(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued April 29, 1997 -- Decided June 27, 1997
GARIBALDI, J., writing for a unanimous Court.
The primary issue presented on appeal is whether the estate of Delia Adair, the surviving spouse of
Herbert J. Adair and the income beneficiary of a "qualified terminable interest property" (QTIP) trust
established under his will, may recover from the remainderman of that trust Florida estate taxes attributable
to the inclusion of the QTIP trust in her estate.
Herbert J. Adair, a New Jersey resident, died on December 10, 1985. He was survived by his second
wife, Delia, and three adult children from his first marriage. At the time of his death, Herbert's estate was
worth approximately $15,000,000.
By will, Herbert created a marital trust of approximately $6,000,000 for the benefit of Delia.
Herbert's executors elected to qualify that trust as a QTIP trust, which deferred the tax on the trust until
Delia's death. Under the trust, Delia was to receive the income for life. She did not own or have any right
to the principal of the trust and could not expend the principal for herself or direct its disposition at her
death. PNC Bank was named Trustee of the QTIP trust.
According to Herbert's will, the QTIP trust terminated on Delia's death and Herbert's children
received the remaining principal. The will directed the trustees to pay any federal taxes due on the trust
from its principal before distributing the balance to the children. The will did not mention the payment of
state death taxes.
During the marriage, Delia had executed several wills wherein she bequeathed her estate to
Herbert's children. However, after her relationship with the children soured, Delia altered her will by
naming her relatives as primary beneficiaries. After her move to Palm Beach, Delia prepared a new will in
January 1989 and then another in February 1990. The February will clearly disinherited the Adair children.
The primary beneficiaries under the will were Delia's sister Eleanor, niece J. Susan Emilio, and nephew
Edward H. Korn. The will also contained a clause directing the QTIP trust to pay its own taxes. However,
on April 19, 1990, Delia prepared a final will and standby trust that contained no reference to the QTIP
trust. Those documents were in effect at her death.
When Delia Adair died on January 5, 1993, she was a resident of Palm Beach County, Florida.
Delia's niece, J. Susan Emilio, was appointed personal representative of the estate. At the time of Delia's
death, the QTIP trust was valued at $7,841,097 and became included in her gross estate for federal estate
tax purposes. Under Florida law, estate tax attributable to a QTIP trust is to be equitably apportioned
among the recipients of that trust, unless payment of the tax is "otherwise directed" by the governing
instrument of the testator. The total federal estate taxes attributable to the trust were $4,390,560; $3,296,282
attributable to the federal estate tax and $1,094,278 owed to Florida as part of the federal state death tax
credit. PNC paid the federal estate tax out of the QTIP trust but refused to pay the federal state death tax
credit. To avoid penalties and interest, Mrs. Emilio paid the tax out of Delia's estate.
PNC filed a declaratory judgment action to determine whether the accrued Florida estate taxes attributable to the QTIP trust should be paid out of the trust. Mrs. Emilio filed a separate complaint,
seeking reimbursement from the QTIP trust for the death taxes already paid to Florida out of the standby
trust. Both parties moved for summary judgment. The trial court granted PNC's motion, finding that the
standby trust clearly indicated responsibility for taxes on non-probate property such as the QTIP trust.
On appeal, the Appellate Division affirmed, finding that the language of the will represented a clear
and unambiguous direction that the standby trust would assume the burden of paying the Florida death taxes
due on the QTIP trust.
The Supreme Court granted certification.
HELD: Delia Adair, in her will and standby trust, did not otherwise direct against statutory tax
apportionment; therefore, the beneficiaries of the QTIP trust are not exonerated from contributing
their share of the Florida state death taxes attributable to the QTIP trust.
