happiness of the holder of the power (and) is not limited by the requisite standard.'
It is true that under Pennsylvania law the decedent's power could only be exercised in good faith and not simply to subvert the will's provision of an ultimate gift to nephews and nieces.
This requirement does not, however, restrict the life tenant's consumption of principal exclusively to support and maintenance. There is present here a power to consume which extends beyond the statutory exception of an ascertainable power for health, education, support or maintenance, even though it is confined within the outer reaches of the judicial limitation of good faith. The judicial requirement is that the estate must not be depleted 'for the mere purpose of defeating the testator's intention, or of preferring certain heirs or beneficiaries'; in all other cases the Pennsylvania courts will be slow 'to condemn expenditures as being contrary to the power lodged' in the holder of the power. Zumbro v. Zumbro, 69 Pa.Super. 600, 603 (1918). Manifestly, Pennsylvania's equitable doctrine does not automatically bring all powers to consume within the statutory exception from taxability under § 2041. Even if the judicial requirement of good faith in the exercise of a power to consume creates an 'ascertainable standard', in this case it would not be a standard which relates to the power holder's 'health, education, support or maintenance'. There are areas of expenditure beyond support and maintenance which do not cross the line of good faith. See Zumbro v. Zumbro, supra. This decedent clearly had such additional power. The enjoyment of that power, unexercised though it was, subjected the decedent's estate to taxation as the owner of a general power of appointment, one which did not fall within the exception delineated by § 2041(b)(1)(A).
The three Supreme Court decisions dealing with the deductibility of gifts over to charity under what is now § 2055 of the Revenue Code of 1954, shed some light on our problem. They are not, of course, decisive for us. For they deal with a greater requirement than an ascertainable standard. The standard there is one which is presently ascertainable in order that the value of the gift in remainder to the charity may presently be determined. In Ithaca Trust Co. v. United States, 279 U.S. 151, 49 S. Ct. 291, 73 L. Ed. 647 (1929), the life tenant's authority to invade principal to the extent 'that may be necessary to suitable maintain her in as much comfort as she now enjoys' was held to establish a suitably definite standard and the charitable deduction was permitted. On the other hand, in Merchants National Bank of Boston v. Commissioner of Internal Revenue, 320 U.S. 256, 263, 64 S. Ct. 108, 112, 88 L. Ed. 35 (1943), it was held that the power of invasion of principal was too broad and speculative to permit a deduction for the charitable bequest over, even though the widow's previous mode of life was modest and her own resources substantial. There the invasion of principal was authorized 'for the comfort, support, maintenance, and/or happiness' or the wife, 'and it is my wish and will that in the exercise of its discretion * * * my said trustee shall exercise its discretion with liberality to my said wife, and consider her welfare, comfort and happiness prior to claims of residuary beneficiaries under this trust.'
In Henslee v. Union Planters National Bank, 335 U.S. 595, 69 S. Ct. 290, 291, 93 L. Ed. 259 (1949), rehearing den. 336 U.S. 915, 69 S. Ct. 601, 93 L. Ed. 1078, the power was held too broad to permit a charitable deduction, where authority was given to invade principal for the 'pleasure, comfort and welfare of my mother', with another provision that 'The first object to be accomplished in the administration and management of my estate * * * is to take care of and provide for my mother in such manner as she may desire', with direction to the trustees to manage the estate 'primarily for this purpose'.
Our Brother Kraft recently reviewed the right to deduction for charitable remainders in In re Bartlett's Estate, 153 F.Supp. 674 (E.D.Pa.1957). There the trustees were authorized to invade principal to such extent as they in their sole discretion considered to be 'for the best interest' of the life tenant 'during illness or emergency of any kind.' Judge Kraft held that the extent of the power to invade principal was not measurable by any presently ascertainable standard.
These cases reveal the extent of variation in the language of powers to consume and the significance which must be attributed to the individual language used in arriving at the ultimate determination of the intention of the individual testator in the particular case.
Plaintiff relies heavily on the recent case of United States v. Powell, 307 F.2d 821 (10th Cir., 1962), where a refund of estate taxes was allowed. There the trustee was authorized to invade principal 'for the maintenance, welfare, comfort or happiness of the * * * wife, * * * or * * * daughters, * * * or for the education * * * of said daughters, * * * provided that the Trustee shall deem that the purpose for which the payments are to be made, justifies the reduction in the principal of the trust properties.' It was held that the trustees were limited by an external standard which the courts of Kansas (whose law was involved) would enforce in the exercise of their equity powers. The question there, however, was whether the power of the decedent as grantor-trustee to invade the trust corpus for the happiness of his wife and daughters constituted a power to alter and amend an inter vivos trust within the meaning of § 811(d)(2) of the Revenue Act of 1939. Moreover, the decision was rendered after a trial on the merits in which evidence was taken regarding the unusual circumstances of the parties, and after a finding of fact that the trust instrument did not intend the subjective pleasure or 'delight' of the wife or daughters, but merely distributions necessary to maintain them according to the conservative mode of life to which they had been accustomed. (See p. 823). This finding was in harmony with the provision that the trustee's power to invade principal was subject to the limitation that the trustee deemed the purpose one which justified reduction in principal and tied in with another provision, not expressly adverted to by the court, that in making investments the protection of principal was to be deemed more important than securing a higher rate of income.
AND NOW, March 28, 1963, the motion for summary judgment of Albert Strite and Commonwealth Trust Company of Pittsburgh, Executors of the Estate of Lillian D. Cree, deceased, plaintiffs, is denied; and the motion for summary judgment of Edgar A. McGinnes, District Director of Internal Revenue, defendant, is granted.