The opinion of the court was delivered by: DUMBAULD
It is agreed by both parties that the solution to the problems presented by the case at bar is to be found in the principles set forth in Strite v. McGinnes, 330 F.2d 234 (C.A. 3, 1964), and Security Peoples Trust Co. v. U.S., 238 F. Supp. 40 (W.D. Pa. 1965). But, understandably, they differ as to the conclusion which those principles require with respect to the facts of the case at bar.
The Government contends that decedent had a general power, taxable under 26 U.S.C. § 2041, to invade the corpus for her own benefit, unrestrained by "an ascertainable standard relating to the health, education, support or maintenance of the decedent."
We must therefore see what powers, under Pennsylvania law, her husband's will gave her; and then determine whether those powers qualify, under the federal definition, as a general power vel non.
The sedes materiae is item FOURTH (b) of the will,
which empowers testator's wife and a Pittsburgh trust company, as co-trustees,
"To make disbursements out of the principal of said Trust Fund to my said wife at such times and in such amounts as my said Trustees, in their discretion, shall deem necessary or expedient for her proper maintenance, support, medical care, hospitalization, or other expenses incidental to her comfort and well-being."
Item SECOND sets up a marital deduction trust, which, we are told, never took effect since the assets not passing under the will sufficed to exhaust the deduction. Appropriate language was used here to give the wife the income for life and power "to make disbursements out of the principal . . . to my said wife at such times and in such amounts as my said wife shall deem necessary and expedient" together with power to make testamentary disposition of the trust estate. In default thereof, the balance is to pass as part of testator's residuary estate under item FOURTH.
Under FOURTH (c), upon the wife's death, the balance of the residue is given to testator's son and daughter, to be paid in moieties upon attaining the age of thirty and thirty-five. FOURTH (d) provides for testator's grandchildren if his children die before distribution.
The object of Congress is to include in a decedent's estate, regardless of the gossamer distinctions which delight students of the writings of Lord St. Leonards and of John Chipman Gray about powers, special powers, powers in trust, and the like, all economic value which a decedent was in a position to divert to his own use if he desired.
The statutory definition was intended to embrace cases where the beneficiary's desires are controlling, and the trustee has no discretion to withhold. When the beneficiary may demand any amount ad libitum, and the trustee has no control over the matter, the property should be includible for estate tax purposes as part of the beneficiary's economic patrimony. 238 F. Supp. at 52.
However, when the widow was made a co-trustee, the Government may plausibly claim that she has a power which could under certain circumstances be used for her own benefit, and the mere fact that it is a power in trust is not sufficient to relieve her. 330 F.2d at 240. It is necessary to ascertain the scope, breadth, terms, and extent of the power in such a case, and to determine what, if any, limits there are to her ability to exercise the power in her own ...