1. The Internal Revenue Code provides that the estate of a surviving spouse has the right to recover from
the recipients of the QTIP principal the amount by which the total federal estate tax exceeds the tax that
would have been payable if the QTIP trust had not been included in the gross estate. Such recovery does
not apply, however, if the decedent otherwise directs by will. (pp. 7-9)
2. State law controls the apportionment of state estate tax liability. Under Florida law, there is a
presumption in favor of apportionment that can only be overcome if the surviving spouse otherwise directs by
an appropriate governing instrument. A direction against apportionment may be explicit or implicit from the
terms of that instrument, but the direction must be clear and unequivocal. The court must also find that the
testator considered and made a deliberate and informed decision about the tax burden. (pp. 9-12)
3. Neither Delia's will nor her standby trust explicitly or implicitly "otherwise directed" against
apportionment. Neither the will nor the standby trust directs the actual payment of any death taxes. The
"boilerplate" provisions of those two instruments do not evince a clear and unequivocal intention by Delia to
otherwise direct against apportionment. Nor was there an implicit direction to pay such taxes from the
residuary estate. (pp. 12-16)
4. The lack of express or implied direction against apportionment precludes a finding that Delia made a
deliberate and informed decision about the burden of taxation. It would defy logic and common sense to
conclude that Delia intended to exonerate her stepchildren from paying their share of the tax in light of the
acrimonious relationship that existed prior to Delia's death. (pp. 12-19)
Judgment of the Appellate Division is REVERSED.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN STEIN and
COLEMAN join in JUSTICE GARIBALDI'S opinion.
SUPREME COURT OF NEW JERSEY
A-
138 September Term 1996
IN THE MATTER OF THE MARITAL
DEDUCTION TRUST UNDER WILL
OF HERBERT J. ADAIR, DECEASED.
-----------------------------
J. SUSAN EMILIO, as Personal
Representative of the ESTATE OF
DELIA DAVID ADAIR, Deceased,
Plaintiff-Appellant,
v.
PNC BANK, N.A., as Trustee of the
MARITAL DEDUCTION TRUST UNDER WILL
OF HERBERT J. ADAIR, Deceased,
Defendant-Respondent.
Argued April 29, l997 -- Decided June 27, 1997
On certification to the Superior Court,
Appellate Division.
Martin A. Heckscher, a member of the Pennsylvania
bar, argued the cause for appellant (Steven K.
Kudatzky, attorney).
Sean T. O'Meara argued the cause for
respondent (Archer & Greiner, attorneys).
The opinion of the Court was delivered by
GARIBALDI, J.
In this appeal, the primary issue is whether the estate of
Delia D. Adair, the surviving spouse of Herbert J. Adair and the
income beneficiary of a QTIP trust established under his will,
may recover from the remaindermen of that trust Florida estate
taxes attributable to the inclusion of the QTIP trust in her
estate.
Florida estate tax attributable to a QTIP trust is to be
equitably apportioned among the recipients of that trust, unless
the payment of the tax is "otherwise directed by the governing
instrument" of the testator. F.S.A. § 733.8l7(l)(e). Therefore,
we must decide whether Mrs. Adair, in her will and standby trust
agreement, "otherwise directed" against statutory tax
apportionment so that the state death taxes attributable to the
inclusion of the QTIP assets in her estate must be paid from her
residuary estate. The practical effect of that decision will
determine whether the remainderman of the QTIP trust, the
children of Mr. Adair's first marriage, will pay the approximate
$l.1 million Florida estate tax owed on the QTIP trust, or
whether the heirs of Mrs. Adair, her niece and nephew, will pay
that sum from her residuary estate, and reduce their inheritance.
Herbert J. Adair, a resident of New Jersey, died on December l0, l985. He was survived by his second wife, Delia D. Adair, and three adult children from his first marriage. The Adairs had
no children of their own. At the time of his death, Mr. Adair's
estate was worth approximately $l5,000,000.
By will, Mr. Adair created a marital trust of approximately
$6,000,000 for the benefit of his wife. Mr. Adair's executors
elected to qualify that trust as a "qualified terminable interest
property" (QTIP) under I.R.C. § 2056(b)(7). That election
deferred the tax on the trust until Mrs. Adair's death. Mrs.
Adair's sole interest in that trust was to receive the income for
life. She never owned or had any right to the principal of that
trust. She could not expend it for herself or direct its
disposition at her death. PNC Bank was named Trustee of that
trust.
In accordance with Mr. Adair's will, the QTIP trust
terminated upon Mrs. Adair's death and Mr. Adair's children
received the remaining principal. The will also directed Mr.
Adair's trustees to pay any federal taxes due on the trust from
the trust principal before distributing the balance to the
children. The will did not, however, mention the payment of
state death taxes.
