Davidson, In re
| Decision Date | 23 February 1982 |
| Docket Number | No. 54878,54878 |
| Citation | 641 P.2d 1110 |
| Parties | In re Leland C. DAVIDSON Trust. FIRST NATIONAL BANK IN BARTLESVILLE, Bartlesville, Oklahoma, Trustee of The Leland C. Davidson Trust, Appellant, v. Donna S. FAULKNER, Executrix of the Estate of Miriam S. Davidson, Deceased, and Shriners Hospital for Crippled Children, Tampa, Florida and Baker University of Baldwin City, Kansas, Appellees. |
| Court | Oklahoma Supreme Court |
Appeal from the District Court of Washington County; James H. Laughlin, Trial Judge.
Appeal of declaratory judgment action apportioning tax under 68 O.S.Supp.1974 § 825 and exempting charitable devisees from tax. AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
James W. Connor, Selby, Connor & Coyle, Bartlesville, for appellant.
Richard Kane, Kane, Kane & Kane, Bartlesville, for appellee, Donna S. Faulkner.
Dale G. Savage, Williams, Landman & Savage, Tulsa, for appellees, Shriners Hospital for Crippled Children, Tampa, Florida and Baker University of Baldwin City, Kansas.
The questions presented for resolution evolve around an inter vivos trust and subsequent probate of an estate effecting part of the trust.
Leland Davidson and Miriam Davidson were married in 1927 and remained husband and wife until Leland died in 1978. Prior to his death, Leland executed an inter vivos trust, naming himself as trustee and appellant (Bank or Trustee) as successor trustee. The terms of the trust divided his assets into Trust A and Trust B with Miriam being granted a general power of appointment over the assets in Trust A. Miriam never exercised that power. She died in 1979.
Appellee, Donna Faulkner (Executrix), was named Executrix of Miriam's estate, and made written demand upon Bank that the estate tax owed by Miriam's estate should be paid and apportioned among the collateral beneficiaries of Trust A because the corpus of Trust A was included in Miriam's estate for tax purposes. Bank invoked the jurisdiction of the district court under 12 O.S.1971 § 1651 requesting directions as to how it should proceed. Executrix, meanwhile, paid all estate inheritance taxes, federal and state, and demanded reimbursement from Bank prior to disbursement of the trust to the beneficiaries.
The trial court ruled both state and federal taxes were subject to apportionment and that Trust A was required to contribute. It also devised a complicated formula for determining the precise amount of contribution. Further, the trial court exempted charitable beneficiaries from contributing to the tax liability.
Bank argues the trial court exceeded its authority when it ordered the trust, and not the individual beneficiaries who are the ultimate recipients of trust proceeds, to contribute to the federal tax liability. 1 It argues application of 25 U.S.C., § 2207 on apportionment:
(Emphasis Bank's).
Bank notes one federal case 2 which interpreted 26 U.S.C. § 2206, (§ 2206 is similar to § 2207 but deals with life insurance rather than powers of appointment):
"The liability of life insurance beneficiaries for an estate tax does not exist and cannot exist until the tax has been paid ..." (Emphasis Bank's).
Simply stated, Bank argues it would be improper to require it as trustee to demand contribution from beneficiaries before the actual tax is determined and paid; it should not have to ascertain which beneficiary should contribute and to what extent. It argues a trust's only obligation is to terminate the trust and distribute to the ultimate beneficiaries their proportionate shares of the trust corpus. It further argues it was given no authority in the trust instrument to hold the trust proceeds until the tax liability of each beneficiary is determined.
Executrix counters she has no trouble accepting Bank's argument that the burden of payment of the apportioned part of federal taxes rests upon the person, or persons, receiving such property. She notes, however, that 22 U.S.C. § 6324 creates a special lien for estate taxes upon any transferee of property included in the taxable estate, and makes said transferee personally liable for the tax to the extent of the property received.
