Court Opinion

ID: 770026
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:29:04+00
Date Added: 2024-06-11T17:55:47.467262
License: Public Domain

223 F.3d 694 (7th Cir. 2000)
Estate of Kenneth E. Starkey, Plaintiff-Appellant,v.United States of America, Defendant-Appellee.
No. 99-2357
In the  United States Court of Appeals  For the Seventh Circuit
Argued February 25, 2000
Decided August 17, 2000

Appeal from the United States District Court  for the Southern District of Indiana, Indianapolis Division.  No. 98 C 343--Larry J. McKinney, Judge.
Before Bauer, Ripple, and Manion, Circuit Judges.
Manion, Circuit Judge.

1
Kenneth Starkey was  apparently both financially successful and  generous. As he neared death, he made out his  last will and testament and set up a charitable  trust. These documents were drafted by his  attorney son, who had little or no experience  drafting such instruments, and the inartful  language caused problems. The Internal Revenue  Service concluded that the charitable trust Mr.  Starkey created did not qualify for a charitable  deduction. As a result, it denied the Estate a  charitable deduction worth well over one million  dollars. This resulted in an estate tax  deficiency of over one half million dollars. The  district court entered summary judgment in favor  of the IRS in the Estate's suit to recover a tax  refund. We hold that the documents, while  inartfully drafted, adequately demonstrate that  Mr. Starkey intended to create a charitable trust  that qualifies for the charitable deduction. We  therefore reverse the district court entry of  summary judgment in favor of the IRS.1

I.  Background

2
Kenneth Starkey's will created an educational  trust for his grandchildren and a charitable  trust. Section 5.02 of the will, the provision at  issue, instructed the trustees of the charitable  trust to distribute the income as follows

3
Half of the income from the trust is to go to  Lawndale Community Church in Chicago, Illinois  provided that Wayne Gordon is still the pastor of  it at the time of my death and that church will  receive this until the time that he is no longer  pastor. The Trustees are to manage the property  of the Trust for the benefit of this beneficiary,  missionaries preaching the Gospel of Christ, and  Milligan College.

4
(Emphasis added.) Section 5.03 authorized the  trustees to distribute the net income or corpus  of the trust to or for the benefit of a  beneficiary "at any time and from time to time as  the Trustees deem advisable." One week later, Mr.  Starkey executed the following codicil to his  will

5
My Last Will and Testament in Items IV and V,  created two trusts, the former an educational  trust and the latter a charitable trust. My Last  Will and Testament further provided that the  trusts would eventually end even though they were  educational and charitable in nature and  therefore not subject to the Rule against  Perpetuities twenty-one years after the death of  my last descendant alive at the time of my own  demise. My last Will and Testament did not  dispose of the residue of the trusts upon the  occurrence of the terminating events. I  specifically leave the residues of both trusts to  Milligan College.

6
Mr. Starkey died about three weeks later. The  Estate claimed a charitable deduction of about  $1.3 million on its federal estate tax return for  the amount Mr. Starkey had left to the charitable  trust and asked the IRS to determine that the  trust was exempt from taxation. The IRS declined  to do so. It noted various defects in the trust  instrument and issued a directive on how the  Estate might remedy them. See Estate of Starkey  v. United States, 58 F. Supp. 2d 939, 944 (S.D.  Ind. 1999).

7
In response, the Estate petitioned the state  probate court to amend Section 5.02 of the will  to allow the trustees, in their discretion, to  distribute trust income to eight specific  beneficiary groups (in effect replacing the  "missionaries" phrase in Section 5.02 with the  eight specific groups). The motion stated that  the groups "all fit the description of those  intended by the testator to benefit from this  trust, "[Lawndale Community Church], missionaries  preaching the Gospel of Christ, and Milligan  College." The Estate then filed an amended  petition stating that the part of Section 5.02  referring to "missionaries preaching the Gospel  of Christ" had "created confusion as to whether  the phrase . . . defines the beneficiary Lawndale  Community Church or whether missionaries  preaching the Gospel of Christ creates a  [separate] class of beneficiaries." The amended  petition no longer sought to substitute  specifically named groups for the "missionaries"  phrase; it retained the phrase and argued that it  was meant simply to describe the Lawndale  Community Church. The Estate requested the state  court to construe the phrase accordingly.

