                         T.C. Memo. 2011-172



                        UNITED STATES TAX COURT



   ESTATE OF ANN R. CHANCELLOR, DECEASED, MARY ANN C. WALKER,
                    EXECUTRIX, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7973-09.                Filed July 14, 2011.



     Harris H. Barnes, III, for petitioner.

     John F. Driscoll, for respondent.



                          MEMORANDUM OPINION


     THORNTON, Judge:    Respondent determined a $716,013 Federal

estate tax deficiency.    After various concessions by respondent,

the sole issue for decision is whether pursuant to section 2041

the gross estate of Ann R. Chancellor (decedent) must include the

value of the assets of a trust of which she was a beneficiary and
                                - 2 -

trustee.1   She died November 16, 2004, and at the time of her

death was domiciled in Mississippi.     When the petition was filed,

Mary Ann C. Walker, executrix, resided in Mississippi.

                             Background

     The parties submitted this case fully stipulated pursuant to

Rule 122.   The stipulated facts are found accordingly.

     Decedent’s husband, Lester M. Chancellor (Mr. Chancellor),

predeceased her in 1989.   His will left her most of his estate

outright, except for property placed in the Lester M. Chancellor

Unified Credit Trust (the trust), as established by the will.

The trust’s cotrustees were decedent and Citizens National Bank

of Meridian, Mississippi (the bank).

     Under the terms of the trust as stated in the will, during

decedent’s lifetime the cotrustees were authorized to apportion

trust income among decedent, Mr. Chancellor’s children, and Mr.

Chancellor’s grandchildren (the beneficiaries) “in accordance

with their respective needs.”   The cotrustees were also given the

     right and power to invade the corpus of the trust and to
     use such part thereof and if necessary, all of it, for
     the necessary maintenance, education, health care,
     sustenance, welfare or other appropriate expenditures
     needed by * * * [Mr. Chancellor’s] wife and the other
     beneficiaries of this trust taking into consideration the
     standard of living to which they are accustomed and any
     income available to them from other sources.


     1
      Unless otherwise noted, all section references are to the
Internal Revenue Code as in effect for the date of decedent’s
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 3 -

     Mr. Chancellor’s will directed that the trust should be

funded with assets equal in value to the maximum amount that

could pass free of estate tax upon Mr. Chancellor’s death.     The

will further stated that it was Mr. Chancellor’s “intention to

convey by this Article of my will the maximum portion of my

estate which, at the time of my death, shall be exempt from the

federal transfer tax.”

     On June 5, 1992, the trust was established in the bank as

the “Lester M. Chancellor Unified Credit Trust”.    On that same

date the trust was opened and funded with listed stocks, and the

bank and decedent began serving as cotrustees.    From the time the

trust was opened until her death, decedent never requested or

received any trust corpus.

     Decedent’s estate’s estate tax return showed a total gross

estate of $1,383,405.    This amount excluded the value of the

trust’s assets, which was $1,205,034 at the time of decedent’s

death.   In the notice of deficiency respondent determined that

decedent’s gross estate includes the fair market value of the

trust’s assets as of the date of her death because decedent had a

general power of appointment over them.

                             Discussion

     The parties have stipulated that the dispute in this case is

whether decedent’s power to invade the corpus of the trust
                                 - 4 -

requires the value of the trust assets to be included in her

gross estate under section 2041.2

A.   General Powers of Appointment--General Rules

      Section 2001 imposes a tax on the transfer of the taxable

estate of all persons who are citizens or residents of the United

States at the time of death.     The amount of the tax depends on

the size of the taxable estate, which is equal to the value of

the gross estate less specified deductions.     See secs. 2001(b),

2051.     The gross estate includes property with respect to which

the decedent had a general power of appointment created after

October 21, 1942.     Sec. 2041(a)(2).   Section 2041(b)(1) generally

defines a general power of appointment as “a power which is

exercisable in favor of the decedent, his estate, his creditors,

or the creditors of his estate”.

