NO. 4-03-0740

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

JUSTICE MYERSCOUGH delivered the opinion of the court:

On June 8, 1995, the trial court admitted decedentGeorgiana Overturf's will and codicil to probate. The court alsoappointed decedent's daughters, Shirley Green (appellant) andMarian Chapman (appellee), independent executrixes of the estate. For federal estate-tax purposes, decedent's estate, including thepersonal probate-estate property ($327,100.64), the real probate-estate property ($716,283.73), and nonprobate joint-tenancyproperty ($605,811.88) totaled $1,649,196.25. Decedent's willdirected the executrixes to pay debts, expenses, and taxes out ofher personal probate estate so that no beneficiary would berequired to reimburse the estate. Decedent's personal estate,however, did not contain sufficient assets to pay all the estatetaxes and expenses. The court found the rule of equitableapportionment applied and ordered payment of a proportional shareof estate taxes by the daughters, who are recipients of thenonprobate joint-tenancy assets. Green appealed, arguing thecourt erred in holding that the rule of equitable apportionmentapplied to decedent's nonprobate estate. We reverse and remandwith directions.

I. BACKGROUND

Decedent, a widow, died on March 29, 1995. In her willand codicil, decedent named her daughters sole beneficiaries ofthe probate estate and appointed them as independentcoexecutrixes of the estate. Both daughters and their respectivechildren were also recipients of decedent's nonprobate joint-tenancy assets. The allocation of the nonprobate real-estateproperty transferred by joint tenancy included $321,479.26 toGreen, $4,161.52 to Green's children, $273,989.04 to Chapman, and$6,182.06 to Chapman's children. On June 8, 1995, the trialcourt admitted decedent's will to probate. Shortly after, thedaughters disclaimed their interests in the real probateproperty, and as a result, decedent's grandchildren inheriteddecedent's real probate estate. Both daughters agreed that theyare responsible for their respective children's estate taxobligations.

The parties agreed that decedent's estate's debtstotaled $473,886.96, including $374,886.96 in federal and stateestate taxes, $49,500 in executor fees, and $49,500 in legalfees. Decedent's will directs payments of estate taxes from herprobated personal estate. Specifically, article fifth of thewill states as follows:

"I direct that my Executors hereinafternamed retain possession of all of my farmreal estate for the farm year in which mydeath occurs and the proceeds of the grainrents therefrom shall be considered part ofmy personal estate.

I direct that my Executors pay from therest, residue[,] and remainder of my personalestate (including the proceeds of the sale ofgrain raised in the year in which my deathoccurs) all of my just debts, funeralexpenses, the expenses of administering myestate, the [f]ederal [e]state [t]ax (ifany), and all state inheritance taxes (ifany) assessed any legatee or devisee underthis [w]ill.

It is my will that all estate andinheritance taxes which shall become payableby reason of my death shall be treated aspart of my just debts[,] and no beneficiaryshall be required to reimburse my estate forany estate or inheritance tax on his or heraccount or chargeable to him or her."

Decedent's probate personal estate, however, only totaled$327,100.64, resulting in a $146,786.32 deficiency.

The parties disagreed on how to pay the outstandingestate debts. Green argued the will provided that the deathtaxes should be paid from the probate estate, and equitableapportionment should not apply to the nonprobate estate. Chapmanargued equitable apportionment should apply to the nonprobateestate and taxes attributable to the nonprobate assets should bepaid from those assets. The parties agreed that due to theinsufficiency of the decedent's probated personal estate, eachone would contribute to the estate. The parties then enteredinto an agreement that provided, without waiving their respectivepositions, Green would contribute $79,978.06 and Chapman wouldcontribute $68,806.26 to the estate to pay the outstanding tax. These contribution amounts are proportionate to the nonprobatejoint-tenancy assets that each party and their children received.

On June 6, 2003, the trial court held a hearing on theissue of apportionment of the estate debts. On June 18, 2003,the court found equitable apportionment applied to the nonprobateestate. On July 2, 2002, Green filed a motion forreconsideration, which the court denied on July 30, 2003. Thisappeal followed.

II. ANALYSIS

On appeal, Green argues the trial court erred inapplying equitable apportionment to decedent's nonprobate estatebecause decedent's will provided that estate taxes and fees attributable to nonprobate assets are to be paid from decedent'sprobate estate. We agree.