Thus we find both Bank and Executrix in agreement that the beneficiaries, not the trust, should bear the responsibility for payment of the apportioned estate tax. We agree. We also agree with Bank that the Executrix should bear the responsibility of determining the apportioned share of tax which each beneficiary should pay, and to demand payment of them individually. The Bank's only authority upon demise of the trustor was to terminate the trust and distribute the assets to the beneficiaries. It had no authority to determine the apportioned tax, to pay out such tax to the Executrix or to withhold same from the beneficiaries. Federal statutes provide remedies should the beneficiaries refuse to contribute their share of the federal estate tax liability.
We believe the question of apportionment to be a state question. 3
Bank contends the apportionment of estate tax in Oklahoma is unclear at this time, and seeks clarification from this Court.
Historically we note, prior to 1965, the tax levied upon the assets of an estate was an "estate" tax, rather than an "inheritance" tax, the difference being that the former was a tax on the "transfer" and the latter a tax on the "receiving" of assets. In 1965, the State Legislature adopted the Uniform Estate Tax Apportionment Act (58 O.S.Stat.1965, § 2001 et seq.). This Act was repealed by the 1969 Legislature. In 1974, the Legislature passed 68 O.S.Supp.1974, § 825 (the Act), 4 and the trial court in our case used it to apportion the estate taxes due.
Executrix contends § 825 is clear and unambiguous on its face, while Bank argues its unconstitutionality on grounds the sections relating to apportionment are not contained in the title to the Act as required by the state constitution (Art. V, § 57) and cases thereunder.
The title to the act in question contains only one reference to the subject matter, to-wit: "An act relating to taxation ...." 5 It amends 68 O.S.1971, § 825, which was a product of the 1965 Legislature, Chapter 250, O.S.L.1965. The title to the original 1965 Act 6 contains many references to the subject matter, including "levying a tax upon the transfer of the net estate of decedents" ... "defining terms," ... "providing for deductions and exemptions," ... "fixing liability of persons and corporations for tax."
If the title to an original act is sufficient to embrace the matters contained in an amendatory act, the sufficiency of the title of the latter need not be inquired into. In the Matter of the Habeas Corpus of Edward E. Wells, 335 P.2d 358 (Okl.Cr.1959).
We find the subject matter of the 1974 amendment (the Act) is sufficiently contained in the title of the 1965 Act, and thus is not an infringement on the constitutional qualifications of title and subject matter; the act is clear and unambiguous on its face.
Having found § 825 constitutional, clear and unambiguous on its face, we need not respond to appellant's contention that estate taxes shall be paid out of the residue of the estate, that law having been supplemented by § 825.
Appellant argues the trial court erred in exempting the charitable beneficiaries from contributing to the estate tax liability. He argues federal law does not exempt charities from paying their share of trust proceeds 7 and that state law determines whether bequests to charity and to the surviving spouse bear any portion of the estate tax. 8 He also cites an United States 10th Circuit Court case involving Oklahoma law 9 for the proposition that spouses and charities are not exempt from contributing to the estate tax liability.
Appellee counters by citing from "Construction and Application of Statutes Apportioning or Prorating Estate Taxes," 71 A.L.R.3rd 247, for the proposition that charitable beneficiaries are not liable for estate taxes when the entire value of the charitable gift is allowed as a deduction for estate tax purposes. In the instant case both the state and the federal governments allowed the charitable deductions in the estate tax returns. They both have therefore found the charitable gifts were deductible items.
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... ... Davidson, 1982 OK 27, 641 P.2d 1110 — in the absence of a contrary expression of testamentary intent, equitable principles impose the responsibility for the payment of estate tax on property generating the tax and exonerate property which does not incur federal or state estate tax liability. Estate of ... ...
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Edmonds v. Karas (In re Estate of Anderson)
... ... It merely imposes a notice requirement as a prerequisite to any suit by an estate to enforce that doctrine. 8 Prior to 1965, taxes imposed on death were paid from the assets of an estate. In re Davidson, 1982 OK 27, 11, 641 P.2d 1110, 1113. In 1974, the Legislature amended section 825 of the Tax Code that provided the rates and method by which estate taxes were to be calculated. 68 O.S. Supp.1974 825 (Repealed by Laws 2006, 2nd Extr. Sess., HB 1172, ch. 42, 6, eff. January 1, 2010). The result ... ...
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