Wisely v. United States

William Wisely died in 1982. In his will, he established two trusts: a family trust and a marital trust. Within the marital trust, Wisely provided that the trustees could pay to his wife, Hazel (plaintiff), any or all of the net income as needed to provide for Hazel’s care, support, and manner of living. Any income not paid to Hazel was to be added to the corpus. Hazel was the executrix of William’s estate. She filed a federal estate-tax return that claimed a marital deduction of the full property transferred to the marital trust. The government (defendant) disallowed the marital deduction. While deduction from the gross estate is usually allowed for property passing to a spouse, a terminable interest could have a deduction only if it met certain requirements in the Treasury Regulations: specifically, that the surviving spouse must be entitled to (1) all the income from the interest in question, (2) all the income from a specific portion of the interest, or (3) a specific portion of the income from the entire interest. The district court ruled that these requirements had not been met and ruled for the government on a motion for summary judgment. Hazel appealed. Hazel argued that she was entitled to all the income and that the will should be considered with extrinsic evidence to aid in reaching a true understanding of William’s intent to craft a plan to avoid estate tax and to justify allowing the deduction.