B.   The Ascertainable Requirement Exception

      A power to consume, invade, or appropriate trust income,

corpus, or both for the decedent’s benefit is not deemed a

general power of appointment if it is “limited by an

ascertainable standard relating to the health, education,

support, or maintenance of the decedent”.     Sec. 2041(b)(1)(A);


      2
      Pursuant to this stipulation we deem respondent to have
waived or conceded any issue as to whether decedent’s power as a
cotrustee to apportion trust income among herself and other trust
beneficiaries “according to their respective needs” required the
value of the trust assets to be included in her gross estate
under sec. 2041.
                                 - 5 -

sec. 20.2041-1(c)(2), Estate Tax Regs.     This exception entails

two requirements:     First, the power of appointment must be

limited by an ascertainable standard; and second, that standard

must relate solely to the decedent’s health, education, support,

or maintenance.     Estate of Little v. Commissioner, 87 T.C. 599,

601 (1986); Estate of Strauss v. Commissioner, T.C. Memo. 1995-

248.

       1.   The Requirement That the Power Be Limited by an
            Ascertainable Standard

       Mr. Chancellor’s will gave decedent power to invade trust

corpus for “necessary maintenance, education, health care,

sustenance, welfare or other appropriate expenditures needed by

* * * [Mr. Chancellor’s] wife and the other beneficiaries * * *

taking into consideration the standard of living to which they

are accustomed”.     In his surreply brief respondent concedes that

the will’s use of the phrase “taking into consideration the

standard of living to which * * * [the will beneficiaries] are

accustomed” satisfies the first requirement, that the power of

appointment be governed by an ascertainable standard.

       2.   The Requirement That the Power Relate Solely to Health,
            Education, Support, or Maintenance

       Respondent contends that decedent’s power fails the second

requirement of section 2041(b)(1)(A) because the terms “welfare

or other appropriate expenditures” fall outside the scope of the

requisite purposes.    A power conforms to the requisite purposes
                                - 6 -

if “the extent of the holder’s duty to exercise and not to

exercise the power is reasonably measurable in terms of his needs

for health, education, or support (or any combination of them).”

Sec. 20.2041-1(c)(2), Estate Tax Regs.      We look to applicable

State law--Mississippi law in this case--to determine the legal

rights and interests that decedent possessed under the trust.

Morgan v. Commissioner, 309 U.S. 78, 80, amended on denial of

rehearing 309 U.S. 626 (1940); Estate of Little v. Commissioner,

supra at 601.

          a.    “Necessary * * * Welfare”

     Some cases hold that a power that permits invasion of trust

corpus for purposes including “welfare” is not limited by an

ascertainable standard related solely to health, education,

support, or maintenance.   For instance, in Lehman v. United

States, 448 F.2d 1318, 1319 (5th Cir. 1971), the decedent was

given broad power to consume trust corpus whenever, in her own

discretion, she deemed the trust income “insufficient for her

support, maintenance, comfort, and welfare.”     The Court of

Appeals agreed with the Commissioner that under Texas law this

power was not “confined within legal limitations sufficiently

definite to exempt it from the statutory definition of a general

power.”   Id. at 1320.   And in Estate of Jones v. Commissioner, 56

T.C. 35, 37-41 (1971), affd. 474 F.2d 1338 (3d Cir. 1973), this

Court held that a power to consume trust corpus “in situations
                               - 7 -

affecting * * * [the decedent’s] care, maintenance, health,

welfare and well-being” was not limited to an “ascertainable

power for her health, support, or maintenance.”    In support of

their holdings each of these cases cited a regulation which

states:   “A power to use property for the comfort, welfare, or

happiness of the holder of the power is not limited by the

requisite standard.”   Sec. 20.2041-1(c)(2), Estate Tax Regs.

     Lehman and Estate of Jones, however, do not involve words of

limitation as appear in Mr. Chancellor’s will.    As previously

discussed, respondent concedes that the power set out in Mr.

