TAXATION-FEDERAL ESTATE TAX-TRANSFER IN CONTEMPLATION OF DEATH-RELEASE OF A POWER TO AMEND

Authors

Milton D. Solomon S.Ed., University of Michigan Law SchoolFollow

Abstract

Decedent, an attorney, in 1925, at the age of sixty-nine, established two spendthrift trusts-one for his daughter and one for his son. In 1934, he added securities to these trusts. Gift taxes were paid on these transfers. These gifts were made to support decedent's children and grandchildren and were intended to be free of all claims, tax or otherwise. Decedent retained a power to amend these trusts with the consent of the trustee and beneficiary but he believed, at the time, that the trust property would not be included in his gross estate for federal estate tax purposes. In 1937, he was advised that these gifts remained a part of his gross estate for estate tax purposes. He then renounced his power to amend the trusts. Decedent died in 1938 at the age of eighty-two. The release of the power to amend the trusts was treated by the commissioner as ground for including the corpus of the trusts within decedent's gross estate on the theory that the release was a transfer made in contemplation of death under section 302 (d) (1, 3) of the Revenue Act of 1926 as amended by the Revenue Act of 1934, Section 401. The tax was paid and the executors brought this suit for refund. The district court gave judgment for the plaintiff and the court of appeals affirmed. Held: The release of the power to amend the trusts, made for the purpose of avoiding the estate tax, was not in "contemplation of death" so as to require inclusion of the trust property in decedent's gross estate. Affirmed. Allen, Collector of Internal Revenue v. Trust Company of Georgia, (U.S. 1946) 66 S. Ct. 389.

Recommended Citation

Milton D. Solomon S.Ed., TAXATION-FEDERAL ESTATE TAX-TRANSFER IN CONTEMPLATION OF DEATH-RELEASE OF A POWER TO AMEND, 44 Mich. L. Rev. 876 (1946).
Available at: https://repository.law.umich.edu/mlr/vol44/iss5/22