Also known as: ascertainable standard · ascertainable-standard doctrine
Written by attorneys — see sources below.
A standard relating to an individual's health, education, support, or maintenance within the meaning of the Internal Revenue Code provisions governing general powers of appointment. The standard limits a trustee's discretion to make distributions for the trustee's own benefit or a beneficiary's withdrawal rights.
Anika Anand serves as both trustee and beneficiary of a family trust. The instrument permits her to distribute principal to herself only for documented medical expenses. Because the authority is confined to an ascertainable standard, her creditors cannot compel distributions beyond what the standard requires.
Andrew Avery holds the right to demand any amount of trust principal at any time. The instrument imposes no requirement that withdrawals serve health, education, support, or maintenance. The absence of an ascertainable standard causes the right to qualify as a power of withdrawal reachable by creditors.
Alan Ackerman, as co-trustee, may invade principal only to pay his own medical bills and educational costs. The limitation to health and education satisfies the ascertainable standard. The trust assets therefore remain outside his taxable estate at death.
The executor paid the federal estate tax that included the value of the trust principal and filed suit for a refund in the district court. All facts were stipulated for the district court proceeding. The district court ruled for the government. The executor appealed to the United States Court of Appeals for the First Circuit. The decedent had been a donor to three inter vivos trusts previously established by his wife. He served as a trustee of the trusts until the date of his death. The initial life beneficiary was the decedent's adult son. Eighty percent of the trust income was normally payable to the son, with the balance added to principal. Subsequent beneficiaries were the son's widow and his issue. The trust instruments contained powers in Article 4 and Article 7. Article 4 permitted the trustees in their absolute discretion to increase the percentage of income payable to the son when needed in case of sickness or desirable in view of changed circumstances. The trustees could also cease paying income to the son and add it all to principal during such period as they decided the stoppage was for his best interests. Article 7 gave the trustees broad administrative powers, including discretion to acquire investments not normally held by trustees and authority to determine what was to be charged or credited to income or principal. It further empowered the trustees generally to do all things in relation to the trust fund which the donor could do if living and the trust had not been executed. The government claimed that the powers in the two articles required inclusion of the trust corpus in the decedent's estate. The executor disputed this position after paying the tax and seeking recovery. The district court had ruled against the executor on the stipulated facts, leading directly to the appeal.
View caseAn ascertainable standard prevents classification as a power of withdrawal only when the power is held by a trustee and is limited to health, education, support, or maintenance. A beneficiary who is not acting as trustee retains a power of withdrawal even if the instrument mentions those purposes.
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Creditors generally cannot compel distributions from a discretionary trust even when the instrument uses an ascertainable standard. The standard guides the trustee but does not create an enforceable right that ordinary creditors may reach.
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Yes. When a trustee-beneficiary's power to distribute to herself is limited by an ascertainable standard of health, education, support, or maintenance, the power is not a general power of appointment. The trust assets are therefore excluded from the trustee's gross estate.
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Language authorizing distributions for health, education, support, or maintenance creates an ascertainable standard. Vague terms such as "as the trustee deems appropriate" or "true commitment to justice" do not qualify.
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