At the time Mr. Adair filed his will, the QTIP statute was
new. Rather than risk possible loss of the federal tax
deduction, Mr. Adair's attorneys thought it prudent to leave the
will silent regarding the payment of state taxes and await
judicial interpretation of the QTIP trust's relationship to state
estate tax laws.
In order to reduce her estate tax burden, Mrs. Adair moved
to Palm Beach, Florida after Mr. Adair's death. During her
marriage, Mrs. Adair had executed several wills. In earlier
versions, Mrs. Adair had bequeathed her estate to Mr. Adair's
children. However, her relationship with his children became
strained and increasingly hostile. Indeed, even before Mr.
Adair's death, Mrs. Adair altered the principal beneficiaries of
her will from Mr. Adair's three children to her own relatives.
After her move to Palm Beach, Mrs. Adair prepared a new will
in January l989. In that will, as in earlier versions, Mrs.
Adair indicated that Mr. Adair's QTIP trust would pay any taxes
related to its inclusion in Mrs. Adair's estate. Mrs. Adair
prepared another will in February l990. Mr. Adair's children
were clearly disinherited in that will, and the primary
beneficiaries were Mrs. Adair's sister Eleanor, niece J. Susan
Emilio, and nephew Edward H. Korn. That will also contained a
clause directing the QTIP trust to pay its own taxes. On April
l9, l990, Mrs. Adair prepared a final will and standby trust that
contained no reference to the QTIP trust. Those documents were
in effect at her death.
Mrs. Adair died on January 5, l993, a resident of Palm Beach
County, Florida. Plaintiff, J. Susan Emilio, her niece, was
appointed personal representative of her estate.
At the time of Mrs. Adair's death, the QTIP trust was valued
at $7,84l,097 and became included in her gross estate for federal
estate tax purposes. I.R.C. § 2044. The aggregate federal
estate taxes attributable to that trust were $4,390,560;
$3,296,282 attributable to the federal estate tax and $l,094,278
owed to the State of Florida as part of the "federal state death
tax credit." PNC paid the federal estate tax, $3,296,282, out of
the QTIP trust. The federal estate tax is not at issue.
Although there is no federal deduction for state inheritance
or state estate taxes, I.R.C. § 2011 provides a maximum dollar-for-dollar credit against the federal estate tax for any state
inheritance taxes or state estate taxes paid. The amount of that
"state death tax credit" is determined by the amount of the
federal gross estate. I.R.C. § 20ll(b). States can adopt estate
tax schemes (called "sponge" or "slack" taxes) in order to take
advantage of that revenue-sharing mechanism. Florida has adopted
such a tax.See footnote 1 If a state does not enact such a tax, the full
amount would be paid to the federal government. 5 Boris I.
Bittker & Lawrence Lokken, Federal Taxation of Income, Estates
and Gifts § l32.4, at l23-24 (2d ed. l993) ("The credit can be
viewed as a rudimentary revenue-sharing device, by which the
federal government diverts funds to the states."); see also
Department of Revenue v. Golder,
326 So.2d 409 (Fla. l976)
(finding Florida estate tax exists so long as estate revenue-sharing exists, and holding any tax in excess of federal credit
violates state constitution).
PNC refused to pay the State of Florida the "federal state
death tax credit" of $l,094,278. Mrs. Emilio (to avoid penalties
and interest) paid that state tax out of the separate assets of
Mrs. Adair's estate.
PNC filed a declaratory judgment action to determine whether
the accrued Florida estate taxes attributable to the QTIP trust
should be paid out of the QTIP trust. Plaintiff then filed her
own complaint, claiming reimbursement from the QTIP trust for the
death taxes already paid to the State of Florida out of Mrs.
Adair's standby trust. Both parties moved for summary judgment.
The trial court granted PNC's motion for summary judgment,
finding that Mrs. Adair's standby trust clearly indicated
responsibility for taxes on non-probate property such as the QTIP
trust.
The Appellate Division, in an unpublished opinion, affirmed.
