
    The New York Life Insurance & Trust Co., as Executor, etc., of Richard Augustine Smith, Deceased, Plaintiff, v. Letitia C. Sands et al., Defendants.
    (Supreme Court, New York Special Term,
    June, 1898.)
    Trusts — Investment — “ Net income.”
    The will of a testator directed his executor to set apart and invest four funds, each sufficient to raise a “ net annual income ” stated, to hold each fund in trust and to pay the income in each- case, to certain beneficiaries during life; he also directed that upon the death of the several beneficiaries the principal, in each case, should pass to other persons, but that, in case of their death before the life beneficiaries, their shares should fall into the residuary estate. He then directed ■that, after the separate funds had been created, ,the residuary estate should be divided at once among two persons, and that, if any bequest should fall into it under the prior provisions of the will, these additions should be divided in the same manner. He further directed his executor to invest the funds,. among other things, “ in such securities as executors and trustees are authorized by the laws of the state of New York to invest in.”
    Held, that it was the duty of the executor to establish at once separate funds which would, during the lives of the beneficiaries, produce the required incomes, and that the life beneficiaries would in each case be thereafter entitled to the whole of. that .income, whether greater or less.
    That ¡the executor must decide what sums, invested in securities in which investments might lawfully be made, would, under reasonably probable contingencies, produce the net income stated and that the court would not decide that question.
    That, by the phrase “ net income ” was meant the income, after the payment of taxes, commissions and a reasonable allowance for .the disbursements of the trustee in the execution of the trust.
    Action for construction of a will.
    Duer, Strong & Jarvis (A. Pennington Whitehead, of counsel), for plaintiff.
    Albert R. Genet, for defendants Gumbes et al.
    George Waddington, for defendants Sands et al., and guardian ad litem.
    
    Young, Verplanck & Prince, for defendant Rhinelander.
    Pennington Whitehead, for defendant Campbell.
    John Mason Knox, for defendant Allen.
    Edo. E. Mercelis, for defendant Coe, guardian ad litem.
    
   Walter L. Smith, J.

