In re Estate of Kuralt, 02-348.
| Citation | 68 P.3d 662,2003 MT 92 |
| Decision Date | 21 April 2003 |
| Docket Number | No. 02-348.,02-348. |
| Parties | In re The ESTATE OF Charles KURALT, Deceased. |
| Court | United States State Supreme Court of Montana |
Gary W. Bjelland and John D. Stephenson, Jardine, Stephenson, Blewett and Weaver, Great Falls, Montana, for Appellants.
James H. Goetz, Goetz, Gallik, Baldwin & Dolan, Bozeman, Montana, for Respondent. Justice JIM RICE delivered the Opinion of the Court.
¶ 1 Appellants, Susan Bowers and Lisa Bowers White (Bowers and White), the daughters of Charles Kuralt and personal representatives of the Estate of Charles Kuralt (the Estate), appeal from the decision of the Fifth Judicial District Court, Madison County, ordering that all estate taxes due as a result of the administration of the estate of Charles Kuralt be imposed on the residual estate. We affirm.
¶ 2 We address the following issue on appeal:
¶ 3 Did the District Court correctly apply New York law to the Kuralt codicil when it ordered that the taxes on the property conveyed therein shall be imposed on the residual estate?
¶ 4 This is the fourth appeal to come before this Court in the Matter of the Estate of Charles Kuralt and most of the relevant facts were previously before this Court. See In re Estate of Kuralt (Kuralt I), 1999 MT 111, 294 Mont. 354, 981 P.2d 771
; Estate of Kuralt (Kuralt II), 2000 MT 359, 303 Mont. 335, 15 P.3d 931; and Estate of Kuralt (Kuralt III), 2001 MT 153, 306 Mont. 73, 30 P.3d 345. We review only the relevant procedural history to make a determination of the issue herein on appeal.
¶ 5 Charles Kuralt died testate in a hospital in New York City on July 4, 1997. While the bulk of his estate was in New York, he also owned property in Madison County, Montana, on the Big Hole River. Mr. Kuralt's widow, Suzanna "Petie" Baird Kuralt, thereafter filed a petition in a New York state court seeking to probate the estate. On September 15, 1997, Petie, as the Domiciliary Foreign Personal Representative of the Estate of Charles Kuralt, through Montana counsel, filed a Proof of Authority seeking to probate the real property owned by Kuralt in Madison County.
¶ 6 On September 30, 1997, Kuralt's long-time and intimate companion, Patricia Elizabeth Shannon, filed a Petition for Ancillary Probate of Will, challenging the application of Kuralt's New York will to the Madison County property based, in part, on a letter which she had received from Mr. Kuralt shortly before his death a letter that this Court, in Kuralt II, determined to be a valid holographic codicil conveying the Madison County property to Shannon.
¶ 7 Mr. Kuralt's wife, Petie, was initially appointed as the personal representative of the Estate in both New York and Montana. She died in October 1999, and on February 22, 2000, the Estate filed a Bench Memorandum informing the Court of Petie's death as well as the correspondent termination of her personal representation of the Estate. On July 21, 2000, Bowers and White were appointed as successor personal representatives of the Kuralt Estate in New York and, on August 21, 2000, petitioned the Montana District Court to appoint them successor personal representatives of the Estate in Montana. The District Court denied their request, and we reversed in Kuralt III.
¶ 8 Left undetermined in the previous cases was the question of whether the Estate or Shannon was responsible for the estate taxes associated with the bequest to Shannon of the Big Hole River property in Madison County. As a consequence of this Court's decision in Kuralt II concluding that Kuralt's 1997 letter was a valid holographic codicil conveying the Big Hole River property to Shannon, there exists a federal estate tax obligation in regard to the property.
¶ 9 On January 4, 2001, Shannon filed and served a "Demand upon Estate of Suzanna Baird Kuralt for Payment of Taxes" demanding that the co-personal representatives, Bowers and White, pay from the residuary of the Estate all federal, state and gift taxes due as a result of the bequest of the Big Hole River property to Shannon.
