Estate of Ann R. Chancellor v. Commissioner (U.S. Tax Court)

Decedent’s husband, who predeceased her in 1989, left decedent with most of the estate, except for the property placed in the Lester M. Chancellor Unified Credit Trust. The trust was to apportion trust income among the descendent as well as the couple’s children and grandchildren ‘in accordance with their respective needs’. Upon death of the decedent, the estate tax return showed a total gross estate of $1.3 Million, an amount which excluded the value of the trust, which was valued at the time at $1.2 Million. The court determined that since the beneficiaries of the trust include not only the decedent but also the children and grandchildren and that the co-trustees were authorized to invade trust corpus only to make ‘necessary’ support related expenditures for the beneficiaries, the limitations meet the exceptions of section 2041 (b) (1) (A) and thus, the decedent’s estate should not include the value of the trust in question.