The plaintiff asks the court’s construction of the following clauses in the will of Richard Augustine Smith: I authorize and empower my said executors to sell and convert into money all my said real and personal estate, at such time or times as they shall deem proper (meanwhile) collecting and applying the rents of any real estate owned by me, not, however, conflicting with the provisions of the fourth clause herein, and out of the said residuary estate to create, hold and maintain the following funds in trust for the purposes hereinafter set forth. I. I direct my executors to set apart and to invest a fund sufficient to raise a net annual income of $5,000, and to hold the same in trust and to receive the income thereof, and to pay the same over in equal quarterly payments to my niece Letitia O. Sands, widow of Charles E. Sands, during her natural life, the first of said quarterly payments to be made three months after my death. Upon the death of my said niece,-the principal of the fund which has produced said income, shall thereupon be paid over by my executors, in equal shares to her daughters Letty 'and Edith Sands and her son Edwin Sands. ■ The share of each one of said children of Letitia O’. Sands who may have died before the said Letitia, shall fall into iny -residuary estate. II. I direct my executors to set apart and to invest, a fund sufficient to raise a net annual income of $10,000, and to hold the same in trust and to receive the income thereof, and to pay the same over in equal quarterly payments, to my niece Mary Jacquelin Stnith, wife of Laroche Jacquelin Smith, during her natural life, the first of said quarterly payments to be made three months after my death. Upon the death of my said niece, the principal of the fund which -has produced said income shall thereupon be paid over by-my executors in equal shares, to her daughters Sally and Gladys. The share of each one -of said daughters^ who may have died before the said Mary Jacquelin Smith, shall fall into my residuary estate. III. I direct my executors to set apart a -fund sufficient to raise a net annual income of $9,000', and to hold the same in trust, and to receive the income thereof, and to pay the same over in equal quarterly payments to my niece Elizabeth •Hildeburn Janeway, wife of John L. J-aneway, during her natural life, the first of said quarterly payments to be made three months after my death. Upon the death of my said niece, the principal of the fund which has produced said income, .shall thereupon be paid over by my said executors in equal shares to her children now liv"ing, if living at the time of her death. The share of each one of the said children who may have died before the said Elizabeth Hildeburn Janeway, shall fall into my residuary estate. IV. I direct my executors to set apart and to invest a fund sufficient to raise a net annual income of $1,000, and to hold the same in trust, and to receive the income thereof, and to pay the same over in equal quarterly payments to Mary S. Barker, daughter of my niece Elizabeth Hildeburn Janeway, and wife of Dr. Wharton Barker, during her natural life, the first of said quarterly payments to be made three months after my death. VII. I direct my executors, after the creation of the separate funds hereinbefore provided for, to pay over all the remaining part of my said residuary estate at once, in equal shares, to John Campbell Smith and Augustine Jacquelin Smith, sons of Mary Jacquelin Smith, and as each of the various funds hereinbefore created shall, under the provisions of this will, fall into my residuary estate, said fund shall thereupon at once be divided in equal shares between the said John Campbell Smith and Augustine Jacquelin Smith. If either of them should not be living at the time of my death, then the 'other shall be the sole legatee under this seventh clause of my will. VIII. I direct my said executors, after the creation of the various funds hereinbefore provided for, to invest and keep invested, each of said funds separately, in such securities as executors and trustees are authorized by the laws of the state of New York to invest in, or in such securities as I may leave my estate invested in, altering the investment thereof from time to time, as they -think proper.” The complaint prays, That this court determine and decide what principal sum is to be set aside, retained and held in trust by the plaintiffs for the benefit of the defendant Letitia O. Sands and the remaindermen, and what income is to be paid to the said Letitia C. Sands; what principal sum is to be set aside and retained by the plaintiffs upon the trusts created for the benefit of the defendant Mary Jacquelin Smith and remaindermen, and what income is to be paid to the said Mary Jacquelin Smith; what principal sum is to be set aside and retained by the plaintiffs for the defendant Elizabeth Hildeburn Janeway and remaindermen, and what income is to be paid to the said Elizabeth Hildeburn Janeway and remaindermen, and what principal sum is to be set aside and retained by the plaintiffs in trust for the benefit of the defendant Mary S. Barker and remaindermen, and what income is to be paid to the said Mary S. Barker, and that a decree be made passing the accounts of these plaintiffs.” From the language used, the testator has clearly directed that, at ones after his death, from his residuary estate shall be separated the several funds that shall produce the incomes which shall go to the life beneficiaries. The residue shall at once be paid to the residuary legatees. No direction is found in the will for the payment to the residuary legatees óf any part of the. fund so separated or of any part of its income. The fixed sum named in the trust is the measure of the fund to be separated. The income of that fund, whether greater or less than that sum, must go to the life beneficiary, and that fund is the bequest to the remaindermen. To determine the specific fund that shall be separated for the specific bequests is a matter of much delicacy. The separation is to be made at once. The securities in which investment may be made are as a class known. That fund then should consist of such an amount as1 will, with the best safe investments available, produce the net income named. Net. income means, I apprehend, the income after the payment of taxes, commissions and a reasonable-allowance for the disbursements of the trustee in the execution of his trust. If the investment be in securities purchased at a premium, only such part of the proceeds therefrom can be counted as income as shall leave the fund unimpaired at the maturity of the investment. But the net income named is to be produced for the life of the life beneficiary. Consideration should, therefore, be had for any contingencies in the investment market that are. reasonably probable within the life of the 'beneficiary named. The fund is not to be so created, however, as to yield the income named in all possible contingencies. As the fund is to be now separated, reasonably probable contingencies are alone to be considered.. The chance of gain or loss is then with the beneficiaries of the fund., Within these rules the determination of the amount of the fund so to be separated' is given by the testator not to the court, but to the trustee. This is confided to its judgment. Such determination reached upon proper principles is binding on all parties. In the decree may be reserved the right to ask the construction by tire court -of any questions that may hereafter arise in the execution of the trust. Account may be stated before Henry S. Van Duzer, as referee. Plaintiff will submit a form.of decision and judgment, which will be settled on notice.

Ordered accordingly.  