years of age and has no issue, and the son is deceased, but the son is survived by several issue, who will take the principal of the estate, per capita , upon her death. There are now eight remaindermen living, some not having attained their majority.

This trust has been administered by successive trustees and the plaintiff is the sole surviving substituted trustee. During the period covered by this account, i.e. , from December 17, 1946 to September 29, 1959, there have been distributions in the form of stock splits and dividends by the corporations whose shares of capital stock are held as investments by the trustee, and the trustee now seeks from this court advice and instructions relating to the following:

1. Advice and instructions relating to the apportionment and allocation of the shares of stock received as stock splits and stock dividends during the period mentioned, as between

the life tenant and the remaindermen, i.e. , as to income and corpus.

2. Advice and instructions from the court in respect to the charges to be made against the life tenant or the remaindermen, or both, as to income taxes to be paid upon capital gains to be realized in the sale of any shares in order to provide funds to accomplish any apportionment ordered.

By N.J.S. 3A:14A-1-9 the Legislature of this State enacted legislation controlling the apportionment of the property of the nature herein involved, and simplified the problem herein discussed. This statute, expressly by its language, is applicable only to trusts established under the wills of testators dying after its enactment. This statute is similar to that adopted in Pennsylvania and to the uniform statute, and is referred to under the court's comments on the Pennsylvania rule. The adoption of these statutes reflects the trend to abandon the Pennsylvania rule in favor of the Massachusetts rule. In re Fera's Estate , 26 N.J. 131 (1958). As to trusts vesting before the adoption date of the statute in 1952, the apportionment rule herein referred to applies. This is so in spite of the fact that in Fera the court determined that the apportionment rule is not one of property but rather one of construction of a rule. Further, the will creating the trust contains no instructions relating to the subject matter.

This estate has been the subject matter of prior adjudicated cases. See Plainfield Trust Co. v. Hagedorn , 28 N.J. 483 (1958); Hagedorn v. Arens , 106 N.J. Eq. 377 (Ch. 1930). Reference is made thereto for the antecedent factual background of this estate. We are concerned here with ten different stock investments involving stock splits or stock dividends and having the factual background set forth in Schedule C of the complaint and Exhibits P-3 -- 23, inclusive.

In this country various rules are followed in apportioning splits and dividends. A comprehensive consideration of the

subject matter is with clarity discussed in Scott, Abridgement of the Law of Trusts , 1960, ...


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