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 trust for the settlor until the beneficiaries come into being or are ascertained. This being so, a declaration of trust for unborn or unascertained beneficiaries creates only a resulting trust for the settlor-trustee. Thus he has legal title and the whole equitable title, which merge. Moreover, said the opinion, a trust cannot exist without someone in being entitled to enforce it. The opinion added that, in any event, a person cannot make an effective transfer to his own right heirs.
William F. Fratche,
TRUSTOR AS SOLE TRUSTEE AND ONLY ASCERTAINABLE BENEFICIARY,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol47/iss7/3