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In re Sued

Sur Ct, Kings County
Oct 5, 2011
2011 N.Y. Slip Op. 51797 (N.Y. Surr. Ct. 2011)

Opinion

2262/10

10-05-2011

In the Matter of the Construction of in the Last Will and Testament of Sarah Sued, a/k/a SALLY SARAH SUED, a/k/a SALLY SUED, Deceased.


Appearances: For the executor (Issac Sued): Dory Salem, Esq., Salem, Shor & Saperstein, 3000 Marcus Avenue, Lake Success, NY 11242.

Diana A. Johnson, J.

This is a proceeding to construe the last will and testament of Sarah Sued. The testator died on April 18, 2010, survived by five children. Her will, dated September 1, 2006 (the "Will"), was admitted to probate on July 2, 2010 and letters testamentary issued to petitioner, one of her children. Article SECOND of the Will established a credit shelter trust for her husband, with remainder to her children. Article THREE left the "rest, residue and remainder" of her estate to her husband outright. Her husband predeceased her and she provided in Article FOURTH that if her husband predeceased her, she left "all the rest, residue and remainder of my estate, real, personal and mixed and wheresoever situated" as follows:

A. I give and devise the real property I own at 1447 Ocean Parkway, Brooklyn, New York, to my daughter ELAINE GROSSMAN.
B. All the rest and remainder of my estate equally among my following five children: AARON SUED, ELAINE GROSSMAN, ISAAC SUED, HELEN GRAZI AND FRIEDA ZAFFARESE, equally and per stirpes.

The estate is sufficiently large to generate a New York State estate tax. Article FIFTH of the will provides that "All estate, inheritance, transfer, succession or other similar taxes shall be payable out of the residuary of my estate". The executor asks that the Court construe the gift to real property to Elaine Grossman in Article FOURTH(A) as a preresiduary gift and the remainder clause of Article FOURTH(B) as the residuary estate. The executor brings this construction proceeding, since he claims that not all of the residuary beneficiaries agree with his interpretation.

Discussion

In the Will in question, Article FIFTH directs that the payment of estate taxes be paid from the residuary estate. The problem is that the Will contains two residuary clauses. The first is found in the preamble to Article FOURTH, which disposes of the "all rest, residue and remainder of my estate, real , personal and mixed and wheresoever situated" of the testator's estate if the testator's husband predeceased the testator. The second is Article FOURTH(B), which purports to dispose of the "rest and remainder" of the testator's estate after the devise of real property in Article FOURTH(A).

The executor asks the Court to construe Article FOURTH(B) as the true residuary estate. The effect will be that all estate taxes will be apportioned among the beneficiaries of Article FOURTH(B) and the devise of real property under FOURTH(A) will pass to the devisee free of New York estate taxes. No objections have been filed to the petition for a construction, although the executor states that not all of his siblings agree with his interpretation.

The executor treats the matter as purely one of construction. He alleges that the "residuary estate", to which tax exoneration provision of the Will applies, is not clear. In construing a will, the Court looks first at whether the will's provisions are clear. If there is no ambiguity, the court should interpret the will in accordance with the testator's intent as expressed in the will. If there is an ambiguity, the Court should take extrinsic evidence of the testator's intention.

However, construction of a tax apportionment clause cannot be made without considering the special rules governing the State's apportionment statute, EPTL 2-1.8. As Surrogate Delahanty wrote in Matter of Mills, 189 Misc 136, 142 (Sur Ct, NY County 1946), aff 272 AD 229 (1st Dept 1947), aff 297 NY 1012 (1948):

The question of allocation should not be approached as would a construction question where at all events the meaning of the text must be determined from the content of the will. In a tax allocation problem the text of the will is to be scanned only to see if there is clear direction not to apportion; and if such explicit direction is not found, construction of text ceases because the statute states the rule. (emphasis in original).

EPTL 2-1.8 provides that whenever it appears that a fiduciary may be required to pay an estate tax with respect to property included in the gross estate, "the amount of the tax, except in a case where the testator otherwise directs in her will" shall be equitably apportioned among the persons to whom the property is disposed of "in accordance with the rules of apportionment set forth, and the persons benefited shall contribute the amounts apportioned against them" (EPTL 2-1.8[a]). EPTL 2-1.8(c) provides that unless otherwise provided in the will or non-testamentary instrument, apportioned among the beneficiaries, in proportion to the benefit received (EPTL 2-1.8[c]).

