125 N.E.2d 600 (Ill. 1955)
Albert B. Farkas died intestate at the age of sixty-seven years, a resident of Chicago, leaving as his only heirs-at-law brothers, sisters, a nephew and a niece.1 Although retired at the time of his death, he had for many years practiced veterinary medicine and operated a veterinarian establishment in Chicago. During a considerable portion of that time, he employed the defendant Williams, who was not related to him.2
On four occasions, December 8, 1948, February 7, 1949, February 14, 1950, and March 1, 1950, Farkas purchased stock of Investors Mutual, Inc.3 At the time of each purchase he executed a written application to Investors Mutual, Inc., instructing them to issue the stock in his name as trustee for Richard J. Williams.45 Investors Mutual, Inc., by its agent, accepted each of these applications in writing by signature on the face of the application.6 Coincident with the execution of these applications, Farkas signed separate declarations of trust, all of which were identical except as to dates.7
The applications and declarations of trust were delivered to Investors Mutual, Inc., and held by the company until Farkas’ death.8 The stock certificates were issued in the name of Farkas as trustee for Williams and were discovered in a safety-deposit box of Farkas after his death, along with other securities, some of which were in the name of Williams alone.9
Said coadministrators, Regina Farkas and Victor Farkas, filed a complaint in the circuit court of Cook County for a declaratory decree and other relief against Richard J. Williams and Investors Mutual, Inc.10 The decree of the circuit court found that said declarations were testamentary in character and directed that the stock be awarded to the plaintiffs as an asset of the estate.11 Upon appeal to the Appellate Court, the decree was affirmed.12 The Supreme Court allowed defendants’ petition for leave to appeal.13
A declaration of trust creates a valid inter vivos trust if upon execution the beneficiary acquires a present interest in the subject matter.16 The settlor does not retain such control over the property as to render the instrument an attempted testamentary disposition.17 Retention of a life interest, power of revocation, and powers to manage as trustee do not invalidate the trust provided the trustee remains subject to fiduciary duties.18
Yes. Farkas executed four separate declarations of trust coincident with purchasing the stock and directing that certificates issue in his name as trustee for Williams.19 The applications and declarations were delivered to Investors Mutual, Inc.20 Upon execution Williams acquired a present beneficial interest because Farkas could no longer deal with the stock as absolute owner but only in accordance with the trust terms.2122 The stock was registered in his name as trustee for Williams.23
Although Farkas retained the rights to receive all cash dividends during his lifetime, to change the beneficiary or revoke the trust, and as trustee to vote, sell, redeem, exchange or otherwise deal in the stock, these reservations do not render the instruments testamentary.24 The power to revoke even when coupled with a life interest is insufficient to invalidate an inter vivos trust.25 The powers reserved as trustee are subject to fiduciary standards enforceable by the beneficiary rather than amounting to absolute ownership.26 The circuit court decree finding the declarations testamentary was affirmed by the Appellate Court but must be reversed because the instruments satisfied the requirements for valid inter vivos trusts.27
The declarations of trust executed by Albert B. Farkas created valid inter vivos trusts of the stock of Investors Mutual, Inc.
Whether upon execution of the trust instruments Richard J. Williams presently acquired an interest in the stock?28
If no interest passes to the beneficiary before the death of the settlor the intended trust is testamentary and invalid for failure to comply with the statute on wills.29 A present interest exists where the settlor parts with some incidents of ownership and manifests an intention to bind himself to having the property pass to the beneficiary upon death unless the trust is revoked in the specified manner.30
Yes. Upon execution of each declaration Farkas showed an intention to presently part with some incidents of ownership because he could not deal with the stock the same as if he owned it absolutely but only in accordance with the terms of the instrument.31 He purported to set himself up as trustee of the stock for the benefit of Williams with the stock registered in his name as trustee for Williams.32 Williams was to be the beneficiary to whom Farkas was obligated.33
Unless Farkas revoked the instrument in the manner set out or the instrument was otherwise terminated, upon Farkas death Williams was to become absolute owner of the trust property.34 The provision that the decease of the beneficiary before Farkas death would operate as a revocation creates only a contingency that does not prevent the beneficiary from holding a contingent equitable interest in remainder during the settlor lifetime.35 The applications and declarations of trust were delivered to Investors Mutual, Inc., and held by the company until Farkas death, confirming that a present interest passed immediately rather than arising only at death.36
Upon execution of the trust instruments Richard J. Williams presently acquired an interest in the stock.37
Whether Albert B. Farkas retained such control over the stock as to render the trust instruments attempted testamentary dispositions?38
Retention by the settlor of a life interest, power to revoke, and power to manage the trust property as sole trustee does not render an inter vivos trust invalid as an attempted testamentary disposition.39 The trustee remains subject to fiduciary duties that the beneficiary may enforce.40 Such powers are treated as conditions subsequent that may defeat the interest but do not prevent the initial vesting of an equitable title.41
No. Although Farkas reserved the right to receive all cash dividends, to change the beneficiary or revoke the trust at any time, and as trustee to vote, sell, redeem, exchange or otherwise deal in the stock with the right to retain proceeds upon sale or redemption, these powers do not amount to retention of full ownership.42 The power to revoke even when coupled with a life interest and extensive management powers does not invalidate the trust.43 The control reserved to Farkas as trustee is not as great as if reserved to him as settlor because he remained obligated to conduct himself in accordance with standards applicable to trustees generally.44 The stock certificates were issued in the name of Farkas as trustee for Williams and were discovered in his safety-deposit box after death along with other securities some of which were in the name of Williams alone.45
Yet the formal execution of four separate applications and declarations manifested the intention in a solemn manner that distinguishes the transaction from a will.46 The circuit court and Appellate Court erred in concluding that the retained control rendered the instruments testamentary.47
Albert B. Farkas did not retain such control over the stock as to render the trust instruments attempted testamentary dispositions.48