Emmertz v. Cherry

• Decision Date: 13 September 1999
• Docket Number: No. S99A1039.,S99A1039.
• Citation: Emmertz v. Cherry, 520 S.E.2d 219, 271 Ga. 458 (Ga. 1999)
• Parties: EMMERTZ v. CHERRY.
• Court: Georgia Supreme Court

520 S.E.2d 219

271 Ga. 458

EMMERTZ v.CHERRY.

No. S99A1039.

Supreme Court of Georgia.

September 13, 1999.

Powell, Goldstein, Frazer & Murphy, William J. Linkous, Jr., Cynthia D. Kennedy, David G. Ross, Atlanta, for appellant.

Altman, Kritzer & Levick, Duane D. Sitar, Joseph S. Carr, Atlanta, for appellee.

HUNSTEIN, Justice.

Prior to his death in September 1997, Lawrence Emmertz purchased three life insurance policies and named as the sole beneficiary his daughter, Sandra Emmertz Cherry.Cherry was also a beneficiary, along with her two brothers, of the residual estate under her father's will.Because the testator had retained incidents of ownership in the life insurance policies, this nonprobate property was included in the value of his gross estate for Federal estate tax purposes.See§ 2042(2) of the Internal Revenue Code of 1986("IRC"), 26 USC § 2001 et seq.Lawrence Emmertz, Jr., the executor of the probated will, paid the estate taxes out of the residuum.The pro rata share of the estate taxes paid on the life insurance proceeds amounted to $122,104.The executor thereafter sought to recover this sum from Cherry and when Cherry refused, the executor filed a declaratory judgment action in probate court to ascertain his duty concerning recovery of the taxes.The probate court found in Cherry's favor, concluding that the executor's recovery of the taxes had been waived by language in the testator's will.¹That language, in Item IV of the will, provided in the first sentence that

I hereby direct that all Estate, inheritance, succession or death taxes shall be paid from my Residual Estate and that no part be paid from that part of my Estate which is exempt from such tax as a marital deduction or from specific legacies.

The third sentence of Item IV provided that

My Executor shall recover from the recipients of any property included in my Estate for federal estate tax purposes, because of a power of appointment held by me or because of any qualified terminable interest, the portion of such taxes legally recoverable.

We affirm the probate court's ruling that the testator in Item IV of his will waived the executor's right to recover from Cherry a pro rata portion of estate taxes paid on the life insurance policies.

IRC § 2206 provides that

[u]nless the decedent directs otherwise in his will, if any part of the gross estate on which tax has been paid consists of proceeds of [life insurance policies] receivable by a beneficiary other than the executor, the executor shall be entitled to recovery from such beneficiary such portion of the total tax paid as the proceeds of such policies bear to the taxable estate.

See also34A AmJur2d, ¶ 143,806.Pertinent to this appeal, there are two other provisions in the Internal Revenue Code which are comparable to § 2206, in that they authorize the recovery of pro rata estate taxes paid for qualified terminable interest property (QTIP) or property over which the testator held a power of appointment.IRC §§ 2207and2207A.

The intent of the testator as gathered from the four corners of the will must serve as the primary guide in determining whether the testator "direct[ed] otherwise" so as to waive the executor's right to recover a pro rata share of estate taxes from the beneficiary of nonprobate property.See generallyLegare v. Legare,268 Ga. 474, 490 S.E.2d 369(1997).The will in issue here in the first sentence of Item IV directs the payment of "all Estate, inheritance, succession or death taxes" from the residuum, but it does not contain language specifically providing for the payment of taxes on the life insurance proceeds from the residual estate.The third sentence of Item IV reflects the testator's knowledge of the estate tax consequences of nonprobate property and his express exclusion from the initial "pay all taxes" provision of those taxes his estate could incur from two specific types of nonprobate property, i.e., QTIP and power of appointment property, pursuant to IRC §§ 2207and2207A.

We agree with the probate court that there existed adequate proof of the testator's intention in Item IV to include the taxes on the life...