with the directions to accumulate income which we are discussing, but it seems proper to refer to it in order to clearly point out it's non-application to the subject in hand. Accumulations in the Interest of Judicious Management 658. The doctrine under which an accumulation in the interest of judicious management is permitted, is to be confined to very narrow limits. The trustee must pay the charges on the trust, and he is not required to make advances out of his own pocket for such purpose. For reasons, therefore, of business convenience, he may consider each year's income as a whole, and retain such part thereof as may reasonably be expected to be necessary to meet impending charges. Any payment to the cestui que trust during the year is a payment on account, and no income can really be said to be due until an account for the year has been stated, and the balance actually due has been ascertained. If, at the end of the year, the trustee requires money for the next year, he may retain a balance for that purpose. The limits of this doctrine may be stated thus: he may retain income to meet impending regular charges against the trust but not to fulfill his ideas of what is to the interest of the cestui que trust, and any direction in the settlement of the trust requiring him to make any special accumulation will be void. So also, and it is conceived for like reasons, the income may be accumulated for the first year after the testator's death.3 1 The time of payment, whether yearly, quarterly, or monthly, may be regulated by the provisions of the trust. Where there is no such provision the usual custom is to pay quarterly, or as arranged between the trustee and the cestui que trust. Such direction, however, involves an accumulation pro tanto. For the case of a direction to pay the income annually, see Penrose's App., 102 Pa. 448 (1883). The validity of these directions has never been questioned in Pennsylvania, and it is not likely that any direction for the term of one year or less would be disturbed. See remarks of the auditor in the court below in Hibbs' Est., 143 Pa. 217 at 220 (1891); see this case stated §664, post. 2 This is the true explanation of Mitcheson's Est., 5 Pa. C. C. 99 (1888); same will as was before the court in 11 W. N. C. 547 (1882); Penrose, J., at 104, 105, said that the trustees could retain the surplus of $549.46, as that amount was necessary to carry out the legitimate purposes of the trust. It appears that the accountants claimed the balance for the expenses incident to the trust for the ensuing year. The remarks in the case were dicta, as no one entitled to the accumulations appeared before the court. 3 In Williamson's Est., 143 Pa. 150 (1891), the testator directed his executors, who were different from his trustees, to hand over the residue of his estate to his trustees, in trust, to accumulate the in Preliminary Discussion of the Misunderstanding of the Doctrine of Accumulations in the Interest of Judicious Management 4 661. The doctrine under which the trustee may accumulate income in the interest of judicious management has, it is apprehended, been misunderstood by the court and been carried beyond all proper bounds. The cases are as follows. McKee's Appeal 662. The first trace of this misunderstanding is to be found in McKee's Appeal.5 On the point of the accumulations, the court said, Gordon, J.," "But since his (testator's) death, there have been large accumulations arising from rents, issues and profits, accumulations which exceed the original estate and the necessities of the trust, and the serious question is, what disposition shall be made of them?" That is all there is in the case as to the doctrine. As the accumulations were all distributed, the remark as to the necessities of the trust was a dictum." come for ten years thereafter, and then to dispose thereof as therein provided, a direction admitted to be void. Upon the filing of the executors' account one year after his death, the balance of the income for the year in the hands of his executors was claimed by the trustees. The court below made an elaborate argument to show the distinction between principal and income, and that the income could not fall into the residuary estate, because if it did there would be an accumulation for one year, which was void, and therefore the income accumulated during the year should be paid to the next of kin. On appeal, the Supreme Court reversed and in an opinion by Mr. Justice Green, after considering all the provisions of the will, concluded with the remark, at p. 166: "That trustee never did and never could accumulate that portion of the income which accrued during the first year, and hence the statute of 1853 has not been, and cannot be transgressed, so far as that year's income is concerned." That point, however, was not before the court; the trustee had not attempted to accumulate income; it was simply asking to have the income accumulated during the first year awarded to it as directed by the testator. Mr. Gray, Rule Perp., 2 ed. (1906), §676a, calls attention to the cases arising in England of a direction that personal property and its accumulated income shall be invested in land or that land and the accumulated rents shall be sold and the proceeds invested in personalty; and says that in such case the courts allow the accumulation for one year. He further says, "Whether this rule be one of construction or convenience so-called, may be doubtful, but it is well settled and prevents such provisions raising any question of remoteness." Such trusts are not of frequent occurrence in Pennsylvania. The law is probably the same. * Discussed $658, ante. Eberly's Appeal 663. In Eberly's Appeals the testator gave the residue of his estate in trust to pay an annuity, provide for the education of his son during minority, and, upon the son's reaching majority, to pay him $500, and a like sum annually until the son was twenty-five