## Facts

- A spouse died in 1970 and, by will, created a trust.
- The surviving spouse (the decedent) received a life estate in trust property.
- The decedent also held a power to invade trust corpus “as desired” to continue the decedent’s accustomed standard of living.
- Upon the decedent’s death, remaining corpus was to pass to other named beneficiaries.
- The decedent died in 1975 while still holding the invasion power.
- Under the governing state law, the “accustomed standard of living” language was not construed as an objective limitation on invasion, other than a good-faith constraint.

## Issues

1. Whether the decedent’s power to invade corpus to continue an accustomed standard of living constituted a “general power of appointment” includible in the decedent’s gross estate under IRC § 2041(a)(2).
2. Whether the invasion power was instead limited by an “ascertainable standard” relating to health, education, support, or maintenance, and therefore excluded from the definition of a general power under IRC § 2041(b)(1)(A) and Treas. Reg. § 20.2041-1(c)(2).
3. What effect the governing state law’s construction of the trust standard has on federal characterization of the power under § 2041.

## Decision

- The IRS concluded the decedent possessed a general power of appointment at death within the meaning of IRC § 2041.
- Because the power was general, the value of the trust corpus subject to the power was includible in the decedent’s gross estate under § 2041(a)(2).
- The “accustomed standard of living” language did not qualify as an ascertainable standard in light of state law treating it as imposing no objective, reasonably measurable limitation beyond good faith.

## Legal Principles

- Property subject to a general power of appointment held at death is included in the holder’s gross estate if the power was created after October 21, 1942. (IRC § 2041(a)(2))
- A power to consume, invade, or appropriate property for the holder’s benefit is not a general power if it is limited by an ascertainable standard relating to the holder’s health, education, support, or maintenance. (IRC § 2041(b)(1)(A))
- An ascertainable standard requires a limitation that is reasonably measurable in terms of the holder’s needs for health, education, or support/maintenance; standards framed as comfort, welfare, or happiness are not sufficient. (Treas. Reg. § 20.2041-1(c)(2))
- Federal characterization of a trust invasion power under § 2041 depends on both the instrument’s language and the governing state law rules that define whether the stated standard meaningfully restricts the holder’s discretion.

## Conclusion

Because applicable state law treated the invasion standard as effectively discretionary and constrained only by good faith, the decedent’s power to invade corpus “as desired” to continue an accustomed standard of living was not limited by an ascertainable standard and therefore constituted a general power of appointment, requiring inclusion of the affected trust property in the decedent’s gross estate under IRC § 2041.


Rev. Rul. 77-60, 1977-1 C.B. 282 (1977)