Bullen v. Wisconsin
Headline: Court upholds Wisconsin inheritance tax on nearly $1 million trust where the donor kept broad control, allowing the state to tax the fund despite assets being held in another state.
Holding: The Court held that Wisconsin may tax the entire trust fund as an inheritance because Bullen reserved broad, general control over the property and enjoyed its income during his life.
- Allows states to tax trust funds controlled by residents even if assets are out-of-state.
- Means heirs may owe inheritance tax on large trusts where the donor kept broad control.
- Confirms domicil state can tax contracts, stocks, and similar property at death.
Summary
Background
George Bullen was a man who moved from Illinois to Wisconsin in 1892 and kept nearly a million dollars in bonds, stocks, and notes in Chicago. He conveyed that fund to a Chicago trust company in 1902, took it back in 1904, and reconveyed it in 1907 under similar trust terms. The trust reserved to Bullen a broad right to revoke, take possession, and direct the use of principal and income; in fact he received all the income during his life. His heirs and next of kin challenged Wisconsin’s demand for an inheritance tax on the whole fund, arguing constitutional objections.
Reasoning
The Court addressed whether Wisconsin could treat the fund as subject to an inheritance tax. It agreed with the Wisconsin Supreme Court that because Bullen had reserved a general power to control and dispose of the trust property — and had exercised control by taking the income and by revoking and reconveying — the power was treated like ownership for tax purposes. The Court said the deeds transferred title and had a real purpose, and that treating such a broad reserved power as effectively equivalent to ownership for the taxing law did not violate the Constitution. The Court also explained that the state of a person’s domicile can tax inheritances of property even when the physical assets are located elsewhere.
Real world impact
The decision means that large trust funds won’t automatically escape a resident’s state inheritance tax simply because the securities are held out of state if the donor reserved broad control. Heirs who receive the remainder after the donor’s death may face state inheritance taxes on the full fund. The Court affirmed the tax judgment in favor of Wisconsin.
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