years old, when the corpus should be paid to him if the trustee saw fit or if, upon proof and order of the Orphans' Court of Cumberland County, it should appear that he was a sober and well-doing man. If it should not be paid to the son, it was to continue to be held in trust, and the income of $500 per annum paid him for life, and at his death the principal to his heirs. The son, on reaching twenty-three, applied to have the accumulations, which it appeared were in the hands of the trustee, paid to him. There seemed to be evidence that the son was not a fit person to take charge of the estate. It also appeared that the accumulations had been attached by various creditors of the son, and that the annuitant was dead. The court in an opinion by Sterrett, J., said that the accumulation of $5,000 in the hands of the trustee was sonable and necessary to the proper administration of the trust in order to keep up the annuity, entirely overlooking the fact that the annuitant was dead. The learned judge was also influenced by the consideration that the subject matter was real estate, as he said that the accumulated income might be necessary to provide for a failure of crops or the destruction of the farm buildings by fire. How the use of the income for the latter purpose could be anything but an accumulation, it is difficult to see. The accumulation was of the income of a residue, and payable to the next of kin or heir at law. It appeared that the son was the only issue of the deceased, and would, therefore, be entitled to the accumulations as heir at law. It is not clear how the son claimed and it is, therefore, difficult to determine the exact value of the case as a precedent. Hibbs' Estate 664. In Hibbs' Estate" the auditor in the court below found as a fact that it was not necessary to keep any sum on hand for the purposes of the trust, the subject matter being 8 110 Pa. 95 (1885). 143 Pa. 217 (1891). See this case stated §674, post. 10 investments in mortgages and judgment liens, and decided that the accumulations of income amounting to $5,000 should be paid to the son. On appeal, the Supreme Court reversed the decree of the Orphans' Court affirming the auditor's report, Sterrett, J., saying that where there were two classes of accumulations, one where the manifest purpose of the testator was to add the accumulations permanently to the estate, which was void, and the other where the accumulations were intended to be temporary and in the interest of judicious management, which was valid; that the record did not show that the amount set apart, $5,000, was unreasonable; and that as the accumulation was temporary, and in the interest of judicious management, it was valid. The court ignored the fact found in the court below, that there was no necessity for the contingent fund, and that the will directed the income to be invested for the benefit of the son, and made no reference whatever to the purpose of judicious management. The action of the court in reversing the question of fact found by the auditor, in the absence of clear error, is open to serious objection."1 McIntosh's Estate 665. In McIntosh's Estate1 the testator gave one-half of the rents of certain real estate in trust for A., "and if he continue sober and industrious, the rents shall be given him as before, but if he be not sober and industrious, said rents shall not be given to him but shall remain and accumulate in the hands of the above-named trustees." There was no disposition of the accumulations, except incidentally as implied in the disposition of the principal. The court below 2 said, "The accumulations, if any, will be simply temporary and in the interest of judicious management. Hibbs' Estate, 143 Pa. 217." The question was not argued, and from the rather obscure report of the case it does not appear what exceptions 10 The report of the auditor on p. 220 is a very clear statement of the correct principle of law. 11 Contrast language of Gordon, J., in Schwartz's App., 119 Pa. 337 at 349 (1888): "The principle on which the court based its order is undoubtedly sound, and whilst it is true that these accumulations might have been allowed to re main in the hands of the executor as a 1 158 Pa. 528 (1893). were carried to the 3 Supreme Court. It further appears from auditing judge of the questions involved, that no question as to the accumulation was before the court. the statement by the Howell's Estate 666. In Howell's Estate the annuitant was dead, and it appeared that there was income in the hands of the trustees arising out of the fund which had been set apart for the annuity under the terms of the will, and that the sole question before the court was as to the distribution of this sum. Any discussion, therefore, as to the propriety of the accumulations was out of place, being an opinion on what the court would have done had an application been made in the lifetime of the widow to have the accumulations stopped. King's Estate 667. In King's Estate the testator gave one-third part of the residue of his estate in trust for his son Alexander for life, the income to be paid him without liability for debts, and upon the son's death the principal to go to his children, the son to receive an income not exceeding $5,000 per annum, and any excess of that amount to be invested for the benefit and increase of the respective shares in the principal. By a codicil, the testator revoked the bequest to the son, and gave that interest to the wife and children of the son during the life of the son, in payments not to exceed $5,000 per annum. An account being filed, it appeared that there were accumulations of income over and above the amount directed to be 7 paid by the will. On the question of accumulations the court below, Hawkins, P. J., said, in an opinion which was affirmed on appeal by the Supreme Court, "The accumulations in this case are so largely in excess of the allowance fixed in the |