8
In the verified petition, Mr. Starkey's son  stated that the Lawndale Community Church was  well known for its missionary program and that,  in fact, its missionary program was the only such  program his father supported. The Estate also  offered the testimony of Dr. Lynn Franken, a  former associate dean of the College of Arts and  Sciences at Butler University, who received her  doctorate in English language and literature. Dr.  Franken is trained as a grammarian, someone who  studies the relationship between words and  meaning. She opined that the "missionaries"  phrase did not create a separate class of  beneficiaries, but merely described the Lawndale  Community Church. The probate court agreed and  construed the phrase "missionaries preaching the  Gospel of Christ" in Section 5.02 "as merely  descriptive of Lawndale Community Church" and "as  not creating a separate class of beneficiaries to  which the trustees could distribute income or  corpus."

9
The next day the IRS issued the Estate an estate  tax deficiency in the amount of $520,178 (plus  penalties). Despite the probate court's  construction of the will, the IRS maintained that  the will created three trust beneficiaries: the  Lawndale Community Church, a group of  missionaries, and Milligan College. The IRS thus  disallowed the Estate a charitable deduction  because the trust assets were split between  charitable and noncharitable beneficiaries  (concluding that while the Lawndale Community  Church and Milligan College were both qualified  charities, a group of unknown missionaries was  not) and the amount of the charitable bequest was  unascertainable.

10
Shortly thereafter, the Estate petitioned the  probate court to appoint a guardian ad litem to  represent the interests of the unknown  "missionaries preaching the Gospel of Christ" so  they could appeal the probate court's ruling that  they--whoever they might be--are not  beneficiaries. The Indiana Court of Appeals, in  an unpublished opinion, affirmed the ruling of  the probate court. It held that the  "missionaries" phrase "is most logically  interpreted in the context of the will as  standing in apposition to, and describing, the  Lawndale Community Church." The guardian sought  transfer to the Indiana Supreme Court, but it  declined to hear the case.

11
After the state court proceedings concluded, the  Estate paid the assessment and filed a refund  claim with the IRS. The Estate claimed that the  trust qualified for a charitable deduction  because in his will, as interpreted by the state  courts, Mr. Starkey had intended to create only  two beneficiaries (the Lawndale Community Church  and Milligan College), both of which are  charities. The IRS disallowed the refund claim,  and the Estate filed this action against the  United States under 28 U.S.C. sec. 1346(a)(1)  (allowing taxpayers to sue for relief from  erroneously assessed taxes).

12
Both sides moved for summary judgment. The  district court framed the issue as whether Mr.  Starkey had "intended that the portion of his  estate transferred to the [charitable] trust  would be used by the trustees exclusively for  charitable purposes, and whether the language he  used in the grant to the trust restricted the  trustees to such use . . . ." Estate of Starkey, 58 F. Supp. 2d at 955. The district court held  that the probate and appellate courts' decisions  did not bind it, and it was only required to give  them "proper" weight. The court determined that  "proper" was not much because the probate court  proceedings were not adversarial due to the  absence of the IRS. Id. at 951. Yet, although the  United States received notice of both the probate  and appellate proceedings, it did not contest  them or even appear. The district court disagreed  with the state courts' interpretation of the  "missionary" phrase and concluded that Mr.  Starkey more likely intended to benefit a group  of missionaries in addition to the church and the  college. Id. at 956-57. Because the trustees had  the discretion to distribute an undesignated  amount of trust corpus or income to a group of  "missionaries" potentially for personal purposes,  the court held that Mr. Starkey had failed to  create a charitable trust. Id. at 957-58. The  district court ruled that the Estate was not  entitled to a charitable deduction and entered  judgment for the Government. The Estate appeals  this ruling.

II.  Discussion

13
We review a grant of summary judgment de novo.  Miller v. American Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir. 2000). The IRS's calculation  of tax assessments is presumed to be correct, and  the taxpayer bears the burden of rebutting this  presumption and proving he is entitled to a  refund. United States v. Janis, 428 U.S. 433, 440  (1976).

