A man created a revocable trust that was to hold his assets for the benefit of his wife after his death. The trust terms provided that upon the man’s death, his wife would receive the trust income monthly, not to exceed $1,000 unless she had an illness that required more money to meet her needs. Upon the wife’s death, the trust “interest” was to be paid to the man’s cousin during the cousin’s lifetime, and then to the cousin’s issue after his death.

The trust was to terminate 20 years after the death of the last to die of the wife and the cousin. At that time, the remaining trust corpus was to be distributed to a cemetery owned and operated by a city in Oklahoma. Before the man’s death, he also executed a will that provided instructions on the distribution of certain assets to his wife, his cousin, the cemetery, and other beneficiaries.

Shortly after his death, differences arose between his wife and his cousin concerning the rights and interests of each of the beneficiaries under both the will and the trust. Over the course of a year, the wife, the cousin, the cemetery, the executor/trustee, and a guardian ad litem for the unborn issue of the cousin negotiated an agreement to settle these issues.

Under the terms of the agreement, the trust would be terminated and its assets distributed directly to certain beneficiaries. The cemetery will receive a set amount. The IRS, in a technical advice memorandum, determined that this distribution to the cemetery will qualify for a charitable deduction under §2055(a)(1). The distribution qualifies for the deduction even though neither the bequest in the decedent’s will nor the transfer of the remainder interest in the trust would have qualified for the estate tax charitable deduction.