## Facts

- Albert B. Farkas purchased shares of a mutual fund on four occasions between 1948 and 1950 and directed that each stock issuance be registered in his name “as trustee for Richard J. Williams.”
- Contemporaneously with each purchase, Farkas executed a written “Declaration of Trust” stating he held the stock as trustee for Williams as beneficiary.
- The declarations provided that Farkas would receive all cash dividends for life and, as trustee, could vote, sell, redeem, exchange, or otherwise deal with the stock.
- Farkas reserved the power to revoke the trust or change the beneficiary by written notice to the issuing company and could retain proceeds from any sale.
- If Farkas died without revoking and Williams survived him, the stock (or proceeds) would become Williams’s property; if Williams predeceased Farkas, the trust would terminate and the property would revert to Farkas.
- After Farkas died intestate, the certificates were found in his safe-deposit box.
- Farkas’s co-administrators (his heirs at law) sued for a declaration that the instruments were invalid testamentary dispositions and that the stock belonged to the estate; the trial and intermediate appellate courts agreed.

## Issues

1. Whether the stock registrations and written declarations created valid inter vivos trusts or were testamentary dispositions ineffective without compliance with will-execution formalities.
2. Whether a beneficiary receives a sufficient present interest where the settlor-trustee retains lifetime income, broad management powers, and an unrestricted power to revoke or change beneficiaries.

## Decision

- The Illinois Supreme Court reversed and remanded.
- The Court held the transactions created valid inter vivos trusts rather than invalid testamentary instruments.
- The Court concluded the beneficiary received a present equitable interest in the stock, though defeasible and subject to divestment by revocation or failure to survive the settlor.
- The Court treated the settlor’s retained powers—including revocation and broad control over the stock—as consistent with a revocable living trust and not dispositive of testamentary character.

## Legal Principles

- An instrument is testamentary only if the settlor retains so much control that the beneficiary receives no present interest during the settlor’s life; postponement of enjoyment until death does not alone make a transfer testamentary.
- A trust is not rendered testamentary merely because the settlor reserves (i) lifetime income, (ii) extensive powers of management and disposition, or (iii) a power to revoke or change beneficiaries.
- When property is titled and held “as trustee,” the settlor’s rights and powers are evaluated in a fiduciary capacity, and the beneficiary holds enforceable equitable rights during the settlor’s lifetime.
- A present equitable interest may exist even if it is contingent or defeasible and may be defeated by revocation or other stated conditions.

## Conclusion

The court upheld the validity of revocable inter vivos trusts created by stock registrations and written declarations, holding that retained control and deferred enjoyment do not make the arrangement testamentary when the beneficiary receives a presently existing, enforceable equitable interest.


Farkas v. Williams, 5 Ill. 2d 417, 125 N.E.2d 600 (Ill. 1955)