Academic journal article Journal of Accountancy , Vol. 177, No. 1
Helen Wall created three irrevocable inter vivos trusts for the benefit of family members. All three trusts had the same trustee, the First Wisconsin Trust Co.
Wall retained the right to remove the corporate trustee and substitute another one. She did not have the right to appoint herself as trustee; the new trustee had to be an independent and qualified corporate trustee. Mrs. Wall also retained the right to contribute additional assets to the trusts. Otherwise, she retained no power, right or interest in the trusts.
The trustee was given broad discretionary powers to distribute or accumulate trust income and principal. Its discretion was not limited by any ascertainable standard.
Mrs. Wall did not change the corporate trustee during her life. Further, she had no financial interest in First Wisconsin.
After Mrs. Wall's death, the trust assets were not included in her gross estate when an estate tax return was filed. However, the Internal Revenue Service argued that Internal Revenue Code sections 2036 or 2038 required that these assets be included in her estate.
Under these sections, if a grantor retains either a power to change the beneficiary (section 2036) or a power to affect the enjoyment of the trust property (section 2038), the trust assets must be included in the grantor's gross estate for estate tax purposes. …