Estate of Greve v. Commissioner, Dkt. No. 16020-02.
| Decision Date | 05 April 2004 |
| Docket Number | Dkt. No. 16020-02. |
| Citation | 87 T.C.M. 1201 |
| Parties | Estate of Sarah W. Greve, Deceased, Charles E. Greve & David R. Greve, Co-Executors, v. Commissioner. |
| Court | U.S. Tax Court |
Louis R. Salamon, for petitioner.
Julia L. Wahl, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined a deficiency of $163,677.55 in Federal estate tax (estate tax) with respect to the estate (estate) of Sarah W. Greve (decedent). The issues for decision are:
(1) Is certain property with respect to which decedent had a power of appointment at the time of her death includible in decedent's gross estate under section 2041(a)(1)?1 We hold that it is.
(2) Is certain property with respect to which decedent had a power of appointment at the time of her death includible in decedent's gross estate under section 2041(a)(2)? We hold that it is.
Most of the facts have been stipulated and are so found.
Decedent was a resident of Pennsylvania at the time of her death on December 27, 1998.
At the time the petition was filed, Charles E. Greve and David R. Greve, decedent's sons and the co-executors (executors) of the estate, had a mailing address in Pittsburgh, Pennsylvania.
On July 29, 1933, Sarah S. Wright (Ms. Wright), decedent's grandmother, executed her last will and testament (Ms. Wright's will) under which Ms. Wright, inter alia, created a testamentary trust (testamentary trust). Ms. Wright's will provided in pertinent part as follows:
SECOND: I give and bequeath all of the bonds and all of the corporate stocks which I may own at the time of my death to THE UNION TRUST COMPANY OF PITTSBURGH,2 IN TRUST, NEVERTHELESS, for the following uses and purposes to-wit:
To hold, manage, invest, re-invest, and keep invested the same in such securities as the Trustee in its sole discretion may deem fit without being limited to those investments known as Trust Investments under the Laws of the Commonwealth of Pennsylvania, and less the expenses incident to the management of the trust and a reasonable compensation to the Trustee, to pay over the net income in equal shares to my children, JOHN, HESTER, CLARA and ROBERT for and during the full term of their natural lives. Upon the death of any of my said children leaving issue, him or her surviving, the income arising from that portion of th[e] [p]rincipal to which said child [was] entitled to receive the income at the time of his or her death shall be paid over equally among such surviving issue for and during the full term of their natural lives * * * [.] Upon the death of any issue of a deceased child of mine while such issue may be entitled to receive a portion of income herefrom, the principal of the fund represented by that portion of the income which such issue was receiving at the time of his or her death shall be paid over free and discharged of any trust to such persons and in such manner as he or she shall by his or her Last Will and Testament designate and appoint, and in the absence of such testamentary disposition it shall be paid over to those persons who are then his or her heirs under the then existing Intestate Laws of the Commonwealth of Pennsylvania.
On November 20, 1933, Ms. Wright died survived by four children, one of whom was Robert Wright (Mr. Wright), decedent's father. On November 6, 1974, Mr. Wright died survived by six children (collectively, Mr. Wright's children).3 Between the date of Ms. Wright's death and the date of Mr. Wright's death, Mr. Wright received a one-fourth share of the income from the testamentary trust. Between the date of Mr. Wright's death and the date of decedent's death on December 27, 1998, decedent received a one-sixth share of the income from that trust.
On May 11, 1976, Hester M. Wright (Hester Wright), one of decedent's aunts, executed a deed of trust (deed of trust) under which she created an inter vivos trust (inter vivos trust). The deed of trust provided in pertinent part as follows:
HESTER M. WRIGHT, of the City of Pittsburgh, Allegheny County, Pennsylvania, as the Settlor, and MELLON BANK, N.A., a national banking association authorized to engage in trust business in the Common wealth of Pennsylvania, as the Trustee, hereby agree as follows:
ONE: The Settlor hereby transfers and delivers to the Trustee * * * [certain property] together with all her interest therein. The Trustee shall hold said property, together with any additions thereto as hereinafter provided, as a Trust Estate, shall invest and reinvest the same and shall distribute the net income (hereinafter called "Income") and principal as set forth in the following provisions.
