Appeal from decree of Court of Common Pleas, Orphans' Court Division, of Montgomery County, No. 73561, in re estate of Abram H. Weiss, deceased.
Richard L. Grossman, with him Smith, Aker, Grossman, Hollinger & Jenkins, for appellant.
Edward N. Polisher, with him Harold Greenberg, Paul J. Schneider, and Cohen, Shapiro, Polisher, Sheikman & Cohen, for appellees.
Catherine R. Barone, Assistant Attorney General, Dante Mattioni, Deputy Attorney General, and J. Shane Creamer, Attorney General, for Commonwealth, appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Pomeroy. Dissenting Opinion by Mr. Justice Roberts. Mr. Justice Nix joins in this dissenting opinion.
This case requires us to consider the nature and extent of certain discretionary powers given to trustees under a testamentary trust; specifically, whether discretion given the trustees to allocate "all capital gains resulting from the sale or exchange of trust assets" to income or to principal "in accordance with applicable Law" must be exercised under the rules of the Principal
and Income Act, July 3, 1947, P. L. 1283, as amended, 20 P.S. § 3470.1 et seq., or whether that discretion can be exercised without reference to that Act. We hold the latter.
Abram H. Weiss died testate on March 6, 1968. His will, dated September 9, 1963, bequeathed all personal effects and automobiles to the testator's wife, Helen L. Weiss, and divided the balance of the estate into two separate trusts, Trust A and Trust B.
Trust A was a "marital deduction trust" designed to take full advantage, through the use of the so-called "formula" approach, of the marital deduction permitted under the Internal Revenue Code of 1954, as amended, for federal estate tax purposes. The income therefrom was to be paid to the wife during her lifetime; the corpus was subject to the wife's power to dispose of all or part thereof during her lifetime, or, upon her death, by testamentary power of appointment. Should the wife's income from all sources be less than $50,000 per annum after taxes, or should payments of principal be required by illness or emergency or to maintain the wife in her accustomed standard of living, then invasion of principal was authorized. Should the testator's wife predecease him -- which proved not to be the case -- then the gift to the wife would lapse and the amount which would have funded Trust A would pass to the heirs of the wife in accordance with the intestate laws of Pennsylvania then in force.
Trust B was to be composed of the residue of the estate. As to it, the testator directed that the trustees pay the income "in such proportion and in such manner" as they might see fit to fourteen named beneficiaries (including his wife, Helen L. Weiss) during the lifetime of the wife. Upon the death of Helen Weiss (an event which has not yet come to pass), the corpus and any undistributed, accumulated income is to be paid over to the A. H. and Helen L. Weiss Foundation,
a charitable organization created by testator and his wife in 1952. Under Trust B the trustees are given no specific power to invade corpus. The will provided for no gift to the thirteen named income beneficiaries of Trust B (other than to Helen Weiss) should the wife predecease the testator; in such event, the charitable foundation would take the residuary estate immediately. By a codicil dated January 5, 1966, however, the testator made specific pecuniary bequests, should his wife predecease him, to those persons; they range from $2500 to $15,000. By a second codicil dated February 1, 1966, the testator added a specific bequest of $500,000 (but not more than 25% of his adjusted gross estate for federal estate tax purposes) to the Federation of Jewish Agencies of Greater Philadelphia for construction of a facility for care and treatment of the aged.
Testator's will set forth in some detail the administrative powers of the trustees under the above two trusts. Several of those provisions which pertain to Trust B give rise to the instant controversy:
"Eighth: I direct that my Executors and Trustees, in addition to and not in limitation of any authority given them by Law, shall have the following powers:
" C. To retain all stocks, bonds and investments owned by me, and to invest and reinvest in other stocks, bonds and investments, without being confined to what are known as 'legal investments,' and to sell and transfer the same, whether in person or by attorney, without liability on the part of the purchasers to see to the application of the purchase or consideration monies. The purchase of life insurance and annuities for the benefit of any trust estate is authorized hereunder.
" D. To purchase securities at a premium and to exercise any option to subscribe for stocks, bonds or other investments; and ...