## Facts

- Daniel Rolin created a 1958 inter vivos trust governed by New York law, retaining a life income interest and a power to amend or revoke.
- At Daniel’s death (Sept. 30, 1968), the trust was to be divided into “Trust A” (equal to the maximum marital deduction under I.R.C. § 2056) and “Trust B” (the balance).
- Daniel’s wife, Genevieve Rolin, was entitled to income from both trusts for life.
- As to Trust A, Genevieve also had (1) a broad right to invade principal during life and (2) a general testamentary power of appointment over Trust A assets; if unexercised, Trust A would merge into Trust B for the benefit of the couple’s issue.
- The trust instrument provided that within 14 months after Daniel’s death, “either Genevieve or her estate” could renounce any rights under the trust.
- Genevieve died about four months after Daniel, having received no trust income and having exercised no rights or powers over Trust A.
- After Genevieve’s death, her executors executed a written renunciation disclaiming all of her Trust A interests, including both the income interest and the general testamentary power.
- The Commissioner conceded the income interest could be disclaimed, but asserted a general testamentary power is personal and could not be disclaimed post-mortem; the Commissioner therefore sought inclusion of Trust A in Genevieve’s gross estate under I.R.C. § 2041.
- The Tax Court ruled the renunciation effective as to the entire Trust A interest and excluded Trust A from Genevieve’s gross estate; the Commissioner appealed.

## Issues

1. Whether, under New York law, executors may effectively renounce a decedent’s unexercised general testamentary power of appointment pursuant to a trust clause authorizing renunciation by “her estate.”
2. If the renunciation is valid under state law, whether federal estate tax law excludes the Trust A property from the decedent’s gross estate under I.R.C. § 2041.

## Decision

- The Second Circuit affirmed the Tax Court.
- The court held that New York law permitted the executors, acting under the trust’s renunciation provision, to disclaim Genevieve’s unexercised general testamentary power of appointment within the stated period.
- Because the disclaimer was effective under state law, the Trust A property subject to the disclaimed general power was not included in Genevieve’s gross estate under I.R.C. § 2041.

## Legal Principles

- State law defines the nature and transferability of property interests (including powers of appointment); federal law determines the estate tax consequences of those state-created interests.
- In determining state law for federal tax purposes, federal courts follow the state’s highest court; absent controlling precedent, they give proper regard to relevant lower state court decisions.
- Under New York law, a power of appointment is not categorically non-renounceable as a purely personal right; it may be disclaimed where the governing instrument and state law permit.
- A timely and valid disclaimer that prevents acceptance of a general power of appointment can preclude inclusion of the related property in the disclaimant’s gross estate under I.R.C. § 2041.

## Conclusion

The Second Circuit held that executors could, under New York law and a trust’s express renunciation clause, disclaim a decedent’s unexercised general testamentary power of appointment, and that this effective disclaimer prevented inclusion of the trust property in the decedent’s gross estate under I.R.C. § 2041.


Estate of Rolin v. Comm’r, 588 F.2d 368 (2d Cir. 1978)