Estate of Vissering v. Commissioner
990 F.2d 578 (1993)
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Rule of Law:
A trustee's power to invade a trust's principal for their own "comfort" is limited by an ascertainable standard, and thus is not a general power of appointment under I.R.C. § 2041, when the trust instrument qualifies that power with limiting language such as "required" and "continued," which relates the invasion to the beneficiary's accustomed standard of living.
Facts:
- Norman H. Vissering's mother created a trust in Florida which became irrevocable upon her death in 1965.
- The trust named her son, Vissering, and a bank as co-trustees.
- Under the trust terms, Vissering was entitled to all the income from the trust during his lifetime.
- The trust agreement authorized the trustees to pay amounts from the principal for Vissering's benefit if 'required for the continued comfort, support, maintenance, or education' of Vissering.
- Vissering developed Alzheimer’s disease and entered a nursing home in 1984.
- Two months before his death, a New Mexico court adjudicated Vissering as incapacitated, but he was never formally removed as a co-trustee.
- Vissering died in 1988.
Procedural Posture:
- The Internal Revenue Service (IRS) determined a deficiency in the federal estate tax for the estate of Norman H. Vissering.
- The Estate of Vissering (petitioner) challenged the deficiency in the United States Tax Court.
- The Tax Court ruled in favor of the IRS (respondent), holding that the trust language created a general power of appointment.
- The Estate of Vissering (appellant) appealed the Tax Court's decision to the U.S. Court of Appeals for the Tenth Circuit.
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Issue:
Does a trustee's power to invade a trust principal for amounts 'required for the continued comfort, support, maintenance, or education' of the trustee constitute a general power of appointment under I.R.C. § 2041, or is it limited by an ascertainable standard?
Opinions:
Majority - Logan, Circuit Judge
No, the trustee's power is limited by an ascertainable standard and does not constitute a general power of appointment. Although a power to invade a trust's principal for a beneficiary's 'comfort,' without further qualification, would typically create a general power of appointment, the modifying language in this trust instrument imposes a legally enforceable limit. The term 'required' indicates that an invasion must be a necessity, not merely a desire. The term 'continued' implies that the purpose of the invasion is to maintain the beneficiary in his accustomed manner of living, not to significantly elevate it. This language creates a standard that is essentially the same as those approved in Treasury Regulations, such as 'support in reasonable comfort' or 'support in his accustomed manner of living.' Therefore, the co-trustee would have been obligated to refuse, and remainder beneficiaries could have successfully sued to prevent, any expenditure that exceeded what was reasonably necessary to maintain Vissering's established lifestyle.
Analysis:
This decision provides crucial guidance on the interpretation of the 'ascertainable standard' exception for powers of appointment under federal estate tax law. It demonstrates that the word 'comfort,' often considered too subjective to create an ascertainable standard, can be sufficiently limited by other qualifying language in the trust instrument. The ruling emphasizes a contextual analysis of trust language over a rigid interpretation of single words, offering a pathway for estate planners to draft flexible trusts without inadvertently creating a taxable general power of appointment. This precedent reinforces the importance of precise drafting and clarifies that words like 'required' and 'continued' can effectively tie a trustee's discretion to an objective, enforceable standard based on the beneficiary's lifestyle.
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