Chancellor’s will satisfies the first requirement of the section

2041(b)(1)(A) exception.   The question, then, which is not

squarely addressed by the above-cited authorities, is whether

“necessary * * * welfare or other appropriate expenditures”, as

accompanied by the additional words of limitation in Mr.

Chancellor’s will, provides a broader standard than “health,

education, support, or maintenance” under section 2041(b)(1)(A).

     In Estate of Strauss v. Commissioner, supra, this Court held

that a power that was exercisable for the decedent’s “care and

comfort, considering his standard of living” as of the date of

the trustor’s death satisfied both requirements of the section

2041(b)(1)(A) exception.   This Court rejected the Commissioner’s

contention that “comfort”, as interpreted by applicable Illinois

law, would include items not within the meaning of “health,
                                 - 8 -

education, support, or maintenance”.     The Court noted that under

the regulations “the words ‘support’ and ‘maintenance’ are

synonymous and their meaning is not limited to the bare

necessities of life.”    Id. (quoting section 20.2041-1(c)(2),

Estate Tax Regs.).   The Court concluded that under Illinois

caselaw, “comfort” would be interpreted “so that the life tenant

was maintained ‘in the station in life to which she was

accustomed.’”   Id. (quoting Rock Island Bank & Trust Co. v.

Rhoads, 187 N.E. 139, 144 (Ill. 1933)).    The Court found little

difference between this standard and “support in his accustomed

manner of living”, which is an acceptable standard under the

regulations.    Id. (quoting sec. 20.2041-1(c)(2), Estate Tax

Regs.).   The Court stated:   “This leads us to conclude that a

standard designed to maintain the decedent in his station in life

does relate to the decedent’s health, education, support, or

maintenance, as interpreted by the regulations.”     Id.

     The Mississippi Supreme Court has endorsed the view that the

word “comfort” in a trust document is intended to maintain the

beneficiary’s standard of living as existed at the trust’s

creation.   Gulf Natl. Bank v. Sturtevant, 511 So. 2d 936, 938

(Miss. 1987).   We have discovered no case in which the

Mississippi Supreme Court has construed the term “welfare” as

used in a trust document.     This term was addressed, however, in

Blodget v. Delaney, 201 F.2d 589, 593 (1st Cir. 1953), which the
                               - 9 -

Mississippi Supreme Court cited with approval in Gulf Natl. Bank

v. Sturtevant, supra at 938.

     In Blodget v. Delaney, supra at 593, the Court of Appeals

observed that “the words ‘comfort and welfare’ * * * do not have

such sweeping subjective connotations” as the word “happiness”.

The Court of Appeals stated that in some circumstances “welfare”

might cover more “elements of the subjective” than “comfort” but

concluded that “it certainly is not as broad in its subjective

sweep as ‘happiness,’ ‘desire,’ or ‘use and benefit.’    Surely it

cannot possibly be construed to cover whim or caprice, or even to

cover an invasion of principal by the trustee to satisfy the life

beneficiary’s wish to make a gift.”    Id.   The Court of Appeals

concluded that under applicable Massachusetts law, taking into

account the life beneficiary’s circumstances and the trustee’s

duty to act in good faith for the best interests of both the life

beneficiary and the remainder interest, the Massachusetts Supreme

Court would equate the meaning of “welfare” as used in the will

“not so much to the meaning of ‘happiness,’ ‘desire’ or ‘use and

benefit’, as to ‘maintenance’ or ‘support.’    That is to say, we

think that court * * * would hold that ‘comfort and welfare’

* * * meant the physical comfort and state of physical well-being

to which the life beneficiary had become accustomed”.     Id. at

594; see also In re Buell’s Estate, 66 N.Y.S.2d 180 (1946)

(interpreting “welfare” under New York law as providing for
                              - 10 -

“physical comfort and well-being” in accordance with the

beneficiary’s accustomed standard of living).