A.  Relevant Tax Principles

14
The Internal Revenue Code imposes a tax "on the  transfer of the taxable estate of every decedent  who is a citizen or resident of the United  States." 26 U.S.C. sec. 2001(a). A decedent's  gross estate includes "the value at the time of  his death of all property, real or personal,  tangible or intangible, wherever situated", id.  at sec. 2031(a), and the value of any property  interests the decedent has transferred (including  by trust) within three years of his death (with  some exceptions). Id. at sec. 2035. A decedent's  taxable estate is determined by deducting from  the gross estate transfers for public, charitable  or religious uses (among other things). Id. at  sec. 2055(a). The entire amount transferred to a  trust for the benefit of a qualified charity is  deductible. Id. at sec. 2055(a)(3).2

15
To qualify for the charitable deduction, the  charitable bequest must be ascertainable at the  time of the transfer. Estate of Marine v.  Commissioner of Internal Revenue, 990 F.2d 136,  138 (4th Cir. 1993) ("Ascertainability at the  date of death of the amount going to charity is  the test."). If a will provides a trustee with  discretion to distribute trust assets to  charities and to individuals for their personal  use, the amount bequeathed to the charities might  not be ascertainable at the time of the transfer.  See Merchants Nat. Bank of Boston v. Commissioner  of Internal Revenue, 320 U.S. 256, 257-58, 263  (1943); see also Estate of Marine, 990 F.2d at  138-39. Such a trust, where the assets are  "split" between charitable and noncharitable  beneficiaries, is known as a "split-interest"  trust. See 26 U.S.C. sec. 2055(e)(2). With such a  trust, the estate can only take a charitable  deduction if the charitable interest of the trust  is presently ascertainable. See id. at sec.sec.  2055(e)(2)(A) & (B), 2055(e)(3); see also Treas.  Reg. sec. 20.2055-2(a) ("If a trust is created or  property is transferred for both a charitable and  a private purpose, deduction may be taken of the  value of the charitable beneficial interest only  insofar as that interest is presently  ascertainable, and hence severable from the  noncharitable interest.").

16
The will's codicil clearly states that Mr.  Starkey intended to set up a charitable trust,  and the IRS acknowledges that this was indeed his  intent. Its dispute with the Estate is over the  type of charitable trust he intended to create  and, more specifically, whom he intended to  benefit. The IRSacknowledges that if Mr. Starkey  intended the "missionaries" phrase to create two  beneficiaries (Lawndale Community Church and  Milligan College, both of which are qualified  charities), then the value of the charitable  interest would be ascertainable and hence  deductible. In that case, the trust would not be  a split-interest trust because both the trust  beneficiaries would be qualified charities and  the trust assets could only be used for their  benefit. As a result, the charitable portion of  the trust would be ascertainable (it would be the  entire value of the trust).3 If, however, Mr.  Starkey intended to benefit a group of  missionaries in addition to the church and the  college, the IRS argues that then Mr. Starkey  will have created a split-interest trust with  both charitable and noncharitable beneficiaries.  In that case the trust assets would not have been  specifically divided among the charitable and  noncharitable beneficiaries. Because the  charitable portion of the trust would thus not be  ascertainable, the Estate would not qualify for a  charitable deduction. See Treas. Reg. sec.  20.2055-2(a). We agree with the IRS that this is  the "ultimate issue" and thus must now determine  whom Mr. Starkey intended to assist financially  in preaching the Gospel of Christ, and if the  will sufficiently expresses his intent.

B.  Kenneth Starkey's Probable Intent

17
Both parties agree that Indiana law governs our  analysis of Mr. Starkey's will. Estate of Bowgren  v. Commissioner of Internal Revenue, 105 F.3d 1156, 1161 (7th Cir. 1997). In Indiana, the  primary goal in interpreting a will is to  determine and give effect to the testator's  intent as expressed in the will, and determining  this intent is a question of law. Gladden v.  Jolly, 655 N.E.2d 590, 592 (Ind. Ct. App. 1995);  Hershberger v. Luzader, 654 N.E.2d 841, 842 (Ind.  Ct. App. 1995). The Estate notes that the probate  court determined that Mr. Starkey intended the  charitable trust to have only two beneficiaries,  and it argues that the district court should have  adopted this determination of Mr. Starkey's  intent because it was affirmed by the Indiana  Court of Appeals, "the highest Indiana Court  which has addressed the issue."

