On May 23, 1938, the petitioner executed a "Special Settlement Request" with respect to the New England Mutual Life Insurance Co. policy. In that instrument the petitioner's daughter, Daphne D., was made primary beneficiary of the policy and her children, if any, and the petitioner's other children and their children were made contingent beneficiaries. The instrument also provided:

The Insurer shall have no right to change the beneficiaries and shall have no right, title or interest whatsoever in the policy. During the lifetime of the Insured all incidents of ownership in the policy shall be vested jointly in Daphne D. Skouras, Spyros S. Skouras, Plato A. Skouras, Dionysia C. Skouras and Diana J. Skouras, children of the Insured, if living, and the survivors or survivor of them, otherwise in the executors, administrators or assigns of the last survivor of said children of the Insured. During the lifetime of the Insured but not after his death the right shall be reserved jointly, to said children of the Insured, if living, on their sole signature1950 U.S. Tax Ct. LEXIS 239">*254 and for their own benefit, and to the survivors or survivor of them, otherwise to the executors, administrators or assigns of the last survivor of said children of the Insured, to change the beneficiaries, 14 T.C. 523">*529 receive dividends, assign the policy as collateral security, surrender the same to the Company for its cash value, and to exercise any right, option or benefit contained in the policy, including the right to change all provisions governing control of the policy.

On May 23, 1938, the petitioner executed "Mode of Settlement" with respect to the Mutual Life Insurance Co. of New York policies Nos. 4,893,050L, 4,893,051L, and 4,893,052L. Under the instrument relating to policies Nos. 4,893,051L and 4,893,052L the petitioner's daughter, Daphne D., was made primary beneficiary of the policies and her children, if any, and the petitioner's other children and their children were made contingent beneficiaries. Under the instrument relating to policy No. 4,893,050L the petitioner's daughter, Diana J., was made primary beneficiary of the policy and her children, if any, and the petitioner's other children and their children were made secondary beneficiaries. The instrument relating1950 U.S. Tax Ct. LEXIS 239">*255 to policies Nos. 4,893,051L and 4,893,052L contained the following:

All benefits, options, rights and privileges shall be reserved to said Daphne D. Skouras, and to Diana J. Skouras, Spyros S. Skouras, Plato A. Skouras and Dionysia C. Skouras, other children of said marriage, jointly, the survivors or survivor of them, and after the death of the last survivor of said children, to the executors or administrators of such last survivor.

The Insured hereby consents to and agrees in all acts which any of said Daphne D. Skouras, said Diana J. Skouras, and said Dionysia C. Skouras may take in regard to this policy. This consent is given in accordance with the provisions of Section 52 of the Domestic Relations Law of the State of New York.

A statement similar to the foregoing was contained in the instrument relating to policy No. 4,893,050L.

Thereafter, on June 7, 1938, the Mutual Life Insurance Co. of New York made the following endorsement on each of policies Nos. 4,893,050L, 4,893,051L, and 4,893,052L:

Rights: Anything in this policy to the contrary notwithstanding, prior to the maturity of this policy, the Insured's children, Diana J. Skouras, Daphne D. Skouras, Spyros S. Skouras, 1950 U.S. Tax Ct. LEXIS 239">*256 Plato A. Skouras and Dionysia C. Skouras, jointly, the survivors or survivor of them, and after the death of the last survivor of said children, the executors or administrators of the last survivor of said children, several of the beneficiaries, may, without the consent and to the exclusion of the Insured or any other beneficiary, receive, exercise and enjoy every benefit, option, right and privilege conferred by this policy or allowed by the Company.

On May 23, 1938, the petitioner executed an instrument addressed to the Connecticut Mutual Life Insurance Co. with respect to the policy issued to him by that company. By that instrument the petitioner's son, Plato A., was made primary beneficiary of the policy and his children, if any, and the other children of the petitioner and their children were made contingent beneficiaries. On May 26, 1938, the petitioner executed an agreement with that company whereby upon 14 T.C. 523">*530 the death of the petitioner the proceeds of the policy were to be held by the company on certain specified terms. The agreement contained the following:

The Agreement will terminate

(a) if said Plato A. Skouras, Spyros S. Skouras, Daphne D. Skouras, Dionysia C. 1950 U.S. Tax Ct. LEXIS 239">*257 Skouras, and Diana J. Skouras, children of the Insured, jointly, or the survivors or survivor of them, shall file with the Company at its Home Office written application for its termination;

* * * *

On May 24, 1938, the petitioner executed "Request for Amendment" with respect to the policy wherein he requested that endorsement be made on the policy of the following:

The right to receive all cash values, amounts, due at endowment maturity, if any, loans and dividends accruing under said Policy, to change the beneficiary named therein, to exercise all privileges and options contained therein, and to agree with the Company to any release, modification, or amendment of said Policy, shall belong and be available without the consent of any other person to Plato A. Spouras, Spyros S. Skouras, Daphne D. Skouras, Dionysia C. Skouras, and Diana J. Skouras, my children, jointly, or the survivors or survivor, or if none be living, to the Executors, Administrators, or Assigns of the last survivor of them.

