Summary
In Young v. Dutton, 209 A.2d 719, 720 (N.H. 1965), the court held that federal estate taxes were not a debt of the testator.
Summary of this case from Rehearing of Decision in re Estate SiebrasseOpinion
No. 5272.
Argued January 6, 1965.
Decided April 30, 1965.
1. The Uniform Estate Tax Apportionment Act (RSA 88-A:2 (supp)) does not apply to taxes due on account of the death of decedents dying prior to October 1, 1959, and hence where a testator died prior to such date making no provision in his will as to the payment of taxes, State or Federal, the residue of the estate is charged with the Federal estate tax.
2. Where the residue of an estate is charged with the Federal estate tax, the fair value of the real estate which is part of the residue may be credited toward payment of the expenses of administration and the Federal estate tax, and the fair value is to be determined by agreement of the parties, or by sale under license from the probate court, or by other proceedings in which all interested are parties.
3. The bequests of "all money I have on deposit at the time of my death in banks, and any other money I may then possess, together with all my stocks and bonds" in the absence of a contrary intent were held to be specific legacies.
4. In such case, the specific legatees were entitled to interest on all money from one year after the testator's death and to all dividends on all stock and all interest on bonds from the date of the testator's death.
Appeal from a decree of the probate court of Cheshire county on the account of the executor. The Superior Court ruled that the Federal estate tax is to be paid from the residue of the estate to the extent that it can be satisfied therefrom before being charged to the other legatees; that the rights of the parties are determined by the law of New Hampshire; that, in the absence of an agreement of the parties, the executor is obligated to sell the real estate and apply the proceeds toward payment of taxes and administration expenses. The Court also ruled that the legatees are entitled to interest on all money bequests from May 29, 1960 and to all dividends on stock and all interest on bonds bequeathed from the date of testator's death, May 29, 1959. The plaintiff executor duly excepted to these rulings and his exceptions were reserved and transferred by Grimes, J.
The will of the testator was executed in 1935 in Massachusetts when the testator was domiciled there. At the time of the testator's death on May 29, 1959 the Court found that he was domiciled in New Hampshire. The pertinent unnumbered paragraphs of the will read as follows:
"After the payment of my just debts and funeral charges and subject to such payment, I give and bequeath in equal shares to my four children, Frank W. V. Young, Esther M. E. Campbell, Ruth W. Dunton, and Gladys H. Young, all money I have on deposit at the time of my death in banks, and any other money I may then possess, together with all my stocks and bonds.
"All the rest, residue and remainder of my estate, both real and personal, of every name, nature and description and wherefor the same may be situated of which I shall die seized or possessed, or to which I may be in any way entitled at the time of my decease, I give, devise and bequeath absolutely and in fee simple, to my son, Frank W. V. Young."
Fisher, Parsons, Moran Temple (Mr. Harold D. Moran orally), for the plaintiff.
William D. Tribble and David J. KillKelley (Mr. Tribble orally), for the defendants.
This state has adopted the Uniform Estate Tax Apportionment Act, effective October 1, 1959. The act provides that the Federal estate tax shall be apportioned among all persons interested in the estate "unless the will otherwise provides." RSA 88-A:2 (supp); Laws 1959, c. 158. Inasmuch as the testator died May 29, 1959, the act by its terms has no application because RSA 88-A:12 provides that it "shall not apply to taxes due on account of the death of decedents dying prior to the effective date hereof." The Superior Court correctly decided that at the time of the testator's death the governing decision was Amoskeag c. Co. v. Dartmouth College, 89 N.H. 471, which placed the burden of the Federal estate tax on the residue of the probate estate in the absence of a contrary testamentary instruction. Restatement (Second), Conflict of Laws, s. 306, comment g (Tent. draft No. 5, 1959); Orr, Some Practice Aspects of Preparing Wills, 6 N.H.B.J. 93, 95 (1964); 4 Powell on Real Property, s. 529 (1964 supp).
"Commentators constantly emphasize the importance and necessity of determining what funds should bear the burden of state and federal taxes and of clearly stating that determination in the will." In re Whitelaw Estate, 104 N.H. 307, 308. See 2 Casner, Estate Planning (3d ed. 1961) 1132-1139 and 1964 supplement; Leach and Logan, Future Interests and Estate Planning 990-991 (1961). Although this advice is frequently not followed, this jurisdiction has sought to carry out the testator's plan as to the incidence of Federal and State taxes even in the face of some ambiguity and opacity in the will. Jansen v. Richardson, 93 N.H. 122; In re Barnhart Estate, 102 N.H. 519; In re Crozier Estate, 105 N.H. 440, 442. In the present case, however, the clues are scant and the will gives little guidance. Unlike the cases cited, there is no mention of taxes, State or Federal. While the will provides that the legacies to the children are subject to the "payment of my just debts and funeral charges," the Federal estate tax is obviously not a funeral charge and under our decisions is not a debt of the testator. In re Barnhart Estate, supra. It follows that the will has not provided for an apportionment of taxes among the legatees and the burden falls on the residue. Amoskeag c. Co. v. Dartmouth College, 89 N.H. 471. See Munro v. Mullen, 100 N.H. 128, 129.
The plaintiff executor contends that he can discharge his obligation with respect to the payment of the Federal estate tax and expenses of administration out of the residue by advancing the appraised value of the real estate. The appraised value of the real estate in the inventory may or may not represent its fair value. Carlton's Petition, 79 N.H. 48. In the present case it appears that the real estate was appraised for $3, 500 but this value "was increased for Federal Estate Tax purposes." The crucial requirement is that the fair value of the real estate be credited toward the payment of expenses of administration and the Federal estate tax before paying any part thereof out of the personal estate specifically bequeathed. See Fellows v. Normandin, 96 N.H. 260. This may be accomplished by agreement of the parties, or by sale under license from the probate court or by any other proceeding to determine its fair value in which all interested are parties. See Carlton's Petition, supra.
The testator bequeathed to his four children in equal shares "all money I have on deposit at the time of my death in banks, and any other money I may then possess, together with all my stocks and bonds." In treating these bequests as specific legacies the Court followed Duncan v. Bigelow, 96 N.H. 216, 220. In that case a bequest of "all my stocks, bonds, cash, bank deposits, notes and evidence of indebtedness or securities" was held to be a specific legacy. See Munro v. Mullen, 100 N.H. 128, 129. Although conflicting rules prevail elsewhere, in this jurisdiction we have generally treated stock legacies as specific unless there is a testamentary expression indicating a general bequest. Duncan v. Bigelow, supra; Paulus, Special and General Legacies of Securities — Whither Testator's Intent, 43 Iowa L. Rev. 467, 518 (1958). There was no error in the ruling below that the specific legatees were entitled to interest on all money from one year after the testator's death and to all dividends on all stock and all interest on bonds from the date of the testator's death. Kinghorn v. Athorne, 102 N.H. 293; Dennison v. Lilley, 83 N.H. 422; Jewell v. Appolonio, 75 N.H. 317.
Plaintiff's exceptions overruled; remanded.
All concurred.