18
The Supreme Court has made clear that we are not  bound by the probate court's decision: "where the  federal estate tax liability turns upon the  character of a property interest held and  transferred by the decedent under state law,  federal authorities are not bound by the  determination made of such property interests by  a state trial court." Commissioner of Internal  Revenue v. Estate of Bosch, 387 U.S. 456, 457  (1967). Intermediate state appellate decisions,  however, are presumed to be a correct indicator  (or "datum") of state law which we may not  disregard unless other decisions convince us  "that the highest court of the state would decide  otherwise." Id. at 465 (emphasis omitted). But  Bosch also tells us that if a state's supreme  court has not resolved an issue, we have to apply  what we "find to be the state law after giving  'proper regard' to relevant rulings of other  courts of the State." Id.

19
While the Supreme Court did not expand upon what  it meant by "proper regard," we note that the  Indiana Court of Appeals did not publish its  decision. As a result, it is questionable whether  we may simply presume that it correctly indicates  Indiana law--whether we may "properly regard" it  as precedent--even though it is, of course,  directly on point. See Ind. R. App. P. 15(A)(3)  (unpublished decisions shall not "be regarded as  precedent nor cited before any court except for  the purpose of establishing the defense of res  judicata, collateral estoppel or the law of the  case."); Horn v. A.O. Smith Corp., 50 F.3d 1365,  1370 n.10 (7th Cir. 1995) (quoting Ind. R. App.  P. 15(A)(3)) ("Although admittedly on point,  Colglazier is an unpublished memorandum opinion,  and Indiana's rules make plain that such opinions  shall not 'be regarded as precedent . . . .'").  But while an unpublished opinion is normally not  presumed to be an indicator or "datum" of state  law as a published (precedential) decision would  be, Bosch, 387 U.S. at 465, we note that arguably  (although no one seems to have made the argument)  it is the law of the case, which is one of the  exceptions under Ind. R. App. P. 15(A)(3) for  when unpublished decisions "may be regarded as  precedent." Supra. Anyway, regardless of the  extent to which it may be viewed as a "datum" of  state law, we are persuaded by the Indiana Court  of Appeals' analysis in this matter.

20
The Court of Appeals concluded that the  "missionaries" phrase was ambiguous and then  construed this ambiguity. A will is ambiguous if  it is reasonably susceptible to different  interpretations. Hauck v. Second Nat'l Bank of  Richmond, 286 N.E.2d 852, 863 (Ind. Ct. App.  1972). In this case, the Estate contends that the  "missionaries" phrase is unambiguous and modifies  "this beneficiary" (which everyone agrees refers  to the Lawndale Community Church). This is an  entirely reasonable grammatical construction. See  In re City of Fort Wayne's Petition to Establish  a Conservancy Dist., 484 N.E.2d 584, 589 (Ind.  Ct. App. 1985) ("in the phrase 'freeholder . . .  , who owns land,' the clause 'who owns land' is a  descriptive clause. Note the clause is set off  from the antecedent noun by a comma indicating a  rather loose relationship to 'freeholder.'").4  The IRS, though, seems to contend that this  phrase is ambiguous and that it should be  construed to denote a second beneficiary in a  series of three beneficiaries. On its face, this  construction is also plausible. Cf. Pleasureland  Museum, Inc. v. Dailey, 422 N.E.2d 754, 756 (Ind.  Ct. App. 1981) (In "the phrase 'stores and  shops'. . . the words are connected with the  conjunctive 'and,' and are set apart from the  other items in the [series] by a comma.").  Because the "missionaries" phrase is reasonably  susceptible to different meanings, we agree that  it is ambiguous. As a result, and like the  Indiana Court of Appeals, we must use rules of  construction to determine Mr. Starkey's intent.  See id. (ambiguity must exist before a court may  construe a will).5

