Estate of Margrave v. Commissioner
United States Court of Appeals for the Eighth Circuit
618 F.2d 34 (1980)
- Written by Angela Patrick, JD
Facts
Robert Margrave set up a living trust and retained an unlimited power to modify or revoke the trust. Through these powers, Margrave could control where the trust’s assets went during his life and after his death. Margrave’s wife bought a life-insurance policy on Margrave’s life and named the living trust as the policy’s beneficiary. The wife had the authority to change the beneficiary at any time before Margrave’s death, but she never did. After Margrave’s death, the policy proceeds were paid into the trust. The federal government (defendant) determined that the proceeds were a taxable part of Margrave’s estate because Margrave allegedly could control where the proceeds went after his death through his control of the trust. Specifically, the government claimed that Margrave possessed either (1) incidents of ownership or (2) a general power of appointment over the proceeds. The estate (plaintiff) petitioned for a determination that the proceeds were not part of the estate because Margrave’s wife, not Margrave, controlled the policy proceeds while Margrave was alive. The Tax Court ruled that Margrave did not have any ownership or appointment rights over the proceeds at the time of his death and, therefore, that the proceeds were not in his estate. The government appealed.
Rule of Law
Issue
Holding and Reasoning (Henley, J.)
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