On May 27, 1938, the requested endorsement was made on the policy.

On May 23, 1938, the petitioner executed a "Request For Change of Policy" respecting the Equitable Life Assurance Society1950 U.S. Tax Ct. LEXIS 239">*258 of the United States policy. By this instrument the petitioner's son, Plato A., was made the primary beneficiary of the policy and his children, if any, and the petitioner's other children and their children were made contingent beneficiaries. In this instrument the petitioner designated the owner of the policy and pursuant to such designation a rider containing the following was attached to the policy:

Owner. The rights conferred upon the Owner by the terms of this policy shall be vested in the Insured's children, Plato A. Skouras, Spyros S. Skouras, Daphne D. Skouras, Dionysia C. Skouras and Diana J. Skouras, jointly during their lifetime. Upon the death of any one of the Insured's said children, such rights shall be vested in the survivors of them, jointly during their lifetime, or if only one of them be then surviving, such rights shall be vested in the survivor, during his or her lifetime. Upon the death of the last survivor of the Insured's said children, such rights shall be vested in the executors or administrators of such last survivor.

A person while thus vested with the rights of Owner may, prior to the death of the Insured, exercise the rights conferred upon the Owner1950 U.S. Tax Ct. LEXIS 239">*259 by the terms of this policy without the consent of the Insured or any special beneficiary.

In 1944 the petitioner felt that he could no longer afford to continue paying premiums in the full amounts required to carry the policies previously described. He felt that he was able to keep up the payment of premiums on the insurance in reduced amounts. Donald M. 14 T.C. 523">*531 Munn, who handled the insurance problems of petitioner, worked out a plan which was approved by petitioner for continuing the above insurance along that line. By this plan the amount of insurance for which each child was primary beneficiary was to be reduced to approximately $ 75,000. The values in the policies were such that a portion could then be taken as paid-up insurance. The balance of the insurance as reduced was to be carried on an annual premium basis, with petitioner continuing to pay the premiums. All of the children except Daphne D. were still minors.

A petition was filed in the surrogate's court by each minor child for the appointment of Sarah K. Skouras, the mother, as guardian. The stated purpose was to have someone legally empowered to act for the minors to the end that the required consents for the1950 U.S. Tax Ct. LEXIS 239">*260 changing of the policies could be executed by and on behalf of the five children. All of the policies except Mutual Life Insurance Co. of New York policies Nos. 4,893,050L and 4,893,051L were changed. Those two policies were continued on an annual premium basis as they were. The petitioner executed a waiver of service of the petition and a consent to the entry of a decree appointing Sarah K. Skouras as guardian. The factual background for the petition covering the policies, their assignments by petitioner to his children, the purpose sought to be accomplished by the original assignments, the necessity for the revisions, the need for the appointment of a guardian for the minor children, the action to be taken after such appointment, and the results to be accomplished were set forth in an affidavit by Munn. A supporting affidavit of Sarah K. Skouras was also attached to the petitions. Her affidavit, in the main, merely recited that her husband, the petitioner, did not feel that he was able to carry the policies as they were then set up and that the proposed change was accordingly necessary, and, further, that she had read the affidavit of Munn and approved his statements therein. 1950 U.S. Tax Ct. LEXIS 239">*261 Munn in his affidavit expressed the view that any change in the policies which could be effected by the owners could be made only by the joint action of all five owners and that Daphne D., being the only adult child, the appointment of a guardian for the other children was essential. On the basis of the petitions and the supporting papers, the court entered its order in the petition of each minor child naming Sarah K. Skouras, the mother, as general guardian, with limited powers and authority to make the elections and give the consents on behalf of the minors for the purpose of making the proposed changes in the insurance policies on the life of petitioner "owned by the said minor and the other children of the said Spyros K. Skouras and in which policies the said minor is either a primary or secondary beneficiary."

14 T.C. 523">*532 During 1944, 1945, and 1946 the petitioner paid premiums on the following policies as indicated:

1950 U.S. Tax Ct. LEXIS 239">*262 In determining the deficiencies involved herein the respondent determined that the total premiums paid by the petitioner on the policies heretofore set forth amounted to $ 8,427.88, $ 6,529.86, and $ 6,447.69 for 1944, 1945, and 1946, respectively. He further determined that such amounts constituted gifts of future interests with respect to which no exclusions were allowable in determining the petitioner's gift tax liability for the respective years.

OPINION.

