## Facts

- In 1937, Mary (Hadwen) Barney created three substantially identical inter vivos trusts, one for each child, including Mary B. Struthers.
- Each trust was expressly irrevocable, and the settlor reserved no power to alter or amend the instruments.
- Each trust had three trustees, including the settlor and two others.
- Trustees had “absolute discretion” to distribute all, part, or none of trust income to the named child, or to accumulate income.
- Trustees could distribute principal for the child’s “care, support, comfort or maintenance.”
- Upon the settlor’s death, each trust terminated and the remaining property was distributed as directed by the instrument, principally to the child-beneficiary.
- After the settlor’s death, the Commissioner included the full value of the three trusts in her gross estate under I.R.C. § 811(c) (1939), reasoning that her retained discretionary powers as co-trustee meant enjoyment did not take effect until death.

## Issues

1. Whether assets of irrevocable trusts are includible in the settlor’s gross estate under I.R.C. § 811(c) when the settlor, acting with co-trustees, retained broad discretion over distributions of income and principal during life.

## Decision

- The Eighth Circuit affirmed judgment for the Collector and denied the refund claim.
- The court held the trust property was properly included in the settlor’s gross estate under § 811(c).
- The court treated Supreme Court precedent as controlling, concluding the settlor’s retained discretionary powers meant possession or enjoyment remained subject to change until death.

## Legal Principles

- Under I.R.C. § 811(c) (1939), a lifetime transfer is includible in the gross estate if possession or enjoyment is intended to take effect at or after death.
- A settlor’s retained power, even if exercisable only jointly as a trustee, to control whether and when beneficiaries receive income or principal may constitute a retained power to determine who shall possess or enjoy the property.
- “Irrevocable” labeling and absence of a unilateral power to revoke or amend do not prevent inclusion when the settlor retains discretionary control that postpones or conditions beneficial enjoyment until death.
- When beneficiaries lack an enforceable present right to income or principal because distributions depend on trustee discretion that includes the settlor, the transfer may be treated as incomplete for § 811(c) purposes until the settlor’s death.

## Conclusion

The Eighth Circuit held that trust assets were includible in the settlor’s gross estate because, despite the trusts’ irrevocable form, the settlor’s retained discretionary authority as a co-trustee over income and principal distributions left beneficiaries’ enjoyment subject to change until her death within the meaning of § 811(c).


Struthers v. Kelm, 218 F.2d 810 (8th Cir. 1955)