Struthers v. Kelm

Mary Barney established three separate irrevocable trusts in favor of her three children. For each trust, Mary Barney was one of three named trustees. Each trust indicated that the income from the trust should be paid to the relevant child, with amounts and times at the discretion of the trustees. The trustees could likewise reach into the principal for the care, support, comfort, or maintenance of the relevant child. On the death of Mary Barney, the remainder of the trust would be paid to the child in question. The trust included a provision indicating that it was intended to be irrevocable and that Mary Barney had no power to alter or amend any terms of the trust. Ultimately, the government (defendant) argued that all three trusts should be included in Mary Barney’s estate and taxed as part of that estate. This argument was based on Barney’s right, with the other trustees, to determine who should possess the trust property and when they should possess it. Mary Struthers (plaintiff), one of Barney’s children, argued that while Barney did keep control over when the funds could be enjoyed, that did not rise to the level of substantial control over the trust corpus sufficient to include it in the estate. The trial court found for Struthers, ruling that inclusion of the trusts in the estate was improper but reserving formal judgment until the Supreme Court ruled on a pending case, Lober v. United States. In that case, child beneficiaries of a trust were found to have been given no present right to enjoy the trust principal or income without the testator/trust settlor’s consent, and thus the estate was taxed for the trust in question. After the Supreme Court’s ruling, the trial court entered judgment for the government, dismissing the suit. Struthers appealed from that ruling, arguing that Lober did not control and that the trust should not be considered part of the estate.