     We believe that the Mississippi Supreme Court would

similarly construe the term “welfare” as used in Mr. Chancellor’s

will as part of the phrase “necessary * * * welfare * * * needed

by * * * [Mr. Chancellor’s] wife and the other beneficiaries of

this trust taking into consideration the standard of living to

which they are accustomed”.   In fact, taken in toto, with the

seemingly overlapping qualifiers “necessary” and “needed”

bookending the list of specified items which includes “welfare”

and which is further qualified by express reference to the

beneficiaries’ accustomed standard of living, Mr. Chancellor’s

will makes at least as clear as the will considered in Blodget v.

Delaney, supra at 593-594, that “welfare” was intended to refer

to decedent’s and the other beneficiaries’ maintenance and

support according to their accustomed standards of living.   See

Amoskeag Trust Co. v. Wentworth, 111 A.2d 198, 200 (N.H. 1955)

(stating that a testatrix’s “adoption of necessity and need as a

criterion of the nature of the payments she intended rules out

those which might contribute to the beneficiary’s happiness,

contentment, and peace of mind regardless of his need for them

and limits payments to those reasonably necessary in view of all

the circumstances”, taking into consideration “the manner and
                              - 11 -

style to which he was accustomed to live at or about the time of

the death of the testatrix” (citations omitted)).

          b.   “Other Appropriate Expenditures Needed” Et Cetera

     For similar reasons, we do not believe that the phrase

“other appropriate expenditures needed by * * * [Mr.

Chancellor’s] wife and the other beneficiaries of this trust

taking into consideration the standard of living to which they

are accustomed”, preceded as it is by a list of “necessary”

support-related purposes, was intended to permit decedent to

invade trust corpus for other than support-related purposes as

necessary to maintain her and the other beneficiaries’ accustomed

standard of living.   We agree with petitioner that the

Mississippi Supreme Court would most likely apply the rule of

ejusdem generis to construe the words “other appropriate

expenditures needed”, etc. as referring to expenditures that are

akin to or of like character with the expressly enumerated items

that precede this phrase in the will; i.e., “maintenance,

education, health care, sustenance, welfare”.3


     3
      The rule of ejusdem generis is that “‘where general words
follow the enumeration of particular classes of persons or
things, the general words will be construed as applicable only to
persons or things of the same general nature or class as those
enumerated.’” Cole v. McDonald, 109 So. 2d 628, 637 (Miss. 1959)
(quoting 59 C.J. 981); see Kan. City S. Ry. Co. v. McNamara, 817
F.2d 368, 372 n.5 (5th Cir. 1987); Estate of Short v.
Commissioner, 68 T.C. 184, 193 n.6 (1977). As the Mississippi
Supreme Court stated long ago:

     This rule, of course, excludes the suggestion that the
                              - 12 -

     We are mindful that as an artificial rule of construction,

ejusdem generis has “limited application” which must be exercised

with caution and is only applicable when the intention of the

testator is ambiguous.   Miller v. United States, 387 F.2d 866,

869 (3d Cir. 1968); see Morgan v. State, 44 So. 2d 45, 48-49

(Miss. 1950) (stating that the rule of ejusdem generis “has been

universally applied with some degree of strictness” and is “only

a rule of construction to aid in arriving at the true intention

of a statute or contract”).   But we disagree with respondent’s

assertion that “there is no ambiguity in the specific language at

issue”.   And we find implausible respondent’s suggestion that Mr.

Chancellor’s will, which states that he intended to convey by the

trust the largest portion of his estate that could be transferred

free from estate tax, reflects the drafter’s “affirmative and

intentional decision” to exceed the scope of the purposes

permitted under the section 2041(b)(1)(A) exception.

     Respondent suggests that applying the rule of ejusdem

generis would effectively render the words “other appropriate

expenditures” meaningless and thereby violate the maxim that



     mere use of general words is sufficient to indicate a
     purpose to include matters not ejusdem generis. It is
     but the application of a principle that governs men in
     their usual intercourse, and applies language to the
     subject with which the speaker is dealing, and limits
     or expands the words used to accord to his
     understanding and intention. [Leinkauf & Strauss v.
     Barnes, 5 So. 402, 404 (Miss. 1889).]
                              - 13 -

effect should be given to each and every word and phrase of a

document.   See, e.g., Malone v. Malone, 379 So. 2d 926, 929

(Miss. 1980).   But such concerns loom even larger under

respondent’s construction of the will.    More particularly, if, as

respondent seems to suggest, the power to invade corpus was

ultimately intended to apply in all-encompassing fashion to any

“appropriate expenditure”, it would be pointless for Mr.