The panel, applying Florida's "apportionment" statute,See footnote 2 held
that the language in Mrs. Adair's standby trust, indicating that
taxes will be paid from her estate for all property "whether or
not" passing under the will, applied to the QTIP trust. The
panel concluded that this language "clearly and unequivocally"
encompassed non-probate assets, including the principal of the
QTIP trust, and represented an unambiguous direction that Mrs.
Adair's standby trust would assume the burden of paying the
Florida death taxes due on the QTIP trust.
We granted plaintiff's petition for certification, but
denied PNC's cross-petition for certification on the issue of
Florida's jurisdiction to tax a New Jersey trust. l
47 N.J. 263
(l996). We now reverse.
In l98l, the Internal Revenue Code was amended, as part of the Economic Recovery Tax Act (ERTA) to include Section 2056(b)(7)(B), which in effect created the QTIP trust. Before the passage of ERTA, the Code allowed a maximum marital deduction of 50" of the value of the estate of the first spouse to die and that deduction was available only in circumstances where the
surviving spouse was given control over the disposition of the
marital property at the time of the surviving spouse's death.
However,
[a]s divorce and remarriage rates rose, Congress
became increasingly concerned with the difficult
choice facing those in second marriages, who could
either provide for their spouse to the possible
detriment of the children of a prior marriage or
risk under-endowing their spouse to provide
directly for the children. In the Economic
Recovery Act of l98l, Congress addressed this
problem by creating the QTIP exception to the
terminable property interest rule. According to
the House of Representatives Report, the QTIP
trust was designed to prevent a decedent from
being `forced to choose between surrendering
control of the entire estate to avoid imposition
of estate tax at his death or reducing his tax
benefits at his death to insure inheritance by the
children.'
[Estate of Shelfer v. C.I.R., 86 F.3d l045,
l049 (llth Cir. l996) (citations omitted).]
Thus, a decedent can now provide for a surviving spouse while
controlling the ultimate disposition of the property after the
surviving spouse's death. See generally Ibid. (stating "the . .
. QTIP trust provisions . . . liberalize[d] the marital deduction
to cover trust instruments that provide ongoing income support
for the surviving spouse while retaining the corpus for the
children or other beneficiaries").
Section 2056(b)(7)(B)(i) of the Code defines "qualified
interest trust property" as property 1) passing from a decedent
to a surviving spouse, 2) in which the surviving spouse has a
qualified interest for life, and 3) for which an election was
made at the time of payment of the decedent's estate taxes.
The value of QTIP property is deducted from the decedent's gross
estate, and no taxes are paid on it at the decedent's death.
I.R.C. § 2056(a). The tax owed on the QTIP property is deferred
until the death of the surviving spouse, at which point the QTIP
property is included within the surviving spouse's gross estate.
I.R.C. § 2044.
Section § 2207A(a)(l) of the Code provides that the estate
of the surviving spouse has the right to recover from the
recipients of the QTIP principal the amount by which the total
federal estate tax exceeds the tax that would have been payable
if the QTIP trust had not been included in the gross estate.
Such recovery does not apply, however, "if the decedent otherwise
directs by will." I.R.C. § 2207A(a)(2).
State law controls the apportionment of state estate tax liability. Riggs v. Del Drago, 317 U.S. 95, 63 S. Ct. l09, 87 L. Ed. l06 (1942); In re Estate of Penney, 504 F.2d 37, 40 (6th Cir. 1974).
The Florida apportionment statute provides, in relevant part:
[T]he balance of the net amount of the tax . . . . shall be equitably apportioned among, and paid by, the recipients and beneficiaries of the properties or interests, in the proportion that the value of the property or interest of each included in the measure of the tax bears to the total value of all the properties and interests included in the measure of the tax, except as otherwise directed by the governing instrument.
Under that section, the estate of a surviving spouse may recover from the QTIP trust the incremental amount by which the Florida estate tax is increased due to the inclusion of the value of that QTIP trust in the surviving spouse's estate. That statute creates a presumption in favor of apportionment that can only be overcome if the surviving spouse "otherwise direct[s]" by an appropriate governing instrument. A direction against apportionment
may be explicit or implicit from the terms of the governing instrument, but must be clear and unequivocal; provided, however, that an implicit direction against apportionment is not sufficient to avoid the apportionment under state or applicable federal law unless the court also finds that the testator considered and made a deliberate and informed decision about the burden of taxation.
