This appeal requires the determination of the question whether, upon the settlement of the-' estate of the testator, the loss to a trust.. fund invested under, the provisions of the will for the benefit of a - daughter of the.testator during life with remainder to her children, occasioned -by the wearing away of the premium on government bonds, is chargeable, to the income or to the principal. It was decided at Special-Term that the primary purpose of the testator in the creation of the trust, was not the preservation of- the corpus of the trust' fund for the benefit of the remaindermen, but its investmént for the benefit of the life beneficiary. - The fund .was invested as specifically authorized by the will in bonds of the United States,. to quote the language of the will, “ so as to constitute a separate and distinct estate for the benefit of each of iny daughters whom I ' ■ shall leave me surviving; and the interest, income and profit of such share shall be received by my executors and paid to the' daughters for whose benefit such investment shall be, made for, and during her/ natural life, for her owm Use/upon, her separate acknowledgment or-receipt therefor, free from-the-debts, control or interference of her ' husband ; and at her decease I give and bequeath such shareffo and' among her children, share and share alike, forever.” There is nothing in the record tending to indicate that at the time the will was executed.the daughter in question had any children.
The general rule is undoubted and was applied in the decision *413of New York Life Ins. & Trust Co. v. Baker (165 N. Y. 484), namely, that the capital of a trust should be kept intact and that to that end an adequate proportion of the annual income should be set apart to make good the amount paid in premiums in order to secure a proper investment, and that it is accordingly the duty of the trustee generally who has invested the funds in bonds purchased at a preminin to set apart out of the income payable to the life beneficiary a sufficient sum each year to form a sinking fund adequate to keep the principal of the trust unimpaired. This general rule, however, is qualified-by the equally undoubted general rule that the intention of the testator in" the creation of the trust must govern where such intention can be fairly deduced from the language employed or the surrounding circumstances. That qualifying rule was stated in the prevailing opinion in the Baker Case (supra, 488) to require the court to “ consider all the surrounding facts and circumstances attending the execution of the will, and if, as a result • of such examination, the conclusion should be reached that it was the intention of the testator that his daughter should have all the income arising from the investment, without allowing any abatement therefrom for the purpose of keeping intact the capital of the trust estate,.then such construction should be given to the will, notwithstanding its phraseology, in obedience to that rule of construction which, as has often been said by this court, makes the intention of the party the polar star of construction.” It does not appear' whether the testator in that case authorized investment in government bonds. Such investment, however, had been made by a preceding trustee. So far as the language of the will could throw any light upon the intention of the testator, it could only operate to suggest the conclusion that it was the intention of the testator that the principal should remain intact, and that the entire income was not necessarily to be paid to the' life tenant. The language of the will is-that after the death of the life tenant, “I give, devise and bequeath the whole of said share, with all arrearages of rucóme,” to the remaindermen. It seéms to me that under the authorities which must be regarded in connection with the Baker Case (supra), there is sufficient in the case at bar to justify the conclusion that what the testator had chiefly in mind was the creation of a trust primarily for the benefit of Ms daughter, and that she should be *414permitted the use oí • all the income' which it might earn, regardless of the fact, which must be assumed to have been known to the testator, that the authority conferred to invest in government bonds would necessarily cause the payment of a premium which in time would shrink away. This conclusion is deducible not only from the authority conferred to make investments of the character considered, but also from the express provision that the income received by the executors should be paid to the daughter for' whose benefit the testator declared in express terms that the investment should be made. I cannot see how the direction that the testator should pay over the income which he received without a suggestion that there might be any arrearage of income, can be distinguished in principle ‘ and effect from that employed by the testatrix in the case of McLouth v. Hunt (154 N. Y. 179). In that case it does not appear that there was either a-direction or authority. to invest in govern-, inent bonds, but securities of that character -were transmitted by the testatrix on her death and retained by the trustees, arid the direction was for payment to the life tenants “ annually from their arriving at age the full income,” and there was a suggestion, perhaps remote, that some of the income might remain unpaid at the end of the life period by the provision that the share to be - paid to the remaindermen should be “ together with any accumulation thereupon which may remain.” ¡Nevertheless, the court held that the direction for the payment of the “ full income ” ‘ was sufficient to indicate that the intention of the testatrix was that the life tenants should receive the whole annual interest on the bonds without diminution to meet depreciation in their market value through their approaching maturity. I think the view that there is no difference between a direction to pay over the full income and one to pay-over the income received, is strengthened somewhat by the decision in Matter of Hoyt (160 N. Y. 607.) There the direction was that the trustees should apply the income of the trust fund to the use of the testator’s daughter for and during her life “in the most bounteous and liberal manner as to expenditure, and so as to promote her convenience and comfort and gratify her reasonable desires.” It is to be observed that nothing was given to the daughter and nothing directed to be paid over to her. The trust, so far as made for her benefit, was limited to an application *415' for her use by the trustees of the income collected, and while the language employed was certainly broad enough to include it all, there was not only no'express direction to that effect, but the will further provided that at the end of the life estate it was the will of the testator as to the trust fund that “ the securities in which the same shall be invested, a/ndany swflus of income therefrom, if any, • which shall not have been applied to her use during her natural life ,shall, on the death of my said daughter, go and be distributed to and among my nephews and nieces.” Nevertheless, the court held that it was the intention of the testator, derived from the face of the will and the surrounding circumstances, to impose the loss of the premium upon the remaindermen.
It seems to me that very slight indications are sufficient in this class of cases to support the view that a testator ordinarily intends in the creation of a trust to benefit his children to the extent of the full income in the popular and ordinary sense where he directs or authorizes an investment in government bonds for the benefit of such children, especially where there is nothing tending to prove the existence of the remaindermen at the time of the making of the will. The fact must be ob’vious to a testator that the effect of such an investment is to give to the remaindermen the very highest security for the preservation of the principal of the fund, and the high character of the security necessarily tends to reduce the amount of the income which it pays. In such circumstances it is inequitable in a sense to further penalize the life tenant in existence by charging him with the payment of a premium for the benefit of remaindermen, possibly not in esse at the time of the creation of the trust.
I think the judgment can be, and should be, affirmed.
Hooker, Rich and Miller, JJ., concurred; Gaynor, J., read for reversal.