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### STATE OF MICHIGAN

COURT OF APPEALS

In re JOSEPH W. BROOKS III TRUST NUMBER
ONE.

CHARLES FRANKLIN WALKER,

Petitioner-Appellant, UNPUBLISHED October 23, 2014

v No. 314619 Ingham Probate Court JOSEPH W. BROOKS III TRUSTEE, LC No. 10-001791-TV

Respondent-Appellee.

Before: H OEKSTRA

, P.J., and S AWYER and G LEICHER

, JJ.

G LEICHER

, J. ( concurring ).

I concur with the result reached by the majo rity. I write separately to offer another reason for reversing the probate court.

Respondent Joseph W. Brooks III admits th at the Joseph W. Brooks III Trust Number One was created as an estate pla nning device intended to avoid pa yment of certain federal estate taxes. Respondent’s brief on appeal states: “T he purpose of the Bypass Trust was to utilize and preserve Appellee’s federal estate tax exemption am ount for the benefit of hi s surviving spouse.”

The Trust provision limiting expenditures during Edwina’s lifetime for her “health, support or maintenance” stems from federal tax law a nd must be interpreted in that context. In a discretionary trust such as this one, the Intern al Revenue Code (IRC) permits invasion of the trust corpus only if limited by “an ascertainable standard relating to the health, education, support, or maintenance” of the decedent. 26 USC 2041(b)(1)(A). The corresponding federal regulation provides:

Powers limited by an ascertainable standard . A power to consume, invade, or appropriate income or corpus, or both, for the benefit of the decedent which is limited by an ascertainable standard relati ng to the health, education, support, or maintenance of the decedent is, by r eason of [26 USC 2041(b)(1)(A),] not a general power of appointment. A power is limited by such a standa rd if the extent of the holder’s duty to exer cise and not to exercise the power is reasonably-2- measurable in terms of his needs for health, education, or support (or any combination of them). As used in th is subparagraph, the words “support” and “maintenance” are synonymous and their meaning is not limited to the bare
necessities of life. A power to use property for the comfort, welfare, or happiness of the holder of the power is not limited by the requisite standard. Examples of powers which are limited by the requisite st andard are powers exercisable for the holder’s “support,” “support in reasonable comfort,” “maintenance in health and reasonable comfort,” “support in his accu stomed manner of living,” “education, including college and professional educa tion,” “health,” and “medical, dental, hospital and nursing expenses and expens es of invalidism.” In determining whether a power is limited by an ascertainab le standard, it is immaterial whether the beneficiary is required to exhaust hi s other income before the power can be exercised. [26 CFR 20.2041-1( c)(2) (emphasis added).]

Respondent’s power to make distributions was limited by the language of the trust and the underlying tax law requirement of the “ascerta inable standard.” The trust’s drafters recognized that to accomplish the estate plan ning goal of sheltering income from federal taxation, the trust had to establis h an “ascertainable standard” for the principal distributions. Respondent was not at liberty to permit expenditures that potentially ran afoul of this carefully crafted language and, th ereby, the IRC. See Hemphill v Shore , 295 Kan 1110, 119-1121; 289 P3d 1173 (2012) (collecting cases); Forsee v United States , 76 F Supp 2d 1135 (D Kansas, 1999). His failure to abide by the trust provisi ons constituted a breach of his fiduciary duty.

/s/ Elizabeth L. Gleicher