That section essentially codifies a test originally articulated in Ferrone v. Soffes, 558 So.2d 146 (Fla. Dist. Ct. App. 1990). The Ferrone court interpreted an earlier version of F.S.A. § 733.817 that did not contain the "explicit and implicit" distinction, but provided an "otherwise directed" exception to avoid the application of the apportionment statute. Id. at 147.
The testator's will provided that the executor would pay "all debts allowed as claims against my estate, my funeral expenses, and all expenses of administration of my estate, and all estate, inheritance, succession, and transfer taxes which may be assessed by reason of my death." Ibid. The question before
the court was whether that language sufficiently overcame the
presumption of apportionment, as applied to jointly held property
that passed to other tenants by right of survivorship at the time
of death.
In assessing the "otherwise directed" exception to Florida's
apportionment statute, the court stated:
the statute requires . . . a clear and unequivocal
direction in the will in order to require the estate to
bear the burden of taxation for property outside the
will. Although no particular form of words is
required, the intention to shift the burden of taxation
must clearly appear.
To meet that burden, the court concluded that the "will must expressly refer to the statute, or expressly indicate that the estate is to bear the burden of taxation for property passing outside the will." Ibid. According to the court, requiring such unequivocal language would make it "unmistakably clear that the testator considered the issue and made a deliberate decision about the burden of taxation." Ibid.
Applying those principles to the testator's will, the court held that the relevant language was insufficient to direct against apportionment for non-probate property such as joint tenancies. As such, the court remanded for an evidentiary hearing that would consider external evidence to clarify ambiguities found in the testamentary language. Id. at 148; see also First Nat'l Bank of Fla. v. Moffett, 479 So.2d 312 (Fla.
Dist. Ct. App. 1985) (holding construction of instrument
necessary in face of ambiguous language).
The critical issue presented in this case is whether Mrs. Adair's will and standby trust evinces a "clear and unequivocal" direction to overcome the presumption of apportionment. If so, the principal beneficiaries of the QTIP trust are exonerated from paying their pro-rata shares of the Florida estate tax in compliance with F.S.A. § 733.817(2)(d).
According to the terms of her April l990 will, Mrs. Adair's assets not otherwise distributed by the will's terms "poured-over" to her trust. Through her will, Mrs. Adair directed the personal representative to seek payment from the trustee of her standby trust of
such amount or amounts as my Personal Representative, in her judgment, may determine to be required for the payment of debts, funeral and administration expenses, in connection with the administration of my Estate and Estate and like taxes payable by reason of my death.
In addition, the standby trust provided:
All estate, inheritance, succession and other
death taxes, including any interest or
penalties thereon, imposed or payable by
reason of [Mrs. Adair's] death with respect
to all property comprising his [sic] gross
estate for death tax purposes, whether or not
such property passes hereunder, shall upon
the written request of the Personal
Representative of [Mrs. Adair's] estate [sic]
be paid to such Personal Representative . . .
out of the principal of the trust estate.
The Trustee shall not be responsible for the
determination of such taxes, nor shall the
Trustee be required to determine or inquire
into the availability of funds for such
purposes from [Mrs. Adair's] probate estate.
We observe that those documents were drafted by a Florida
attorney who had not prepared any of Mrs. Adair's prior wills.
Mrs. Adair's Florida attorney testified that the April l990 will
and trust did not contain language relating to the QTIP trust
because those documents were designed in the event that Mrs.
Adair became incapacitated and not as an estate plan. He
testified that he did not discuss tax issues with Mrs. Adair.
An explicit direction against apportionment can be
determined from the language of a governing instrument. When
only an implicit direction against apportionment exists, however,
the presumption against apportionment is overcome only where the
testator made a "deliberate and informed decision" about the
burden of taxation. F.S.A. § 733.817(2)(d). In that analysis,
extrinsic evidence beyond the four corners of the pertinent
testamentary documents is relevant. Whether the direction
against apportionment is either explicit or implicit, in either
case, it must be clear and unequivocal.