21
Rules of grammar may be used to construe a will.  See Donahue v. Watson, 411 N.E. 741, 750 (Ind.  Ct. App. 1980); Nichols v. Alexander, 152 N.E. 863, 864 (Ind. Ct. App. 1926) (en banc); cf.  Faris Mailing, Inc. v. Indiana Dept. of State  Revenue, 557 N.E.2d 713, 716 (Ind. Tax 1990)  ("rules of grammar can be used to construe an  ambiguous statute"). We are reluctant, however,  to hang our hat on the cases the parties have  cited to support their competing interpretations  of the "missionaries" phrase (modifier versus an  item in a series). In the case the Estate cites,  the court was determining what a phrase modified;  it was not passing upon the question presented in  this case whether a phrase is a modifying phrase  or a separate item in a series. See Donahue (and  other cases), note 4, supra. And the case the IRS  cites, Cape v. State, 400 N.E.2d 161, 164 (Ind.  Ct. App. 1980), also did not address this  specific issue. See also Pleasureland Museum,  Inc., supra.

22
However, Dr. Franken (the English professor whom  the Indiana courts relied upon as a grammatical  aid) did address this precise question. She  concluded that the "missionaries" phrase most  likely modified "this beneficiary" because for  the phrase to denote an item in a series would be  "inconsistent . . . with the parity of value  generally intended by such a seriatim listing. It  is not a reasonable interpretation that the  decedent could have intended an elaborate item in  the middle surrounded by two very specific and  short items." She also rejected the notion of a  seriatim listing because "[r]ead as three items  in a series, the phrase fails to produce three  distinct categories." Dr. Franken's expert  opinion provides a sound grammatical reason for  the Indiana Court of Appeals to conclude "that  the phrase 'missionaries preaching the Gospel of  Christ' is most logically interpreted in the  context of the will as standing in apposition to,  and describing, the Lawndale Community Church."

23
Furthermore, all the evidence indicates that  Kenneth Starkey intended to benefit the  missionary program of the Lawndale Community  Church, not any and all Christian  missionaries.6 Specifically, his son stated in  the Estate's verified petition in state court  that the Lawndale Community Church is well known  for its missionary programs that preach the  Gospel of Christ, and its missionary program was  the only such program his father was known to  support.

24
This case is thus similar to Chappell v.  Missionary Society of Churches of Christ in  Indiana, 29 N.E. 924 (Ind. Ct. App. 1892). Ms.  Chappell bequeathed $500 to the "Christian  Missionary Society of this state." The Missionary  Society of the Churches of Christ in Indiana  filed a petition claiming to be the missionary  society listed in the will. The Society averred  that Ms. Chappell was a member of the Church of  Christ in Indiana. Id. The Society also asserted  that it was the only missionary society in  Indiana affiliated with Ms. Chappell's church,  and that it was commonly known as the "Christian  Missionary Society" of this state. Id. at 924-25.  Relying on the Indiana Supreme Court's decision  in Skinner v. Harrison Tp., 18 N.E. 529 (Ind.  1888), the Chappell court held that because the  ambiguity concerned the "object of the testator's  bounty," the ambiguity was latent, and therefore  it was proper for the trial court to rely on  extrinsic evidence in determining that Ms.  Chappell intended to benefit the Society. 29 N.E.  at 925.7

25
The Indiana Court of Appeals in this case  applied Chappell and observed that "there would  appear to be . . . no persons or corporations in  existence who precisely answer to the description  'missionaries preaching the Gospel of Christ.'"  (Emphasis in original.) "Therefore," it  concluded, "the trial court did not err in  admitting extrinsic evidence in determining the  testator's intention regarding the object of his  bounty." The Court of Appeals' analysis was  consistent with Indiana law. See Chappell and  note 6, supra. The evidence about the missionary  program Mr. Starkey supported was not introduced  to create a new instrument or vary the will's  terms. See Hauck, 286 N.E.2d at 862. Rather, the  ambiguity in Section 5.02 "was easily explained  by resort to extrinsic evidence." Superbird  Farms, Inc. v. Perdue Farms, Inc., 970 F.2d 238,  244 (7th Cir. 1992) (emphasis added) (applying  Indiana law), overruled on other grounds by  Medcom Holding Co. v. Baxter Travenol Lab., Inc.,  106 F.3d 1388, 1397 n.3 (7th Cir. 1997). This  evidence compels us, as it did the Indiana  probate court and Court of Appeals, to conclude  that because Mr. Starkey intended to benefit the  missionary program of the Lawndale Community  Church, the "missionaries" phrase modifies or  describes "this beneficiary" (the Lawndale  Church), as opposed to listing another class of  beneficiaries.

