## Facts

- William H. Wisely died testate in 1982, leaving a will that created a family trust and a marital trust, and naming his wife, Hazel S. Wisely, as executor.
- The marital trust directed trustees to pay Hazel Wisely “so much, or all” of the net income as the trustees, “in their sole discretion,” deemed necessary for her support and emergencies.
- Any income not paid to Hazel Wisely was to be accumulated and added to the marital trust corpus; the trustees could also invade corpus for specified emergencies.
- The will granted Hazel Wisely a general testamentary power of appointment over the marital trust corpus.
- The Estate claimed a full marital deduction for property passing to the marital trust under I.R.C. § 2056(b)(5).
- The IRS disallowed the marital deduction and assessed additional estate tax, penalties, and interest totaling $124,311.
- The Estate filed a federal refund suit; the district court granted summary judgment for the United States.

## Issues

1. Whether a marital trust qualifies for the estate-tax marital deduction under I.R.C. § 2056(b)(5) when trustees, in their sole discretion, may pay the surviving spouse “so much, or all” of trust income and may accumulate undistributed income into corpus.
2. Whether extrinsic evidence of the testator’s intent to qualify for the marital deduction may be used to alter or reinterpret the trust’s income-distribution terms.

## Decision

- The court of appeals affirmed summary judgment for the United States.
- The marital trust did not qualify under § 2056(b)(5) because the surviving spouse lacked an enforceable right to receive all trust income (or a qualifying specific portion) for life.
- The trust also failed because it did not specify that income would be payable at least annually.
- The will’s language was unambiguous; extrinsic evidence of tax-planning intent was inadmissible to change the dispositive terms under applicable state law.
- The surviving spouse’s general testamentary power of appointment did not cure the failure to satisfy the income-entitlement and payment-frequency requirements.

## Legal Principles

- A § 2056(b)(5) marital deduction for a life estate with power of appointment requires that the surviving spouse be entitled, as a matter of enforceable right, to all income (or a qualifying specified portion) from the property for life.
- Trustee discretion to withhold or limit income distributions, coupled with authorization to accumulate undistributed income into corpus, is inconsistent with the spouse’s required income entitlement.
- For § 2056(b)(5) treatment, the governing instrument must require income payments at least annually (or otherwise satisfy regulatory timing requirements).
- When a will or trust instrument is unambiguous, courts determine intent from the instrument’s text and do not admit extrinsic evidence to vary clear dispositive language.
- A general testamentary power of appointment is necessary but not sufficient for § 2056(b)(5) if the spouse lacks the required income rights.

## Conclusion

The court held that a marital trust with discretionary income distributions and no specified payment frequency does not qualify for the § 2056(b)(5) marital deduction, and that unambiguous trust language cannot be reworked through extrinsic evidence of tax-minimizing intent.


Wisely v. United States, 893 F.2d 660 (4th Cir. 1990)