The only reported case interpreting the Florida amended
apportionment statute in the context of QTIP trusts is Fort Wayne
National Bank v. Barnett Banks Trust Co.,
637 N.E.2d 1301 (Ind.
Ct. App. 1994). The facts there were very similar to the facts
in this case. The decedent, Maurice, and his spouse, Louise,
were married and had no children, but Louise had a child from a
previous marriage. Id. at 1303. Maurice established a QTIP
trust in favor of Louise. Ibid. After Maurice's death, Louise
moved to Florida and executed a will and trust that revoked her
prior wills. Ibid. Her new will provided:
I direct that all estate, inheritance, succession and
other death taxes of any nature . . . with respect to
property passing under this will or any other property,
shall be considered a cost of administration of my
estate, and that such taxes, together with all debts I
am legally obligated to pay at the time of my death . .
. shall be paid out of my residuary estate without
apportionment.
Louise's trust indicated that she designed her estate plan to provide "maximum financial security" to her beneficiary, her daughter. Ibid. The trustee for Louise's estate argued that because Louise was not obligated, under Florida law or the Internal Revenue Code, to pay the taxes on the QTIP Trust unless she "otherwise directed," she could not be legally obligated to pay the tax. Ibid. Therefore, there was an ambiguity in the will's terms with regard to apportionment. Maurice's trustee argued that there was no ambiguity in the will. Ibid.
Finding sufficient ambiguity to allow external evidence of Louise's intent to apportion, the court concluded:
it is clear that the words 'which I am legally
obligated to pay' modify the direction within the
paragraph. Because Louise's estate was entitled to
recover the incremental federal tax attributable to the
value of the QTIP property, the plain meaning of the
qualification is readily susceptible to a reading that
she did not direct the payment of taxes attributable to
the QTIP property. Thus, an ambiguity exists.
External evidence convinced the court that Louise did not intend to pay the QTIP taxes out of her estate. Id. at 1305.
In this case, neither Mrs. Adair's will nor standby trust explicitly or implicitly "otherwise directed" against apportionment. Mrs. Adair's will merely directed her personal representative to request payments from her standby trust of such an amount as the personal representative, "in her judgment, may determine to be required for the payment of debts, funeral and administration expenses, in connection with the administration of my Estate and Estate and like taxes payable by reason of my death". That provision does not direct her personal representative actually to pay any death taxes. In fact, the word "required," as used in Mrs. Adair's will, can only mean debts and death taxes that Mrs. Adair's estate would be "legally obligated to pay." Thus, as in Fort Wayne, an ambiguity exists in the will and extrinsic evidence should be considered to determine whether Mrs. Adair intended to "otherwise direct" against apportionment.
In her standby trust, Mrs. Adair did not direct her trustee to pay the Florida estate taxes. The trustee was directed to pay to Mrs. Adair's personal representative only such funds as she requests for the payment of taxes. There is no direction, however, for the trustee to pay any death taxes to the taxing authorities.
The tax provisions in Mrs. Adair's standby trust and will
are generic, boilerplate provisions. For example, the trust
agreement refers to Mrs. Adair in the masculine. Additionally,
the paragraphs of Mrs. Adair's will were misnumbered. Such
generalized instructions do not evince a clear and unequivocal
intention by Mrs. Adair to "otherwise direct" the pro rata
apportionment of Florida estate taxes on estate property. See
Estate of Swallen v. C.I.R.,
98 F.3d 9l9, 924-25 (6th Cir. l996)
(holding boilerplate tax clause does not present clear direction
and is ambiguous). Furthermore, we find no implicit direction to
pay such taxes from her residuary estate. Thus, the lack of an
express or implied direction against apportionment precludes a
finding that Mrs. Adair "made a deliberate and informed decision
about the burden of taxation." Indeed, all the evidence of her
intent points in the opposite direction.
We conclude, therefore, that there is no explicit or
implicit direction in Mrs. Adair's testamentary documents that
statutory apportionment should not apply. Our conclusion is in
harmony not only with decisions interpreting Florida law, Fort
Wayne and Ferrone, but also with other states that have addressed
the issues raised in this case. For example, in In re Gordon,
510 N.Y.S.2d 815 (N.Y. Sur. Ct. 1986), at issue was a New York
estate law provision that was adopted specifically to cover QTIP
trusts. The statute contained a presumption for apportionment
unless the testator "otherwise directed." Id. at 817.