26
The IRS offers three reasons why the  "missionaries" phrase should be interpreted as  referring to a distinct class of beneficiaries.  It first argues that it does not make sense to  interpret the "missionaries" phrase as modifying  the Lawndale Church ("this beneficiary") because: a) Mr. Starkey already described the church in  the first part of Section 5.02 by specifying its  pastor (Wayne Gordon) and its location (Chicago,  Illinois); and b) the church is a singular noun  while "missionaries preaching the Gospel of  Christ" is plural. Dr. Franken, however,  explained away both of these asserted  difficulties with the state courts'  interpretation of Section 5.02: "Read as an  appositive renaming the noun 'beneficiary,' the  phrase 'missionaries preaching the Gospel of  Christ' characterizes the Lawndale Community  Church in a way that explains and justifies the  nature of the bequest."

27
The IRS next argues that the "spendthrift  clause" in Section 5.05 "serves no purpose if the  only beneficiaries of the will were Lawndale  Community Church and Milligan College, since  those entities do not have a 'life' and are not  subject to claims for alimony or spousal support.  By contrast, the clause serves a purpose if the  trustees are authorized to distribute trust  assets to individual missionaries . . . ."8  According to the IRS, the state courts'  interpretation of the "missionaries" phrase would  thus violate the principle that "in construing a  will effect should if possible be given to every  provision thereof and the will must not be  interpreted to render any part meaningless". See  Diaz v. Duncan, 406 N.E.2d 991, 1000 (Ind. Ct.  App. 1980).

28
We disagree with the IRS that the state courts'  interpretation of the phrase would render the  spendthrift clause meaningless. The church is a  (not-for-profit) corporation. Thus, under the  Estate's interpretation of the phrase, the  "spendthrift clause" would still protect the  trust from claims of the Church's creditors. The  clause would also protect the trust from claims  for alimony from a former spouse of Wayne Gordon.  Rev. Gordon is specifically referred to in the  will and, as pastor, he is either the perceived  or actual leader of Lawndale Community Church. It  is of course unusual for a testator to worry that  a pastor might have his assets (or those over  which he had some influence) subject to claims  for alimony. But it is just as unusual for a  testator to worry that Christian missionaries  might have their assets subject to claims for  alimony. See id. (Courts should not reject any  provision "to which a reasonable effect can be  given.") (emphasis added). These equally bizarre  scenarios lead us to agree with the Estate that  the "spendthrift clause" was most probably  included because the will's drafter, Mr.  Starkey's son, admittedly had little or no  experience drafting wills and inserted the clause  as boilerplate language from a form book.

29
In this situation, we will not reject the state  courts' interpretation of the "missionaries"  phrase even if it renders part of the  "spendthrift clause" meaningless. Significantly,  the often-quoted rule the IRS cites states that  "if possible" a will should be interpreted to  give effect to every provision. Id. Indiana  courts have declined to apply this rule when  doing so would thwart the testator's intent. See  Matter of Estate of Walters, 519 N.E.2d 1270,  1272-73 (Ind. Ct. App. 1988) (citing principle  from Diaz but then declining to give effect to  the "mischievous words per stirpes" to thwart an  intent which was otherwise clear: "We are of the  opinion that its use was merely a legalistic  flourish, devoid of any expression of intent.").  Here, under either the Estate's or the IRS's  interpretation, the phrase has little, if any,  applicable meaning. The extrinsic evidence,  however, is persuasive that the "missionaries"  phrase means the Church. Using the "spendthrift  clause" to create a separate class of  beneficiaries, then, would thwart the testator's  intent. We do not believe that the Indiana  Supreme Court would agree with this use of Diaz.  See Keplinger v. Keplinger, 113 N.E. 292, 293  (Ind. 1916) (after testator's intent has been  ascertained, "ambiguous terms not reconcilable  therewith may be disregarded.").9

