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SACHTER v. UNITED STATES

March 31, 1970

Joseph SACHTER and Manufacturers Hanover Trust Company, as Executors under the Last Will and Testament of Bertha M. McClary, Deceased, Plaintiffs,
v.
UNITED STATES of America, Defendant


Mansfield, District Judge.


The opinion of the court was delivered by: MANSFIELD

MANSFIELD, District Judge.

In this suit for a refund of estate taxes based on plaintiffs' contention that the estate should have been allowed a charitable deduction pursuant to § 2055(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 2055(a), *fn1" defendant has moved for summary judgment dismissing the complaint. The issue is whether the will contains standards for a life tenant's invasion of trust principal that render a contingent remainder to charity "presently ascertainable." For the reasons stated below, we hold that it does not and grant the motion. The undisputed facts are as follows:

 On March 10, 1960, the decedent, Bertha M. McClary, died a resident of Kings County, New York. She was survived by a 35-year old daughter, Helen Arlene McClary, who was mentally retarded and since 1941 had been institutionalized at the Devereux Foundation (the Foundation), a qualified charitable organization, under a prepaid contract providing for her lifetime care.

 The decedent's will was duly admitted to probate by the Surrogate's Court of Kings County. After making the usual provisions for payment of debts, funeral expenses, taxes and certain bequests, the testatrix had recited in the will that the daughter was mentally retarded and a resident of the Foundation pursuant to the 1941 lifetime contract for her care and maintenance, and established a trust for the daughter with a remainder to go to certain charitable organizations. The testatrix's intent was then expressed in part as follows:

 
"THIRD: Notwithstanding said contract with The Devereux Foundation, it was always the intention of my husband and myself to secure the continued care, maintenance and support of our daughter after our deaths against unforeseen circumstances or emergencies or, if such did not occur, to provide an additional fund while she resided with and was maintained by The Devereux Foundation under said contract which, so far as possible, would add to and enhance the welfare and happiness of our daughter by way of luxuries or travel or anything else which might contribute to her health and peace of mind over and above the care, maintenance and support undertaken by The Devereux Foundation and now being furnished to our daughter under the terms of said contract."

 In Paragraph THIRD: a, the Executors were directed to deliver the residue of her estate to her Trustees to be held in trust for the life of the daughter, the income to be paid to the Foundation and applied by it for "such luxuries, travel, entertainment, vacations, emergencies, or extensive medical requirements, or any like or similar purpose" as the Foundation determines "will add to and enhance the welfare, well-being and happiness of our daughter, even though such other purposes may incidentally benefit other deserving persons in need of or being cared for by the said Foundation or be otherwise beneficial and charitable in nature with respect to helping dependent individuals."

 The will (Par. THIRD: b) next gives the Trustees power to invade principal up to $3,500 a year to provide for such "emergency or extensive medical needs", if the income should be insufficient, as might appear necessary to "relieve pain and suffering, prolong the life of our daughter or add to her comfort or recovery." The Trustees were relieved of responsibility for seeing to the proper use of the income by the Foundation but were required to pay semi-annual visits to it and obtain semi-annual accountings from it. The will then contains the following provisions which are of particular pertinence to the issue before us:

 
"THIRD: * * *
 
"d. The payments of income, and of principal to the extent hereinabove provided to The Devereux Foundation shall be conditioned upon and shall only be made while our daughter resides with and is being maintained and cared for by The Devereux Foundation under the contract dated August 8, 1941 between my husband and myself, and it. Should said contract in accordance with the rights therein contained be terminated by me, or should The Devereux Foundation fail or refuse or become unable for financial or other reasons to perform its contract for the care, support and maintenance of our daughter, or after my death, if it be determined in the sole and uncontrolled judgment of my Trustees, or survivor of them, that The Devereux Foundation or other home or institution, public or private in which our daughter may be residing, from time to time, is not adequately providing for the care, support and maintenance of our said daughter, then and in each such case I empower my Trustees or survivor of them to terminate the contract then prevailing, if such contract is then in effect, or exercise such rights in the premises as I would be able to, if alive, and in each such case, to arrange with any other home or institution, public or private, as successively as may be necessary in the judgment of my Trustees or survivor of them for the proper care, maintenance and support of our said daughter, and in any of such events the home or institution, public or private which at the time is providing our said daughter with care, maintenance and support shall be entitled to receive the income from the trust which would otherwise be payable to The Devereux Foundation and if such income be inadequate, I vest my Trustees, or survivor of them with full discretion to invade and pay over any part or all of the principal as may, in any instance, or from time to time in their judgment, or survivor of them, be desirable, prudent or required, to insure that our daughter is not lacking in any essential or comfort for her well-being and contentment. The powers herein given to my Trustees or the survivor of them, may be exercised at any time and from time to time and their, his or its judgment, as the case may be, shall be conclusive. (Emphasis added)
 
* * *
 
"FIFTH: Realizing in advance that I have vested my Trustees with full authority to invade principal, in the instances specified, which imposes upon the burdens and responsibilities, I release them from liability for payments so made, requesting, however, that in exercising such discretion, my Trustees, at such time, give consideration to the size of the principal and need for future security of our daughter.
 
* * *
 
"EIGHTH: I admonish my Trustees, however, that the health, welfare and happiness of our daughter shall always be considered paramount and that is my express wish and intention that the payments herein authorized and directed for her shall be made or applied with the view of carrying out my intentions and in preference to preserving any part of principal for the remaindermen."

 Since her mother's death in 1960 the daughter has continued to reside at the Foundation where she has been cared for pursuant to the 1941 prepaid contract, with the income from the testamentary trust (in addition to Social Security benefits) being ...


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