In that case, the testator's will contained language very
similar to the language relied on by the lower courts in this
case. The will directed that death taxes be paid by the
residuary estate "whether such property passes under or outside
my will." Ibid. That language, according to the court, was
insufficient to direct against apportionment because an explicit
reference to QTIP property was absent. Id. at 818. In the
absence of such an express reference, the presumption that "most
testators do not intend to apply a general tax exoneration clause
to QTIP property" was not overcomeSee footnote 3. Ibid.; see also In re
Kramer,
610 N.Y.S.2d 31 (N.Y. App. Div. 1994) (ordering
apportionment based on lack of explicit mention of QTIP trust,
even though testatrix explicitly ordered apportionment for other
types of non-probate property).
Gordon exemplifies the view in a majority of jurisdictions
requiring explicit reference to QTIP property in tax
apportionment clauses. See, e.g., Estate of Vahlteich v.
Commissioner, 95-2 U.S.T.C. ¶ 60,218 (6th Cir. 1995)
(interpreting Ohio statute, Ohio Rev. Code Ann. § 2113.86 (I),
and finding decedent's estate need not pay wife's QTIP trust
taxes); Branch Banking & Trust Co. v. Staples,
461 S.E.2d 921
(N.C. Ct. App.)(applying apportionment statute and finding
express direction for apportionment against QTIP trust), review
denied,
463 S.E.2d 233 (N.C. l995); Firstar Trust Co. v. First
Nat'l Bank of Kenosha,
525 N.W.2d 53 (Wis. Ct. App. 1994)
(applying Gordon and holding absent explicit direction, general
"pay all taxes" clause does not include tax on non-probate
property), aff'd in part, rev'd in part,
541 N.W.2d 467 (Wis.
1995); Cf. In re Miller,
595 N.E.2d 630 (Ill. Ct.
App.)(interpreting clause requiring payment of taxes caused by
testatrix's death as "unambiguous" and clearly including QTIP
trust taxes), appeal denied,
602 N.E.2d 453 (Ill. 1992).
There is nothing in Mrs. Adair's will or standby trust that evidences an intention to exonerate her stepchildren from contributing their share of the tax. The sole beneficiaries under her will and standby trust are her relatives, primarily her niece, J. Susan Emilio, and her nephew, Edward H. Korn. Indeed, the record is replete with the bitter feelings between Mrs. Adair and Mr. Adair's children. It defies logic and common sense to conclude that Mrs. Adair, who bitterly disliked Mr. Adair's children, intended to exonerate them from paying the Florida estate tax on the QTIP trust, so that her heirs (her niece and nephew) would instead have to pay the $l.l million in death tax on the QTIP trust from their inheritance.
Accordingly, the court finds that Mrs. Adair did not, in her
will or standby trust, exonerate the beneficiaries of the QTIP
trust from contributing their share of taxes.
The judgment of the Appellate Division is reversed.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN STEIN and COLEMAN join in JUSTICE GARIBALDI'S opinion.
NO. A-138 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
IN THE MATTER OF THE MARITAL
DEDUCTION TRUST UNDER WILL
OF HERBERT J. ADAIR, DECEASED.
-----------------------------
J. SUSAN EMILIO, as Personal
Representative of the ESTATE OF
DELIA DAVID ADAIR, Deceased,
Plaintiff-Appellant,
v.
PNC BANK, N.A., as Trustee of the
MARITAL DEDUCTION TRUST UNDER WILL
OF HERBERT J. ADAIR, Deceased,
Defendant-Respondent.
DECIDED June 27, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice Garibaldi
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1Section 198.02 of the Florida State Tax Code provides as
follows:
A tax is imposed upon the transfer of the
estate of every person who, at the time of
death, was a resident of this state, the
amount of which shall be a sum equal to the
amount by which the credit allowable under
the applicable federal revenue act for
estate, inheritance, legacy, and succession
taxes actually paid to the several states
exceeds the aggregate amount of all
constitutionally valid estate, inheritance,
legacy, and succession taxes actually paid to
the several states of the United States
(other than this state) in respect of any
property owned by such decedent or subject to
such taxes as a part of or in connection with
his estate. All values shall be as finally
determined for federal estate tax purposes.