The parties are agreed that the premiums paid by petitioner on the policies herein during the taxable years constituted gifts by him to his children in those years. The only question in dispute is whether the gifts were gifts of future interests within the meaning of the statute so as to deprive the petitioner of the statutory exclusions provided by section 1003 (b) (3) of the Internal Revenue Code. ¹

1950 U.S. Tax Ct. LEXIS 239">*263 It is the position of the respondent that under the doctrine of Ryerson v. United States, 312 U.S. 405">312 U.S. 405, the interests of the donees, petitioner's children, were future interests within the meaning of the statute and accordingly no statutory exclusions on the gifts are allowable. It is the claim of the petitioner that under the assignments herein the children became full and complete joint owners of the insurance policies and that the general rules of law applicable to any property wholly and directly owned by two or more persons as joint tenants is applicable; that in the case of such joint tenancy, each person has a present right to sever the joint tenancy at will and to take, consume, pursue, or use in any manner satisfactory to himself his pro rata share of such property; and that such present and existing 14 T.C. 523">*533 rights in and to the property is a present and not a future interest in the property within the meaning of the above statutory provisions.

It is our conclusion that the position of the petitioner is not well taken, for where the use, possession, or enjoyment of the donee is postponed to the happening of future uncertain events the1950 U.S. Tax Ct. LEXIS 239">*264 interest of the donee is a future interest within the meaning of the statute. United States v. Pelzer, 312 U.S. 399">312 U.S. 399.

We do not have here the simple case of property held in joint tenancy such as petitioner uses as his basis for comparison. The property involved consisted of contracts of insurance on petitioner's life. Normally a life insurance contract affects three parties -- the insured, the insurance company, and the beneficiary. The insured has rights, but he also has liabilities. He may retain and hold certain privileges, but there are usually offsetting obligations. As a general proposition, a named beneficiary has a vested right and, unless as a part of the contract itself the right to change the beneficiary has been reserved, it is a right of which he can not be divested without his consent. Where the right to change a beneficiary has been reserved, the rights of the beneficiary are vested conditionally or rather are vested subject to the right of the insured to divest them.

In the instant case, the record clearly shows that the steps taken by petitioner were taken advisedly. His first step was to divide the insurance coverage into1950 U.S. Tax Ct. LEXIS 239">*265 five equal parts and to set over to each child as primary beneficiary, separate and apart from his or her brothers and sisters, one such part. His next step was to assign all of the rights and privileges retained by him in all of the policies to the children jointly, not individually. When, with care, he first designated each child as primary beneficiary of policies having an aggregate principal amount of $ 150,000 and prescribed the mode of settlement at his death and then made the assignments over of his reserved rights and privileges in and to the policies to his five children jointly, he knew and intended that the settlement of the policies would be made according to the plans set up unless at some future time the children by joint action made a change of beneficiaries or prescribed some other plan of settlement. If he had been desirous of or had intended placing all of the incidents of ownership to one-fifth of the aggregate principal amount of all policies in the absolute control of each child separately as petitioner contends, the simple method would have been to have made the assignment to each child of all his rights and incidents of ownership in the policies of which 1950 U.S. Tax Ct. LEXIS 239">*266 each such child was the primary beneficiary. That he had no such plan or intention was further shown in the guardianship proceedings in 1944, when it was found to be expedient and desirable to have the face amount of the policies reduced and to take paid-up policies in part so that the annual premium payments on the remaining policies would be less burdensome to him. 14 T.C. 523">*534 Supporting the guardianship petition, Munn, who had been adviser to petitioner and who presumed to speak for him and who had apparently worked out and devised the whole program, plainly and definitely stated that the program had been designed to give to the children, not individually and separately, but jointly, the powers and privileges which petitioner had assigned. In its action the court acted on the representation that the changes desired, or to put it differently, the exercise of the rights of ownership over the policies, could be taken only by the joint action of all of the children. It thus appears that the petitioner, by his act in designating the beneficiaries as he did and then making the assignments to his five children jointly, had postponed the possession and enjoyment of the rights and interests1950 U.S. Tax Ct. LEXIS 239">*267 in and to the policies or the proceeds thereof until his death or until such time as the children, acting jointly, might change or negative the action he had thus taken.

While, as the petitioner points out, there was not a grant to trust as in the Ryerson case, nevertheless, the effect of the joint assignments was in substance the same as the grant to trust in that case. The "use and enjoyment of any part" of the policies and property interests represented thereby were postponed to the happening of future and uncertain events. The interests conveyed were accordingly future interests within the meaning of the statute and, since the payment of the premiums in the taxable years had no effect other than that of preserving, maintaining, and building up the policies which had been so assigned, the payment of the cash premiums likewise constituted gifts of future interests. 312 U.S. 405">Ryerson v. United States, supra, and 312 U.S. 399">United States v. Pelzer, supra.The action of the respondent in denying the statutory exclusions with respect to each of the gifts in question is accordingly substained.

Decision will be entered for the 1950 U.S. Tax Ct. LEXIS 239">*268 respondent.