The interpretation of a will is a question of law thatthis court reviews de novo. See Thomson v. Ricks, 21 Ill. App.2d 465, 476, 158 N.E.2d 440, 445 (1959). The purpose of willinterpretation is to ascertain and, if possible, give effect tothe intention of the testator. Peck v. Drennan, 411 Ill. 31, 38,103 N.E.2d 63, 66 (1951). In interpreting a particular provisionof a will, the law authorizes and requires a consideration of thewhole will. Further, the testator's intention is to be gatherednot from one clause of the will alone, but from the instrument asa whole and all of its parts, bearing in mind the plan of thetestator as expressed in the entire will. Whitmore v. Starks, 17Ill. 2d 202, 206, 161 N.E.2d 254, 257 (1959).

In deciding beneficiaries' federal estate-taxobligations, Illinois courts have consistently applied thedoctrine of equitable apportionment to permit the apportionmentof the estate taxes among recipients of probate and nonprobateassets. However, Illinois does not allow equitable apportionmentas to nonprobate assets where the testator has expressed a clearintention to the contrary. In re Estate of Fry, 188 Ill. App. 3d336, 338-39, 544 N.E.2d 109, 111 (1989). The sole question inthe case before us, therefore, is whether decedent expressed aclear intention contrary to equitable apportionment in her will.

As stated above, decedent's will stated that all estateand inheritance taxes shall be treated as part of her debts andno beneficiary shall be required to reimburse the estate for anyestate or inheritance tax. In addition, in a codicil thatdecedent executed eight months before her death, decedentexpressly stated as follows:

"I give and bequeath upon my daughters,MARIAN CHAPMAN, of Pontiac, Illinois, andSHIRLEY GREEN of Saunemin, Illinois, in equalshares, share and share alike[,] all of myhousehold goods, furnishings[,] and personaleffects, including antiques, which I may ownat the time of my death, it being my desirethat my said two daughters be treated alikeand equally insofar as possible."

The above language demonstrates decedent's clear intention totreat her two daughters equally and not to require anybeneficiaries to reimburse her estate for taxes from theirpersonal accounts.

Such language is similar to the language in question inFry. In Fry, 188 Ill. App. 3d at 338, 544 N.E.2d at 110, articletwo of the decedent's will provided as follows:

"All estate and succession taxes,including interest and penalties payable byreason of my death, shall be paid out of andbe charged against the principal of myresiduary estate, without reimbursement fromany person."

The decedent's residuary estate, however, was insufficient tocover decedent's estate taxes. The parties argued whether thedoctrine of equitable apportionment should apply to thedecedent's nonprobate estate and whether the recipient of thenonprobate estate should be required to share in the taxes. Theappellate court in Fry found that the language in article twoclearly expressed the decedent's intention that "the taxes bepaid from the residuary estate and not from the nonprobate assetreceived by the respondent." Fry, 188 Ill. App. 3d at 340, 544N.E.2d at 111. The court, therefore, held that "the doctrine ofequitable apportionment cannot be applied here and thus therespondent cannot be required to share in the taxes and expensesof the estate." Fry, 188 Ill. App. 3d at 340, 544 N.E.2d at 111. The court lastly noted that "although the residuary estate willbe exhausted, there are ample assets *** in the probate estate topay the [f]ederal estate taxes and the expenses ofadministration." Fry, 188 Ill. App. 3d at 340, 544 N.E.2d at111-12.

Similar to the decedent in Fry, decedent in the instantcase clearly stated her desire not to have her daughters bepersonally responsible for her estate's taxes. In addition,decedent's probate estate also contains sufficient assets tosatisfy the outstanding estate obligations. Therefore, decedentexpressed a clear intention not to apply equitable apportionmentof her nonprobate estate taxes in her will. Accordingly, wereverse the trail court's judgment and hold that any deficienciesshould be assessed against decedent's probate real estate.

III. CONCLUSION

For the reasons stated, we reverse the trial court'sjudgment.

Reversed and remanded with directions.

MCCULLOUGH, J., concurs.

COOK, J., dissents.

I respectfully dissent and would affirm the trialcourt's decision.

Decedent attempted to divide her substantial estateequally between her daughters, Green and Chapman. Each receivedreal property under the will and each received nonprobate realestate through joint tenancies. It is difficult to divide realestate equally, however, and Green received real estate worthmore than Chapman. The majority reverses the trial court becauseit says it wants to treat the daughters equally. It is not equaltreatment, however, to split the estate tax equally betweenunequal recipients, i.e., to require Chapman to pay taxes on thereal estate received by Green. Chapman received real estateworth less than the real estate received by Green, and nowChapman is required to pay a disproportionate share of taxes.