(A) During the Settlor's lifetime, the Trustee shall pay the Income quarter-annually to her or for her benefit and shall also pay to her such sums from principal as she may direct in writing * * *
(B) Upon the Settlor's death, the Trustee shall pay directly to the taxing authorities or through the personal representative of her estate all estate, inheritance and other taxes in the nature thereof * * *. The Trustee shall also pay to the Settlor's personal representative or shall expend directly, from assets other than the proceeds of insurance, such sums as said personal representative shall certify as necessary to supplement the Settlor's probate estate in order to pay debts, funeral expenses, legacies and administration expenses. Subject to such payment, the trust shall continue as follows:
(1) During the lifetime of the Settlor's sister, CLARA E. WRIGHT, if she survives [t]he Settlor, the Trustee shall pay the Income quarter-annually to her or for her benefit * * *
(2) Upon the death of the survivor of the Settlor and her said sister, the principal shall be divided into six equal shares for the Settlor's nieces and nephew, ELIZABETH WRIGHT ANDERSON, SARAH WRIGHT GREVE, ANN WRIGHT CURRAN, PATRICIA WRIGHT CALDWELL, ROBERT McELDOWNEY WRIGHT, JR., and NANCY ROBERTS WRIGHT, and each share shall be held as a separate trust. If any of them is not then living, his or her share shall be distributed as is hereinbelow provided.
(a) During the lifetime of each of them, the Trustee shall pay the Income from his or her trust quarter-annually to or for the benefit of said niece or nephew, and if the Trustee considers the Income to be insufficient, in view of other funds readily available for such purpose of which it has knowledg[e] to provide for the welfare and comfortable support of said niece or nephew and his or her family, including educational and funera[l] expenses, the Trustee is authorized in its discretion to use such sums from principal as it deems advisable therefor. In addition, the Trustee shall pay to said niece or nephew such sums from prin[cipal] as he or she may request in writing, not to exceed FIVE THOUSAND ($5,000) DOLLARS in any one calendar year4 on a noncumulative basi[s.]
On July 21, 1980, Hester Wright died. On a date not disclosed by the record on or after July 21, 1980, Clara E. Wright (Clara Wright), one of decedent's aunts, disclaimed her interest in the inter vivos trust.
On December 31, 1981, Mellon Bank, N.A., the trustee under the deed of trust, and Mr. Wright's children, who were Hester Wright's nieces and nephew, entered into an agreement to amend the inter vivos trust (agreement to amend the inter vivos trust). That agreement provided in pertinent part as follows:
WHEREAS, Hester M. Wright, settlor under the Deed of Trust died July 21, 1980; and WHEREAS, Clara E. Wright, first life tenant under the Deed of Trust, disclaimed all of her interest as such life tenant, thereby accelerating the interests of the Beneficiaries hereto as successor life tenants; and
WHEREAS, the Beneficiaries desire that during the term of this Agreement the Trustee hold and administer the entire trust estate as one fund, rather than dividing the same into six separately held and administered trust funds, one for each Beneficiary.
NOW, THEREFORE, the parties, intending to be legally bound hereby, agree as follows:
1. Notwithstanding the provisions of Article ONE (B)(2) that, on the death of the Settlor and her sister, the principal of the trust estate shall be divided into six equal separate trusts, the Trustee shall during the continuance of this Agreement hold, invest and reinvest and otherwise administer the trust estate as one fund, distributing the net income in equal shares directly to the six Beneficiaries and not through the separate trusts.
2. Notwithstanding the provisions of Article ONE (B) (2) (a), the Trustee shall not, during the continuance of this Agreement, (i) make any distribution of principal to any Beneficiary pursuant to its discretionary powers in this subparagraph or (ii) make any distribution of principal to any Beneficiary pursuant to such Beneficiary's power to request sums from principal not to exceed $5,000 in any one calendar year, except that at the request of the Attorney-in-Fact (hereinafter appointed), the Trustee shall make equal distributions to each Beneficiary of such sums from principal as shall not exceed $5,000 to each Beneficiary in any one calendar year.
3. By the execution of this Agreement, each Beneficiary hereby appoints ROBERT McE. WRIGHT, JR.5 (the Attorney-in-Fact) as her [sic] attorney-in-fact under the Deed of Trust and hereunder:
(a) to take any actions and make any decisions contemplated to be taken or made by the Beneficiaries and to communicate the same to the Trustee;
(b) to communicate to the Trustee the investment objectives of the Beneficiaries with respect to the investment of the principal of the trust fund;
(c) to request on behalf of the Beneficiaries equal distributions from principal not to exceed $5,000 per Beneficiary in any one calendar year, as contemplated in paragraph 2 hereof; and
(d) generally to make representations, give consents and act on her [sic] behalf in all dealings with the Trustee under the Deed of Trust and hereunder.
Each...
To continue reading
Request your trial