flow of trust income is hardly some subtle divination of a latter-day observer of the 1958-1959 tax landscape. Contemporary observers saw the same thing. A summary of the field in the 1959 Tax Law Review concluded: "Until the law is made more definite, a grantor who retains any management powers is proceeding at his own risk. ... [T]here is no certainty. . . ." Gray & Covey, State Street-A Case Study of Sections 2036 (a)(2) and 2038, 15 Tax L. Rev. 75, 102. The relevant subcommittee of the American Bar Association Committee on Estate and Tax Planning hardly thought reliance appropriate. It wrote in 1960 that:

"The tax-wise draftsman must now undertake to review every living trust in his office intended to be excluded from the settlor's estate in which the settlor acts as a trustee with authority to:

"1. Exercise broad and virtually unlimited investment powers Tax-Wise Drafting of Fiduciary Powers, 4 Tax Counsellor's Quarterly 333, 336. More could be said, but I think it is clear that the majority should find no solace in its reliance argument.

V

The majority, I repeat, has erred in every substantial respect. It remains only to note that if it is wrong in any substantial respect-i. e., either in its § 2036 (a) (1) or (a) (2) arguments-Byrum's trust is by law liable to taxation.

if he bound himself as a trustee to an ascertainable method of income distribution. While Byrum and his lawyer were pondering the terms of the trust agreement now in litigation, the Court of Appeals for the First Circuit was reconsidering whether a settlor could retain power over his trust's investments even when he bound himself to a fiduciary's strictest standards of disinterested obligation to his trust's beneficiaries. Early in 1958 the United States District Court for the District of Massachusetts had ruled that a settlor could not maintain powers of management of a trust even as a trustee without assuming estate tax liability. State Street Trust Co. v. United States, 160 F. Supp. 877. The estate's executor appealed this decision and argued it before the First Circuit panel on October 7, 1958. Byrum's trust agreement was made amidst this litigation, on December 8. On January 23, 1959, the First Circuit affirmed the District Court. 263 F. 2d 635.13

The point is not simply that Byrum was on notice that he risked taxability by retaining the powers he retained when he created his trust-though that is true. It is also that within a month of the trust's creation it should have been crystal clear that Byrum ran a substantial risk of taxation by continued retention of control over the trust's stock. Any retained right can be resigned. That Byrum persisted in holding these rights can only be viewed as an indication of the value he placed upon their enjoyment, and of the tax risk he was willing to assume in order to retain control.

The perception that a settlor ran substantial risk of estate tax if he insisted on retaining power over the

13 The First Circuit again shifted its position on this question in Old Colony Trust Co. v. United States, 423 F. 2d 601 (1970), but this change is obviously irrelevant to the majority's argument as to the legitimacy of Byrum's reliance from 1958 to 1964.

upon which Byrum was entitled to rely, and it is quite true that cases exist holding that a settlor's retention of the power to invest the assets of a trust does not by itself render the trust taxable under § 2036 (a)(2). But the majority's emphasis on these cases as a proper foundation for Byrum's reliance is doubly wrong. First, it could not have evaded Byrum's attention and should not escape the majority that all cited prior cases--save King (the tax court case written four years after Byrum structured his trust)-involved retention of power to invest by the settlor's appointment of himself as a trustee; that is, they posed instances in which the settlor's retained power was constrained by a fiduciary obligation to treat the life tenant beneficiaries and remainderman beneficiaries exactly as specified in the trust instrument. Thus, the "freedom" to reallocate income between life tenants and remaindermen by, e. g., investing in wasting assets with a high present return and no long-term value, was limited by a judicially enforceable strict standard capable of invocation by the trust beneficiaries by reference to the terms of the trust agreement. See Jennings v. Smith, 161 F. 2d 74 (CA2 1947), the leading case. Byrum must have realized that the situation he was structuring was quite different. By according himself power of control over the trust income by an indirect means, he kept himself quite free of a fiduciary obligation measured by an ascertainable standard in the trust agreement. Putting aside the question of whether the situation described should be distinguished from Byrum's scheme, surely it must be acknowledged that there was an apparent risk that these situations could be distinguished by reviewing courts.

Second, the majority's analysis of the case law skips over the uncertainty at the time Byrum was drafting his trust agreement about even the general rule that a settlor could retain control over a trust's investments

That logic no longer survives. When three Supreme Court per curiams affirmed May on March 2, 1931, and thus indicated that this view would not be confined to its facts, the Treasury Department, on the next morning, wrote Congress imploring it to promptly and finally reject the Court's lenient view of the estate tax system. Congress responded by enacting the predecessor of § 2036 (a)(2) that very day. The President signed the law that evening. Thus the holding of May and the underlying approach of Northern Trust have no present life. I note further that though Congress has refused to permit pre-1931 trusts to be liable to a rule other than that of May, in 1949 this Court itself came to the conclusion that May was wrong, and effected "a complete rejection" of its reasoning. Commissioner v. Estate of Church, 335 U. S. 632,12 645.

I seriously doubt that one could have confidently relied on Reinecke v. Northern Trust Co. when Byrum drafted his trust agreement in 1958. This Court is certainly not bound by its logic, in 1972. I do not mean any disrespect, but as Mr. Justice Cardozo said about another case, Northern Trust is a decision "as mouldy as the grave from which counsel . . . brought it forth to face the light of a new age." B. Cardozo, The Growth of the Law, in Selected Writings 244 (M. Hall ed. 1947).

2. The majority argues that there were several lower court cases decided after the enactment of § 2036 (a) (2)

12 In considering this and its companion case, Estate of Spiegel v. Commissioner, 335 U. S. 701 (1949), the Court in effect invited argument on whether Northern Trust itself should be overruled. Journal of the Supreme Court, O. T. 1947, pp. 296-297. Though the Court held for the Government without having to reach this issue, I note that in the 23 years since Church and Spiegel no opinion of this Court has once cited, much less relied upon, Northern Trust. Mr. Justice Reed, dissenting in Church and concurring in Spiegel, announced at the time that he thought these cases overruled Northern Trust.

1. Again the majority turns to Reinecke v. Northern Trust Co., but it is no more credible to use Northern Trust as a foundation for Byrum's § 2036 (a) (2) position than it was to use it as a basis for the Court's § 2036 (a) (1) argument. Northern Trust was decided on January 2, 1929, two years and three months before Congress passed the first version of § 2036 (a)(2). Section 402 (c) of the Act of 1921, the provision under which Northern Trust was decided, proscribed only transfers in which the settlor attempted to retain "possession or enjoyment" until his death. It is thus not surprising that Northern Trust focused on the question of the settlor's "power to recall the property and of control over it for his own benefit," 278 U. S., at 347 (emphasis added), and made no mention of possible tax liability because of a retained power to designate which beneficiaries would enjoy the trust income. A holding in this context cannot be precedent of "weight" for a decision as to the efficacy of a trust agreement made as this trust was-27 years after the predecessor of § 2036 (a) (2) was enacted.

I note also that Northern Trust rests on a conceptual framework now rejected in modern law. The case is the elder sibling of May v. Heiner, 281 U. S. 238, a three-page 1930 decision which quotes Northern Trust, at length. May in effect held that under § 402 (c) a settlor may be considered to have fully alienated property from himself even if he retains the very substantial string of the right to income from the property so long as he survives. The logic of May v. Heiner is the logic of Northern Trust. As one authority has written:

"When retention of a life estate was not taxable under the rule of May v. Heiner, it followed that mere retention of a right to designate the persons to receive the income during the life of the settlor was not taxable . . . 1 J. Beveridge, Law of Federal Estate Taxation § 8.06, p. 324 (1956).