Chancellor’s will to have listed specified purposes (“necessary

maintenance, education, health care, sustenance, welfare”) that

fall within the penumbra of “appropriate expenditures”.    Cf.

Leinkauf & Strauss v. Barnes, 5 So. 402, 405 (Miss. 1889)

(overruling an objection to the application of the rule of

ejusdem generis in construing a statute, stating “it would be

useless to specify certain things as to which the statute should

apply, if it was intended that it should apply to all other

things, whether ejusdem generis, or of a totally distinct

character.”).

     Respondent observes that the will’s power of appointment

language lists “other appropriate expenditures” in the

disjunctive from the other listed purposes, seeming thereby to

suggest that “other appropriate expenditures” must mean something

apart from the other listed purposes.    Although we do not view

the will’s use of the preposition “or” as controlling one way or

another, we observe that in other circumstances the Mississippi
                                - 14 -

Supreme Court, applying the rule of ejusdem generis, has

construed “or” to mean “and”.     Anderson v. City of Hattiesburg,

90 So. 163, 164 (Miss. 1922) (applying the rule of ejusdem

generis to construe a city ordinance against exhibiting “any

obscene, indecent, or immoral picture” as if it read “obscene,

indecent, and immoral.”).

C.   Conclusion

      In the final analysis, we believe that the phrase “welfare

or other appropriate expenditures needed by * * * [the

beneficiaries] taking into account the standard of living to

which they are accustomed”, preceded as it is by a list of

“necessary” support-related items, “merely rounds out the

standard of living concept”.    Estate of Wood v. Commissioner, 39

T.C. 919, 923-924 (1963) (holding that in a trust instrument

authorizing invasion of trust corpus for the beneficiary’s

“support, maintenance, welfare, and comfort”, the addition of the

words “comfort” and “welfare” did not cause the instrument to

fail the requirement of providing a reasonable standard for

determining the extent to which charitable remainders might be

depleted by power of invasion).

      This conclusion, we believe, is consistent with Mr.

Chancellor’s intent as revealed in his will.    Although he left

most of his estate to decedent outright, she was not the sole

beneficiary of the trust; Mr. Chancellor’s children and
                              - 15 -

grandchildren were also beneficiaries.    The cotrustees were

authorized to invade trust corpus to make “necessary” support-

related expenditures for any of these beneficiaries, “as needed”,

taking into account their accustomed standards of living.

Consequently, this case is not governed by the rule, sometimes

invoked by courts, that the power to invade principal should be

construed broadly where the beneficiary is the main object of the

testator’s bounty.   See, e.g., Doyle v. United States, 358 F.

Supp. 300, 308 (E.D. Pa. 1973).   To the contrary, we believe that

to implement Mr. Chancellor’s intent a Mississippi court would

construe the power narrowly to authorize invasion of trust corpus

only for support-related needs like those described in the will,

so as to conserve trust assets to provide, to the extent possible

and necessary, for all of the beneficiaries’ support and

maintenance during decedent’s lifetime.

     Accordingly, we conclude and hold that decedent’s power of

appointment was limited by an ascertainable standard relating

solely to her health, education, support, or maintenance so as to

meet the exception of section 2041(b)(1)(A).    Consequently,

decedent’s gross estate does not include the value of the trust

assets.4


     4
      In the light of this holding, it is unnecessary to address
petitioner’s alternative argument that pursuant to sec.
2041(b)(1)(C)(ii), decedent’s power over the trust property was
not a general power of appointment because she could exercise her
power only in conjunction with the bank.
                        - 16 -

To reflect the foregoing and respondent’s concessions,


                                   Decision will be entered

                              for petitioner.