There is a strong public policy in favor of apportionment (Matter of Kindermann, 21 NY2d 790 [1968]). Where there is a clear tax exoneration clause, it will control. Where the exoneration clause is not "clear and unambiguous", the apportionment statute applies (Matter of Pepper, 307 NY 242, 251 [1954]; see also Matter of Shubert, 10 NY2d 461 [1962]; Matter of Mills, 297 NY 1012 [1948]; Matter of Bros, 11 Misc 2d 943 [Sur Ct, NY County 1958], aff 7 AD2d 978 [1st Dept 1959]). ). Those who contend against apportionment have the burden of proof (Matter of Pepper, supra).

Accordingly, the courts have applied a rule of strict construction where exoneration from apportionment is alleged (Matter of Pepper, supra; Matter of Owen, supra). "In case of doubt as to what the will means on the subject of taxes the statutory direction to apportion is absolute" (Matter of Mills, supra, 189 Misc 136, 141, cited with approval in Matter of Pepper, supra at 251).

Where the will directs payment of federal and State estate taxes out of the residuary estate, taxes are to be apportioned among the residuary beneficiaries unless there is a clear direction against apportionment. [Provisions that estate taxes are to be paid out of the residuary estate] do not amount to unambiguous directions against proration within the residuary itself" (Matter of Shubert, supra at 471; see also Matter of Cromwell, 303 NY 681 [1951]).

Despite this heightened standard of proof, the Court of Appeals has indicated that EPTL 2-1.8 is not a canon of construction, but a directive to apportion estate taxes among all testamentary beneficiaries unless the will provides otherwise (Matter of Kindermann, 21 NY2d 790 [1968]).

In Matter of Kindermann, Article THIRD of the will directed that estate taxes be paid from the residuary estate and that "no part thereof be charged against any legatee, devisee or beneficiary other than other receiving my residuary estate." However, the will contained multiple residuary dispositions, requiring the court to construe the will to determine which provision constituted the residuary estate for purposes of apportioning estate taxes.

In Article SIXTH, the testator provided that "All the rest, residue and remainder of my estate, real, personal and mixed, wheresoever situate . . . I give devise and bequeath to my EXECUTORS, hereinafter named" and directed that they pay therefrom various sums of money to various individuals and charities named in Article SIXTH(a) to SIXTH(i). Article SIXTH(j) provided that:

The balance of my residuary estate, including any lapsed legacies, then remaining, I direct my EXECUTORS to divide into two equal parts or shares, and to pay one of such equal parts or shares to MOTHER CHURCH FIRST CHURCH OF CHRIST SCIENTIST . . . and the remaining equal part or share to the WARTBURG ORPHAN FARM SCHOOL OF EVANGELICAL LUTHERAN CHURCH

The executors construed Article SIXTH(j) as the true residuary clause and apportioned the estate taxes between the two charitable beneficiaries of SIXTH(j). In the proceeding to settle their account, the Attorney General and the Christian Scientist Church objected, contending that the taxes should be apportioned against all of the legacies contained in Article SIXTH, on the ground that Article SIXTH was the true residuary estate.

The Surrogate sustained the objections, finding that the multiple residuary clauses created an ambiguity as to which was the true residuary clause, so that the statutory apportionment applied (Matter of Kindermann, 48 Misc 2d 607, 609 [Sur Ct, Westchester County 1965]). In three to two decision, the Appellate Division affirmed the decision of the Surrogate (Matter of Kindermann, 27 AD2d 856 [2d Dept 1967]).

The Court of Appeals reversed (Matter of Kinderman, 21 NY2d 790, 791 [1968]). In a memorandum opinion, five of the judges adopted the opinion of the dissenting judges in the Appellate Division, finding that the appearance of a residuary of a residuary was illusional since there was more than sufficient money in the estate to pay all the unqualifiedly directed payments in subparagraphs (a) through (i); that the true and real residuary was delineated in subparagraph (j), in which no amount was specified and upon which the testatrix relied to prevent intestacy as to any of her property, and that she intended the tax exoneration clause in her will to exonerate the legacies contained in subparagraphs (a) through (i) (id. at 791).

