## Facts

- Clara E. Edgar and her sister, Jean Edgar Vaughan, created reciprocal revocable inter vivos trusts in 1961.
- Each trust paid income to its settlor for life, then to the other sister, and authorized the trustee to distribute principal when, in the trustee’s judgment, invasion was “necessitated” by illness, emergency, or inadequacy of income for the beneficiary’s support and necessities.
- Under Jean’s trust, after the sisters’ interests ended, the trust provided fixed monthly payments to four named individuals and then directed the remaining income and ultimate remainder to qualifying charitable organizations.
- Jean predeceased Clara; at Clara’s death, Jean’s trust was funded and its corpus income was sufficient to cover the fixed monthly payments to the individuals.
- Clara’s will poured over her entire estate into Jean’s trust.
- The estate claimed a federal estate tax charitable deduction under I.R.C. § 2055 for the full amount transferred, asserting that (a) Clara’s assets would not be needed to satisfy noncharitable payments, or (b) the charitable remainder could be valued actuarially.
- The Commissioner disallowed any charitable deduction, asserting the trustee’s discretionary invasion power made the charitable remainder not ascertainable and not assured to pass to charity.

## Issues

1. Whether an estate tax charitable deduction under I.R.C. § 2055(a)(2) is allowable for a remainder interest where the trustee may invade principal for noncharitable beneficiaries under a discretionary “support/necessities” standard.
2. Whether actuarial valuation can isolate a deductible charitable remainder when an open-ended invasion power can reduce or eliminate what passes to charity.
3. Whether the practical sufficiency of other trust assets to satisfy noncharitable payments can establish a deductible charitable remainder despite the governing instrument’s legal contingencies.

## Decision

- The Tax Court held the estate was not entitled to any charitable deduction under § 2055 for the remainder interest passing under Jean’s trust.
- The court sustained the deficiency determination and entered judgment for the Commissioner.
- The court concluded the charitable remainder’s value was not presently ascertainable at Clara’s death and was not assured to pass to charity due to the trustee’s discretionary principal invasion authority.

## Legal Principles

- A § 2055 charitable deduction for a split-interest trust requires that the charitable interest be presently ascertainable and severable in value at the decedent’s death.
- If a trustee’s power can divert corpus to noncharitable beneficiaries, the deduction is unavailable unless the possibility of diversion is so remote as to be negligible and the invasion power is constrained by an objectively enforceable, valuation-permitting standard.
- Actuarial tables cannot reliably value a charitable remainder when trustee discretion permits unquantifiable principal invasions responsive to future beneficiary needs.
- The deduction analysis turns on the governing instrument’s legal rights and powers at the date of death, not on postulated economic likelihoods that charity will receive the property.

## Conclusion

Because the trust terms allowed discretionary invasions of principal for noncharitable beneficiaries under a broad support-and-necessities standard, the amount ultimately passing to charity could not be valued with reasonable certainty at the decedent’s death; accordingly, no estate tax charitable deduction was allowed for the claimed remainder interest.


Estate of Edgar v. Commissioner, 74 T.C. 983 (1980)