In the Hertz v. Woodman case of 1909, the U.S Supreme Court ruled on a dispute involving inheritance tax law. The respondent, Mrs. Woodman's husband had established a trust for her benefit before his death and she was receiving income from it at the time of her own death. The question in this case was whether or not this trust fund should be considered part of Mrs. Woodman's estate for taxation purposes under an act passed by Congress in 1898 which imposed taxes upon legacies and distributive shares passing from deceased persons to others. The court held that since Mr.Woodman’s will did not give his wife any power over disposition or control beyond receipt of income during her life, the property could not be regarded as having passed from her at death within meaning of Inheritance Tax Law; hence no tax could be levied against it by virtue thereof. This decision clarified how trusts are treated with respect to federal inheritance taxes - they are only taxable if they pass directly from decedent to beneficiary after their demise.

In the dissenting opinion for Hertz, Collector v. Woodman, Justice Holmes disagreed with the majority's interpretation of the War Revenue Act of 1898. He argued that a life insurance policy should not be considered as property transferred at death and thus subject to estate tax under this act. Instead, he believed it was more akin to a contract where payment is made upon an event (in this case, death), rather than a transfer of wealth or property from one person to another at their passing. Therefore, according to his interpretation of the law and its intent, such policies should not fall within its purview and be taxed accordingly.