In the case of United States v. Security Trust & Savings Bank, Executor, et al., 1950, the U.S Supreme Court was tasked with determining whether a California state law that allowed for an executor to take commission on federal bonds included in an estate was valid or if it violated federal law. The court ruled unanimously that the California statute did not conflict with any provision of federal legislation and therefore could stand. This decision upheld the principle of states' rights by allowing individual states to enact laws regarding matters not specifically addressed by Congress without interference from Federal courts.

The dissenting opinion in the case of United States v. Security Trust & Savings Bank, Executor, et al., argued that the majority's decision to allow a tax deduction for estate taxes paid on life insurance proceeds was incorrect. The dissenters believed this interpretation contradicted both the language and intent of Congress when it enacted Section 812(b) of the Internal Revenue Code. They pointed out that under normal circumstances, life insurance proceeds are not subject to income or estate tax because they are considered death benefits rather than property transfers. However, if an individual has incidents of ownership over their policy at time of death (such as being able to change beneficiaries), then those proceeds become part of their gross estate and can be taxed accordingly. In this particular case, since there were no such incidents present with respect to Mr.Hornby’s policies,the dissenters felt his executor should not have been allowed a deduction for federal estate taxes paid on them.They also expressed concern about potential abuse by wealthy individuals who might use similar arrangements solely as tax avoidance strategies.