Response or Comment
The Supreme Court of the United States, in the recent case of Cohen v. Samuels, 38 Sup. Ct. 36, has put an end to a method, approved by some of the lower Federal Courts, whereby a person could create a fund which would be completely under his control but which would nevertheless be protected against any claim on the part of his trustee in bankruptcy. The circumstances in the principal case were as follows: Samuels had taken out ordinary life insurance policies, with the usual provisions as to loan and surrender values, payable to certain of his relatives as beneficiaries, but 'with a provision reserving to Samuels the right to change the beneficiary without the latter's consent. At the time of Samuels' bankruptcy these surrender values were about $1,200, and if before that time Samuels had wished to realize on such surrender values, all that he need have done was to name himself as beneficiary and thus become entitled to the amount. He became bankrupt, and now insists that the policies do not pass to his trustee in bankruptcy as assets because, not being payable to himself, his estate, or personal representatives, they do not fall within the language of § 70, which defines what property shall pass to the trustee. And his claim was apparently so well fortified by authority that the District Court for the Southern District of New York felt impelled to uphold it, and was supported by the Circuit Court of Appeals for the Second Circuit, where, however, HOUGH, C. J., registered a vigorous dissent.
Holbrook, Evans. "Insurance Policies as Assets in Bankruptcy." Mich. L. Rev. 16 (1918): 187–9.