ESTATE OF McCUNE v. Commissioner

• Decision Date: 31 October 1984
• Docket Number: Docket No. 19287-82.
• Citation: 48 TCM (CCH) 1510,1984 TC Memo 580
• Parties: Estate of Emily L. McCune, Deceased, Curtiss S. McCune, Executor v. Commissioner.
• Court: U.S. Tax Court

48 TCM (CCH) 1510

1984 TC Memo 580

T.C. Memo. 1984-580. Estate of Emily L. McCune, Deceased, Curtiss S. McCune, Executor v. Commissioner.

Docket No. 19287-82.

United States Tax Court.

Filed October 31, 1984.

Frank J. Miller, for the petitioner. Joellyn R. Cattell, for the respondent.

Memorandum Opinion

FEATHERSTON, Judge:

Respondent determined a deficiency in petitioner's estate tax in the amount of $75,363.92. The only issue for decision is whether petitioner, the estate of Emily L. McCune, deceased, is entitled to a marital deduction under section 2056(a)¹ based on a bequest to decedent's surviving spouse.

All of the facts are stipulated.

Emily L. McCune (hereinafter decedent) died testate on January 19, 1980. Following a provision for the payment of her debts and funeral expenses, Item First of decedent's will bequeathed $25,000 to her daughter. Item Second provided as follows:

ITEM SECOND: All the rest, residue and remainder of my Estate, whatsoever and wheresoever Situate, I give, devise, and bequeath to my husband CURTISS SALISBURY McCUNE, with the understanding, that should he re-marry, whatever monies he has received from me shall be equally bestowed upon my daughter * * * and my four grand-daughters * * *.

In the final paragraph of the will, decedent's husband, Curtiss Salisbury McCune, was designated as executor of the will.

Relying upon Item Second of the will, petitioner claimed a marital deduction of $250,000 on its estate tax return. Sec. 2056(a). In the notice of deficiency, respondent reduced the marital deduction from $250,000 to $5,690, limiting the deduction to the value of jointly owned property, on the ground that —

the spouse's interest in the balance of the property will fail on the occurrence of his remarriage and therefore is a terminable interest under IRC section 2056(b)(1).

Section 2056(a) allows a deduction, subject to certain limitations, for the value of any interest in property which "passes or has passed from the decedent to his surviving spouse." This general marital deduction rule is qualified in several respects. One qualification is that no marital deduction will be accorded a "terminable interest." Sec. 2056(b)(1).² The definition of that term has been concisely stated in Allen v. United States 66-1 USTC ¶ 12,393, 359 F. 2d 151, 154 (2d Cir. 1966), as follows:

A terminable interest is defined, in general, as one which possesses the three characteristics found in sections 2056 (b)(1)(A) and (B). First, it must be an interest in property which will terminate upon the occurrence or non-occurence of an event or upon the lapse of time. Second, another interest in the same property must pass or have passed to someone other than the spouse from the decedent for less than an adequate consideration. And third, such other person must be able to possess or enjoy a part of such property upon the termination of the spouse's interest. With certain exceptions not relevant to this case, the interest bequeathed to a spouse qualifies for the marital deduction unless all three of these characteristics are present.

It is now well settled that the determination of whether an interest is terminable is to be judged in the light of events at the precise moment of the decedent's death. * * * Fn. ref. omitted.

See also sec. 20.2056(b)-1, Estate Tax Regs.

Petitioner contends that decedent made a gift to her husband under Item Second of her will in absolute terms, and that the langage which follows those terms — "with the understanding, that, should he re-marry, whatever monies he has received from me shall be equally bestowed upon my daughter * * * and my four granddaughters" — is precatory only. Petitioner argues that the language following the outright gift was "the expression of a wish or hope, communicated to the husband, that the husband bequeath the property to the daughter and granddaughters even though he remarries."

Respondent argues that decedent did not make an absolute gift to her husband because the clause introduced by the words "with the understanding" is "mandatory" and imposes a "condition subsequent" on the bequest to the husband. Respondent maintains that the will should be given effect as if the "with the understanding" clause read: "provided that" or "on the condition that." Respondent argues that it does not matter whether the language is interpreted —

as a testamentary bequest to the daughter and granddaughters, as a testamentary trust in favor of the daughter and granddaughters, as an agreement or contract by the husband to transfer the property to the daughter and granddaughters immediately upon his remarriage, or as an agreement or contract by the husband to bequeath the property to the daughter and granddaughters in his will.

Under any one of these interpretations, respondent argues, the gift is contingent and is, therefore, a terminable interest for which the estate is not entitled to a marital deduction.

