Court Opinion

ID: 9424064
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:10:07.470178+00
Date Added: 2024-06-11T17:22:47.924286
License: Public Domain

Mr. Justice Douglas,
dissenting.
The object of a reciprocal trust, as I understand it, is for each settlor to rid himself of all taxable power over the corpus by exchanging taxable powers with the other settlor. Yet Joseph P. Grace and his wife did not exchange taxable powers. Each retained a sufficient power over the corpus to require the inclusion of the corpus in his or her taxable estate. Each settlor, as one *326of the three trustees, reserved the right to alter the trust by paying to the chief beneficiary “any amounts of the principal of the said trust, up to and including the whole thereof, which the said Trustees or a majority of them may at any time or from time to time deem advisable.” I have quoted from Janet Grace’s trust. But an almost identical provision is in the trust of Joseph P. Grace.
I would conclude from the existence of this reserved power* that the corpus of the Janet Grace trust was includible in her estate for purposes of the estate tax. Lober v. United States, 346 U. S. 335.
That is to say the use of a reciprocal trust device to aid the avoidance of an estate tax is simply not presented by this case.
I would dismiss the petition as improvidently granted.

The relevant provision of the 1939 Internal Revenue Code (§811 (d)(2)) is practically identical with the corresponding provision of the 1954 Code (26 U. S. C. § 2038 (a) (2)). Each provides that a decedent’s gross estate shall include property—
“To the extent of any interest therein of which the decedent has at any time made a transfer . . . where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power ... by the decedent alone or in conjunction with any person, to alter, amend, or revoke . . . .” (Emphasis supplied.) The provisions of the Joseph and Janet Grace trusts would seem to satisfy that test, for only two out of the three trustees were necessary to alter the trust. See Helvering v. City Bank Co., 296 U. S. 85.