## Facts

- A California testator died in 1956 and, by will, created a testamentary trust holding his half of community property.
- The will named the testator’s widow, Serafina, as lifetime beneficiary and trustee and stated the trust was for her “benefit” and “for support,” without defining those terms or imposing express limits on her use of the trust corpus.
- In 1972, Serafina signed a “Power of Attorney” stating she would confer with family members and follow a majority vote regarding sales, leases, loans, or other transactions involving family property.
- Serafina died in 1978; her executor filed a federal estate tax return that did not include the trust assets in her gross estate.
- The IRS concluded the will gave Serafina the power, exercisable in her own favor, to consume or dispose of the trust corpus, treated that power as a general power of appointment under I.R.C. § 2041, and assessed an estate tax deficiency with penalties and interest.
- The executor paid the assessment and sued for a refund; the district court granted summary judgment to the United States, and the executor appealed.

## Issues

1. Whether the testamentary trust gave Serafina, at death, a “general power of appointment” under I.R.C. § 2041, requiring inclusion of the trust corpus in her gross estate.
2. Whether, under California law governing will construction, the will’s references to Serafina’s “benefit” and “support” imposed an ascertainable standard limiting her ability to consume or dispose of corpus for herself.
3. Whether Serafina’s later “Power of Attorney” family arrangement legally restricted the testamentary powers relevant to the § 2041 analysis.

## Decision

- The Ninth Circuit affirmed summary judgment for the United States.
- California law governed interpretation of the will’s grant of powers; federal law governed whether those powers constituted a § 2041 general power of appointment.
- The will conferred on Serafina a legally enforceable power to consume, appropriate, or dispose of the trust corpus for her own benefit.
- The “benefit” and “support” language did not supply an ascertainable standard that objectively limited Serafina’s discretion.
- The 1972 “Power of Attorney” was treated as a voluntary family arrangement and did not amend or legally curtail the powers granted by the will.
- Because the relevant documents were undisputed and the dispute was legal interpretation, summary judgment was proper.

## Legal Principles

- For estate tax purposes, property subject to a decedent’s general power of appointment is included in the decedent’s gross estate under I.R.C. § 2041.
- A power is not “general” if it is limited by an ascertainable standard relating to the decedent’s health, education, support, or maintenance; vague terms that do not impose an objective limitation may fail to qualify.
- State law determines the scope of property rights and powers created by a will or trust; federal law determines the tax consequences of those rights and powers.
- Informal or voluntary arrangements that do not legally modify the testamentary instrument do not negate a power of appointment for § 2041 purposes.

## Conclusion

The court held that the testamentary trust gave Serafina a § 2041 general power of appointment because her authority to use or dispose of corpus for her own benefit was not confined by an ascertainable standard, so the trust corpus was includible in her gross estate and the refund claim was properly denied.


De Oliveira v. United States, 767 F.2d 1344 (9th Cir. 1985)