The parties agree that this ambiguous instrument, which petitioner's counsel states was drafted by decedent herself, must be interpreted in accordance with Delaware law. Wilmington Trust Co.v. Wilmington Trust Co., 26 Del. Ch. 397, 24 A. 2d 309, 312 (1942); see Morgan v. Commissioner 40-1 USTC ¶ 9210, 309 U.S. 78, 80 (1940); Helvering v. Stuart 42-2 USTC ¶ 9750, 317 U.S. 154, 162 (1942). They also agree that the intent of the testatrix must be determined from the language used in the will.³ In cases of real doubt, however, consideration may be given to pertinent material facts and circumstances which throw light on the intended meaning of the language used. Bird v. Wilmington Soc. of Fine Arts, 28 Del. Ch. 449, 43 A. 2d 476, 484-485 (1945), affg. Wilmington Trust Co.v. Wilmington Soc. of Fine Arts, 27 Del. Ch. 243, 34 A. 2d 308, 312 (1943); Hall v. Crandall, 25 Del. Ch. 339, 20 A. 2d 545, 547 (1941); Maloney v. Johnson, 24 Del. Ch. 77, 5 A. 2d 660, 661 (1939).

In ascertaining decedent's intended meaning of the language of Item Second, it is pertinent that decedent's will shows that it was executed on May 17, 1973. The estate tax return discloses that decedent was born on October 8, 1909, and that she married her husband, who survived her, on November 7, 1931. Decedent was thus 64 years of age when she made her will, and at that time she and her husband had been married 42 years. This was hardly an "autumn marriage." Nonetheless, the "with the understanding" clause indicates that she recognized the possibility that her husband might remarry and bestow property he had received from her to a new wife. The issue turns on whether that clause, which appears to have been included in the will in recognition of that possibility, is mandatory or precatory. We conclude that the language is precatory and, thus, we hold for petitioner.

In the first clause of Item Second, decedent placed no restrictions on her husband's consumption of the property he received from her. The "give, devise, and bequeath to my husband" clause is unqualified and covers "All the rest, residue and remainder of my Estate." This was not a gift of money or income from property, but of the property itself. This portion of Item Second is not ambiguous; standing alone it was obviously sufficient to pass decedent's residuary estate to her husband. In other words, decedent's gift to her husband was absolute. In a long line of cases courts have recognized that:

Where there is an absolute gift of real or personal property, in order to qualify it or cut it down, the latter part of the will should show equally clear intention to do so by use of words definite in their meaning and by expressions which must be regarded as imperative.

Tillman v. Ogren, 227 N.Y. 495, 125 N.E. 821, 823-824 (1920); James v. James, 16 Del. Ch. 34, 139 A. 787, 788 (1927); Wilmington Trust Co.v. Pryor, 26 Del. Ch. 191, 25 A. 2d 685, 687 (1942); Craven v. Wilmington Teachers Ass'n., 29 Del. Ch. 180, 47 A. 2d 580, 583 (1946); Goldberger v. Goldberger, 34 Del. Ch. 237, 102 A. 2d 338, 340 (1954); cf. Kellmann v. United States 68-1 USTC ¶ 12,518, 286 F. Supp. 632, 634-635 (E.D. Mo. 1968). This test is not a rule of law but is designed to assist in determining the real intention and meaning of the will as a whole. We think the "with the understanding" clause is too ambiguous to meet the test. The clause does not show a clear intention to qualify decedent's absolute gift to her surviving husband. It is precatory only.

Although the language of any two wills is never exactly the same, the decided cases confirm that the "with the understanding" clause is precatory. Lewis v. Novello, 22 Del. Ch. 134, 194 A. 29 (1937), recognizes that the word "understanding" is highly ambiguous and holds it to be precatory in that case. The will there at issue provided (supra at 30):

To my brother, John Flinn, all my possessions, with the understanding that he will properly provide and care for my son Frank G. Maguire, who is at this time a patient in a Government Asylum.

Rejecting the contention that the provision limited or qualified the language of absolute gift to John Flinn and created a trust for the testatrix's son, the court stated (supra at 30-31):

If a gift be absolute, it requires language of a clear and decisive character to cut it down to a lesser estate. * * *

* * *

In the instant case, the language which is said to have an obligatory effect, was used in reference to the person of the devisee. It does not indicate that the property was to bear the burden of providing and caring for the son, as might be contended if there had been language to the effect that the property was given for the support and care of the son. The language is entirely consistent with the thought that the testatrix in expressing her "understanding" was simply revealing as a reason for the gift to her brother that she was confident he would see to it out of a sense of personal responsibility that the son was looked after and not be left without care and

...