Estate of Rolin v. Commissioner

When Daniel Rolin died, he left his wife, Genevieve Rolin, a trust governed by New York law. Under the trust’s terms, for the first 14 months after Daniel’s death, either Genevieve or her estate could disclaim, i.e., renounce or refuse to accept, any rights under the trust. If Genevieve accepted the trust, she would receive (1) income from the trust for life and (2) a general testamentary power to appoint the trust’s assets to anyone she wanted at her death. If Genevieve disclaimed the trust, the trust’s assets would pass to the couple’s issue, i.e., biological descendants. Genevieve died four months after Daniel, in 1969. At that time, Genevieve had not disclaimed the trust. However, Genevieve had also not received any trust income or exercised her power to appoint the trust’s assets to anyone. If the trust’s assets were included in Genevieve’s already large estate (plaintiff), the assets would pass to the couple’s issue, and Genevieve’s estate would owe an additional $99,000 in estate taxes. However, if Genevieve’s estate disclaimed the trust, the assets would still pass to the couple’s issue through Daniel’s smaller estate for only an additional $35,000 in estate taxes. Accordingly, in order to increase the total distribution from the couple to their issue, the executors of Genevieve’s estate disclaimed all of Genevieve’s interests in the trust. The federal government (defendant) conceded that the estate could disclaim Genevieve’s interest in the trust income. However, the government argued that because a power of appointment was personal and expired at a person’s death, the person must disclaim the power while still alive. Because Genevieve had not disclaimed her power of appointment over the trust’s assets while alive, the government considered the trust’s assets a taxable part of Genevieve’s estate. The Tax Court ruled that the estate’s disclaimer of the entire inheritance—the trust income and the power of appointment—was valid. The government appealed.