Chief Judge Breitel, concurred, in an opinion in which Judge Jason agreed. Judge Breitel argued that the decisions applying strict rules of construction of exoneration clauses should be relaxed. Judge Breitel argued that matter should treated as one of construction. "Strict construction is practically mischievous, and a reasonable interpretation just. The statute does not forbid such interpretation of the whole will and consequent construction of the tax clause, and, therefore, I agree that the testatrix' intention should be effectuated" (id. at 793). Construing the provision of Article THREE that none of the legatees, devisees or beneficiaries "other than those receiving my residuary estate" should bear the burden of estate taxes, Judge Breitel found that it was evident from the provisions of the will, read as an entirety, including "the relationships of the donees to the testatrix, and the financial consequences, that the primary intra-residuary gifts were not intended to bear a tax burden" (id.)

Accordingly, this Court must construe the Will to determine the proper apportionment of estate taxes, attempting to effectuate the intention of the testator in accordance with the testator's intent as expressed in the will. The court must first look within the four corners of the instrument to determine the grantor's intent, which "is to be construed as written and the [testator's] intention determined solely from the unambiguous language of the instrument itself" (Mercury Bay Boating Club v San Diego Yacht Club, 76 NY2d 256, 267 [1990]). Unless an intention to deviate from the apportionment rule of EPTL 2-1.8 is found, EPTL 2-1.8 governs.

In the instant case, the Will contains a tax exoneration clause, Article FIFTH, which provides that estate taxes are to be paid out of the residuary estate. The residuary estate is defined to be all property in an estate which has not otherwise been disposed of by the terms of the will (see Morton v Woodbury, 153 NY 243 [1897]; Matter of Gray, 176 Misc 829 [Sur Ct, NY County 1941, aff 266 AD 732 [1st Dept 1943], aff 292 NY 532 [1944]). Phrases such as "all of the rest of my estate" are normally construed as a residuary clause (see In re Sykes' Will, 53 NYS2d 442 [Sur Ct, Nassau County 1945]) and liable for payment of estate taxes under a will providing that estate taxes are to be paid out of the residuary (In re Goldman's Estate, 145 NYS2d 919 [Sur Ct, NY County 1955]).

The Will contains two possible residuary clauses, the residuary clause of Article FOURTH and the residuary clause of Article FOURTH(B). Reading the Will as an entirety, it is clear that the residuary clause is contained in Article FOURTH of the Will and not, as the executor argues, in Article FOURTH(B). This construction is supported by the plain terms of Article FOURTH, which contains the broadest possible language, "all the rest residue and remainder of my estate, real, personal and mixed and wheresoever situated", that is typically found in a residuary clause. The clause of Article FOURTH(B) is more limited, providing for the disposition of the "rest and remainder" of the testator's estate after the devise of real property in Article FOURTH(A). This is more like the language of a provision disposing of the remainder of the residuary estate (see e.g. Matter of Jaret, 44 Misc 2d 262 [Sur Ct, Kings County 1964]).

Nor can it be said that the residuary clause of Article FOURTH is "illusory". The testator clearly provided for the disposition of her residuary estate in Article THIRD, after creating a marital trust for her husband in the event that her husband survived her. The language used, "all the rest, residue and remainder of my estate", is broader than the language of Article FOURTH(B).

Finally, the effect of finding that the residuary estate is created by Article FOURTH(B) would be to relieve the child receiving the real property from the obligation to share in the estate taxes imposed on the value of the devise. While the testator left her daughter a specific devise out of the residuary estate, there is no indication that the testator also intended to exonerate the specific devise from its share of the estate taxes imposed as a result of the gift.

Based on the above, the Court construes the provision of Article FOURTH as the residuary clause. At a minimum, there is an ambiguity as to the testator's intentions, requiring the application of the tax apportionment statute. Accordingly, the estate taxes imposed must be apportioned among the residuary beneficiaries , including the devisee of the real property, according to the value of their residuary bequests.

This constitutes the decision and order of the Court.

____________________________

HON. DIANA A. JOHNSON

Surrogate


Summaries of

In re Sued

Sur Ct, Kings County
Oct 5, 2011
2011 N.Y. Slip Op. 51797 (N.Y. Surr. Ct. 2011)
Case details for

In re Sued

Case Details

Full title:In the Matter of the Construction of in the Last Will and Testament of…

Court:Sur Ct, Kings County

Date published: Oct 5, 2011

Citations

2011 N.Y. Slip Op. 51797 (N.Y. Surr. Ct. 2011)