## Facts

- A decedent’s spouse died in 1972 and created a testamentary trust.
- The trust paid income to the decedent for life.
- The remainder was payable equally to the decedent’s children, or to any one child as the decedent might appoint by will.
- During life, the decedent could direct trustees to distribute any or all trust property to anyone (including the decedent), but only with the consent of one child (“A”).
- The decedent and A served as co-trustees until the decedent’s death in 1977.
- The estate-tax question was whether the decedent’s consent-conditioned distribution power caused inclusion of the trust property in the decedent’s gross estate under IRC § 2041.

## Issues

1. Whether a lifetime power to appoint trust corpus to oneself, exercisable only with the consent of a child who is a remainder beneficiary and co-trustee, is a “general power of appointment” under IRC § 2041.
2. Whether the requirement of consent by a person with a substantial adverse interest prevents estate inclusion under Treas. Reg. § 20.2041-3(c).

## Decision

- The IRS concluded the decedent’s power was not a general power of appointment under IRC § 2041.
- Because the power was exercisable only with A’s consent and A had a substantial adverse interest, no amount of the trust property was includible in the decedent’s gross estate under § 2041.

## Legal Principles

- Under IRC § 2041(a)(2), property subject at death to a general power of appointment (created after October 21, 1942) is included in the gross estate.
- A power is “general” if exercisable in favor of the decedent, the decedent’s estate, or their creditors, subject to statutory and regulatory exceptions.
- Under Treas. Reg. § 20.2041-3(c), a power exercisable only with the consent or joinder of a person holding a substantial interest adverse to exercise in favor of the decedent is not a general power.
- A taker in default of appointment has an adverse interest to exercise of the power.
- Where the adverse-party consent exception applies, the power is excluded from general-power treatment and § 2041 inclusion does not result.

## Conclusion

A decedent’s ability to direct distributions of trust property to oneself does not create a taxable general power of appointment under IRC § 2041 when exercise is conditioned on the consent of a remainder beneficiary whose substantial, adverse interest would be reduced by such distributions.


Rev. Rul. 79-63, 1979-1 C.B. 302 (1979)