In re Estate of Muchemore

G. Robert Muchemore executed a revocable trust agreement that included a pecuniary credit-shelter trust and a marital-deduction trust. These trust provisions were designed to eliminate federal estate taxes on the transfer of Robert’s property to his wife, Agnes B. Muchemore (plaintiff) when Robert died. At Robert’s death, $600,000—the amount of the federal estate tax credit—was to be transferred to the credit-shelter trust. The balance of Robert’s assets was to be transferred to the marital-deduction trust so that the assets qualified for the unlimited federal estate-tax marital deduction. The trust agreement gave Agnes the power to appoint by will any property remaining in the marital-deduction trust at the time of her death. If Agnes did not exercise this power of appointment, then upon her death, the assets in the marital-deduction trust were to be placed in the credit-shelter trust. Pursuant to the terms of the credit-shelter trust, the assets would then be distributed to Robert’s nieces and nephews. After Robert died, Agnes filed a petition in county court for determination of inheritance tax, arguing that the assets in the marital-deduction trust were not subject to Nebraska inheritance tax. Agnes reasoned that she had been granted a general power of appointment concerning the assets in the marital-deduction trust and that, under state law, the assets were deemed transferred to her at the time of Robert’s death. Douglas County, Nebraska (defendant) argued that the trust agreement granted Agnes a life interest in the marital-asset trust and granted a remainder interest in the credit-shelter trust to Robert’s nieces and nephew. Douglas County further argued that the remainder interest was subject to state inheritance tax at Robert’s death. The county court found for Agnes, and the district court affirmed. Douglas County appealed to the Nebraska Court of Appeals, and the Nebraska Supreme Court removed the case to its docket.