Estate of Vissering v. Commissioner
990 F.2d 578 (1993)

  • Vissering died and left a testamentary trust. The trust appointed her son, Norman and a bank as co-trustees. Norman was to receive income for life from the trust (aka a life income trust), and upon his death, the money would pass to his two children.
    • In addition to getting income from the trust, the trust agreement also gave the trustee the authorization to use the trust principle to pay for Norman’s required support, maintenance, and education.
      • That’s known as a power of invasion.
      • So, in a way, Norman had the power to appoint the money to either himself or his children. That could be construed as a general power of appointment.
  • Norman died. The IRS stepped in and said that since Norman had a general power of appointment, the assets in the trust were considered his property and his estate would have to pay estate taxes.
    • Under the Internal Revenue Code § 2041, a person has general power of appointment if they posses at the time of death a power over assets that permits them to benefit themselves, their estate, their creditors, or creditors to their estate.
  • The Tax Court found that the trust assets should be taxed as part of Norman’s gross estate. Norman’s estate appealed.
  • The Federal Appellate Court reversed.
    • The Appellate Court focused on the word required and found that Norman didn’t have the power over the trust principle, because he couldn’t have taken what he didn’t require. Therefore he did not have a general power of appointment and the trust assets should not be considered to be part of his greater estate.