In the case of Greenough et al., Trustees, v. Tax Assessors of Newport et al., 1946, the U.S Supreme Court ruled that a trust fund established by a Rhode Island resident for his children and grandchildren was not subject to state inheritance tax. The court held that since the settlor retained no beneficial interest in or control over the trust property after its creation, it did not constitute part of his estate upon death and thus could not be taxed as such under Rhode Island law. This decision clarified how trusts are treated with regard to inheritance taxes and reinforced their use as an estate planning tool.

In the dissenting opinion for Greenough et al., Trustees, v. Tax Assessors of Newport et al., Justice Frankfurter disagreed with the majority's decision to exempt a trust fund from taxation. He argued that there was no legal basis for treating this particular trust differently from other trusts or property owners in Rhode Island. The fact that the income generated by this trust is used exclusively for educational purposes does not make it immune to state taxes, according to his interpretation of existing tax laws and previous court rulings on similar cases. Furthermore, he pointed out inconsistencies in how different types of properties are taxed within the state and suggested that these discrepancies should be addressed through legislative action rather than judicial decisions.