I agree that Fry is the key case here. Fry begins withthe proposition that equitable apportionment, the distribution ofthe burden of estate taxes among the beneficiaries in the sameproportion as they respectively cause such expenses to beincurred, is the general rule in Illinois. Equitable apportion-ment promotes fairness and equality and makes good sense,although the concern has been expressed that Illinois does notprovide for equitable apportionment by statute. Fry, 188 Ill.App. 3d at 338, 544 N.E.2d at 111. Nevertheless, equitableapportionment will be applied unless "the testator has expresseda clear intention to the contrary." Fry, 188 Ill. App. 3d at339, 544 N.E.2d at 111.

In Fry, the testator directed that all taxes due byreason of her death be paid out of "'my residuary estate, withoutreimbursement from any person.'" Fry, 188 Ill. App. 3d at 338,544 N.E.2d at 110. Again, such a provision makes good sense. Under it, every specific gift made by the testator is honored infull, without any charge against the beneficiary. The taxes andexpenses of the estate are paid out of the residue, that which isleft of the estate after the various gifts are made. In a caselike ours, where the residue is divided equally between the twoindividuals who receive the rest of the estate, the direction forpayment from the residue may result in one individual paying morethan her share. Such a result may be justified, however, on thebasis that it is important that all specific gifts be honored infull, without concern that it may be necessary to liquidate thegift to pay the taxes on it. Division of what is left over inthe residue is generally less important to a testator than thespecific gifts that have been made.

In Fry, the question was whether the taxes on anonprobate gift of real estate should be paid out of the probateestate even after the residue was exhausted. Why shouldnonprobate gifts be favored over probate gifts? If a testatorgives 80 acres to one son by means of joint tenancy and another80 acres to another son by will, why should either son be givensome advantage in the payment of taxes?

The court in Fry stated that the intent of the testatorwas clear that the taxes be paid from the residuary estate andnot from the nonprobate asset received by the respondent. Thecourt went on to note that although the residuary estate will beexhausted, there were ample assets in the probate estate to paythe federal estate taxes and the expenses of administration. Fry, 188 Ill. App. 3d at 340, 544 N.E.2d at 111-12. It isdifficult to explain that reasoning. Fry relied upon In reEstate of Wheeler, 65 Ill. App. 2d 201, 203, 213 N.E.2d 35, 36(1965), but in that case the will provided that the taxes were tobe paid out of the principal of the estate, not the residuaryestate. Perhaps the explanation is that the will in Frycontained only one minor "specific" bequest, a bequest thatsingles out a particular thing the testator intends the donee tohave without regard to its value. Fry, 188 Ill. App. 3d at 337,544 N.E.2d at 110; see Landmark Trust Co. v. Aitken, 224 Ill.App. 3d 843, 856, 587 N.E.2d 1076, 1085 (1992). The Fry willapparently consisted primarily of a "general" bequest to thetestator's stepson (was the nonprobate gift to testator's naturalson?). A general bequest is one that could be satisfied out ofgeneral assets, one where the chief element of the gift is itsvalue. A general bequest is somewhat similar to a gift of theresidue. "[S]pecific legacies are preferred over generallegacies such that the specific legacies are satisfied first ifthe estate is insufficient to pay all legacies." Landmark Trust,224 Ill. App. 3d at 856, 587 N.E.2d at 1085; 755 ILCS 5/24-3(b)(West 2002).

None of that analysis has any relevance here. There isno question here whether the nonprobate assets should be favoredover the probate assets. Green and Chapman received both. Thereis no question whether general bequests should pay the taxes onspecific bequests. All the gifts to Green and Chapman, otherthan the residue, are specific gifts. The majority says that"[s]imilar to the decedent in Fry, decedent in the instant caseclearly stated her desire not to have her daughters be personallyresponsible for her estate's taxes." Slip op. at 7. Themajority decision does nothing to further that intent. Thedaughters will be personally responsible for the estate's taxesin any event. There is not enough money in the estate, either inthe residue or in general bequests, to pay the taxes on thespecific gifts of real estate. Green and Chapman are going tohave to reach into their own pockets to pay these taxes. Theonly question is whether Chapman has to pay taxes incurred byGreen's receipt of property. Nothing indicates any such intenton the part of the decedent. The decedent directed that taxes bepaid "from the rest, residue and remainder of my personalestate." That has been done to the extent possible. The trialcourt refused to require Chapman to pay the additional taxes, andso should we.