30
Lastly, the IRS argues that the state courts'  construction of the "missionaries" phrase should  be rejected because "the state court proceedings  . . . were instituted for the sole purpose of  decreasing the estate's tax liability." We have  no doubt that they were; it is not unusual not to  want assets, which have already been taxed, to be  taxed again. This desire is not impermissible.  The only inquiry here is whether Mr. Starkey  intended to draft his will so as to permissibly  reduce, or even avoid, his estate's tax  liability. In this regard, the IRS candidly  acknowledged at oral argument that Mr. Starkey  did not have an illegal intent. The charitable  trust was not a "tax dodge." Mr. Starkey was not,  for example, trying to shuffle money between  family members to "shelter it" from tax while  really keeping it within the family.10 His  charitable intent, and his estate's attempt to  implement it, were both perfectly  permissible.11

III.  Conclusion

31
Dr. Franken's analysis of Section 5.02 of the  will and the extrinsic evidence of Mr. Starkey's  intent show that he intended his charitable trust  to have only two beneficiaries (the church and  the college). Because our objective in construing  Mr. Starkey's will is to determine and give  effect to his true intent, "rather than have that  intent frustrated," Gladden, 655 N.E.2d at 592,  we hold that "missionaries preaching the Gospel  of Christ" in Section 5.02 of Kenneth Starkey's  will modifies "this beneficiary" ("the Lawndale  Community Church"). As so construed, the bequest  to the trust qualifies for a charitable deduction  under 26 U.S.C. sec. 2055(a)(3).

32
The judgment of the district court in favor of  the defendant is REVERSED and the case is remanded  for judgment to be entered in favor of the  plaintiff.

Notes:

1
 The IRS also denied the Estate a marital  deduction it had claimed on its estate tax  return. The Estate does not challenge this denial  on appeal.

2
 "For purposes of the tax imposed by section 2001,  the value of the taxable estate shall be  determined by deducting from the value of the  gross estate the amount of all bequests,  legacies, devises, or transfers to a trustee or  trustees . . . but only if such contributions or  gifts are to be used by such trustee or trustees  . . . exclusively for religious, charitable,  scientific, literary, or educational purposes, or  for the prevention of cruelty to children or  animals, such trust . . . would not be  disqualified for tax exemption under section  501(c)(3) by reason of attempting to influence  legislation, and such trustee or trustees . . .  does not participate in, or intervene in . . . ,  any political campaign on behalf of (or in  opposition to) any candidate for public office.  Id.

3
 The IRS notes that the church and the college are  qualified charities, and since trust assets could  only be used for their benefit under this  interpretation of Mr. Starkey's will, the IRS  agrees that the will would sufficiently limit the  trustees' discretion. The IRS thus disagrees with  the district court, which held that even if the  "missionaries" phrase were interpreted simply to  refer to the church, the bequest still would not  qualify for a deduction because the will did not  sufficiently restrict the trustees' discretion.  See Estate of Starkey, 58 F. Supp. 2d at 952, 955-  57. We agree with the IRS that if the trust is  interpreted to have only the two beneficiaries,  then the trustees' discretion is sufficiently  limited for the bequest to qualify for the  charitable deduction.

4
 Cf. Spears v. State, 412 N.E.2d 81, 82 (Ind. Ct.  App. 1980) ("Commas set off the modifying phrase  'by visible or audible means' . . . ."); Donahue  v. Watson, 411 N.E.2d 741 (Ind. Ct. App. 1980)  ("As an extension of the previous phrase the  provision for surviving issue can only be read as  a modification of the surviving child's  interest."); Freigy v. Gargaro Co., 60 N.E.2d 288, 293 (Ind. 1945) ("The last phrase, set off  by commas, modifies all of the preceding phrase .  . . .").

5
 Before attempting to construe an ambiguity, a  court must determine whether Mr. Starkey's  "intent is clearly articulated in other  provisions of the will." In re Estate of Grimm,  705 N.E.2d 483, 498 (Ind. Ct. App. 1999) (citing  Pleska v. Zakutansky, 459 N.E.2d 745, 748-49  (Ind. Ct. App. 1984)). Other provisions of Mr.  Starkey's will do not clearly indicate his intent  with respect to the "missionaries" phrase.

6
 In Indiana, extrinsic evidence may be used to  resolve a "latent" ambiguity but not a "patent"  ambiguity. See McConnell v. Robbins, 140 N.E. 59,  61 (Ind. 1923); see also First Federal Sav. Bank  of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 607  (Ind. 1990). Unlike a "patent" ambiguity, a  "latent ambiguity arises not upon the face of the  instrument by virtue of the words used, but  emerges in attempting to apply those words in the  manner directed in the instrument." Hauck, 286 N.E.2d at 862. Thus, with a latent ambiguity,  "introduction of extrinsic evidence merely  completes the instrument by identifying its  object or subject matter." Id. But with a patent  ambiguity, where "the writing is too uncertain  for a settled construction, admission of  extrinsic evidence would, in effect, create a new  instrument." Id. The ambiguity in this case is  latent. It arose when the IRS attempted to apply  the "missionaries" phrase to determine whom, if  anyone, besides the church and the college could  receive proceeds from the trust. Id.; see also  Eckart v. Davis, 631 N.E.2d 494, 497 (Ind. Ct.  App. 1994). Moreover, an ambiguity concerning  whom the testator intended to benefit is  typically latent. See Hauck, 286 N.E.2d at 862;  see also Huyler's v. Gas Appliance Supply Corp.,  257 N.E.2d 831, 836 (Ind. Ct. App. 1970) (latent  ambiguity exists when description "is shown to  fit different pieces of property").

7
 The court stated that "[n]o principle is better  settled than that parol evidence is admissible to  remove latent ambiguities, and, when there is no  person or corporation in existence precisely  answering to the name or description in the will,  parol evidence may be given to ascertain who were  [the beneficiaries] intended by the testator."  Id. (emphasis added).

8
 Section 5.05 provides that "[n]o interest under  this instrument shall be transferable or  assignable by any beneficiary or be subject  during his life to the claims of his creditors or  to any claims for alimony or for the support of  his spouse."

9
 It is also difficult to believe that Mr. Starkey,  who was very specific about which church was to  benefit from his trust (the "Lawndale Community  Church in Chicago, Illinois"), and about the  conditions under which the church would be  allowed to do so ("provided that Wayne Gordon is  still the pastor of it at the time of my death"),  would then turn around and give his money to  unknown missionaries of whatever stripe--Baptist,  Catholic, Mormon--without any real conditions  (just that they preach "the Gospel of Christ").

10
 Indeed, because the money for the charitable  deduction was (and is) clearly going outside the  family one way or another, Mr. Starkey's  relatives have nothing to gain or lose from the  outcome of this case. The only people who stand  to lose under the IRS's proposed construction are  the charities themselves if half the trust corpus  goes to the United States. We believe an Indiana  court would not find this to be Mr. Starkey's  intent. See Pleska, 459 N.E.2d at 749 ("The  specificity of Peter's bequests supports a  determination that he did not intend for his  probate estate to be exhausted by the payment of  [estate] taxes on the non-probate assets.").

11
 The IRS points out that the Estate initially  petitioned the probate court to amend the will to  substitute eight specific groups for  "missionaries preaching the Gospel of Christ,"  stating that the groups "all fit the description  of those intended by the testator to benefit from  this trust, "[Lawndale Community Church],  missionaries preaching the Gospel of Christ, and  Milligan College." In light of this petition, the  IRS argues that the Estate cannot now maintain  that Mr. Starkey intended the "missionaries"  phrase merely to modify "this beneficiary." The  Estate's course of action in this regard, though,  is understandable. At this time, the Estate was  still represented by Mr. Starkey's son, who did  not have expertise in this area. He had been  corresponding with the IRS about how the trust  could qualify for a charitable deduction, and it  was in response to a directive from the IRS that  he filed the petition in question. The petition  was effectively withdrawn when the Estate filed  an amended petition in which the Estate  represented that the "missionaries" phrase was  descriptive. Under these circumstances, we do not  deem the Estate's actions with the initial  (superceded) petition as indicative of Mr.  Starkey's true intent.