¶ 10 Bowers and White opposed Shannon's demand for payment out of the residuary of the Estate and argued that, under both New York and Montana law, estate taxes should be apportioned under the New York apportionment statutes, notwithstanding language to the contrary in Kuralt's 1994 will. They contended that the conveyance of the property to Shannon created adverse tax consequences against the Estate, contrary to the "dominant purpose or plan of distribution" of the 1994 will to take full advantage of the marital deduction and to protect Mrs. Kuralt from burdensome taxation.
¶ 11 Shannon responded that, under the applicable New York statutory and case law as well as Montana law, where the language of the will makes it clear that there is to be no apportionment of estate taxes according to state statute, the courts of both states will abide by the explicit language in the will.
¶ 12 The District Court agreed with Shannon and concluded that, under substantially similar laws of New York and Montana, the court must adhere and give effect to the testator's plan if such plan can be ascertained. The District Court further concluded that, under Article Twelve of Kuralt's 1994 will, wherein it states that all death taxes "shall be paid without apportionment," all taxes are to be paid by the residual estate and thus ordered that the taxes generated from the bequest of the Big Hole River property to Shannon be paid accordingly.
¶ 13 Bowers and White now appeal the District Court's decision.
¶ 14 Did the District Court correctly apply New York law to the Kuralt codicil when it ordered that the taxes on the property conveyed therein shall be imposed on the residual estate?
¶ 15 The issue before this Court is a question of law. When reviewing a district court's conclusions of law, we determine whether the court's interpretation of the law is correct. In re Estate of Ober, 2003 MT 7, ¶ 7, 314 Mont. 20, ¶ 7, 62 P.3d 1114, ¶ 7; Matter of Estate of Alcorn (1994), 263 Mont. 353, 355, 868 P.2d 629, 630.
¶ 16 Initially we note that Charles Kuralt was domiciled in New York at the time of his death and that his 1994 will was executed in New York and was admitted to probate there. This Court determined in Kuralt II that Kuralt's 1997 letter to Shannon was a valid holographic codicil to the 1994 will, and thus, a part of the 1994 will. Under these circumstances, Bowers, White and Shannon agree and have stipulated that New York law applies to the construction of the will as well as the codicil. Furthermore, Montana law is essentially the same on the points at issue in this case.
¶ 17 On appeal, Bowers and White argue that the District Court should be reversed because its decision that the estate taxes attributable to the Big Hole River property is chargeable against the residuary is contrary to Kuralt's "purpose or plan" as expressed in his 1994 will and contrary to the well established New York statutory law and public policy.
¶ 18 The applicable New York statute provides:
Unless otherwise provided in the will or non-testamentary instrument, and subject to paragraph (d-1) of this section: (1) The tax shall be apportioned among the persons benefited in the proportion that the value of the property or interest received by each person benefited bears to the total value of the property and interest received by all persons benefited....
EPTL § 2-1.8(c). When interpreting the earliest version of this statute, the Court of Appeals of New York stated that the statute "requires apportionment of Federal and State estate taxes among the legatees and devisees `in the proportion that the value of the property or interest received by each such person' ... except where the testator `otherwise directs in his will.'" In the Matter of the Will of Shubert (1962), 10 N.Y.2d 461, 467, 225 N.Y.S.2d 13, 180 N.E.2d 410, 412 (emphasis supplied).
¶ 19 This holding was affirmed by the Supreme Court, Appellate Division of New York in In the Matter of the Estate of Dewar (1978), 404 N.Y.S.2d 750, 62 A.D.2d 352. In Dewar, the decedent's last will and testament, dated December 4, 1972, provided:
I direct that all my just debts and funeral and administration expenses be paid. I further direct that all inheritance, estate, transfer, succession and death taxes imposed by any jurisdiction upon property passing under this, my Will, be paid out of the general estate as expenses of the administration thereof, without apportionment as to any legatee.
Dewar, 404 N.Y.S.2d at 752, 62 A.D.2d at 353 (emphasis supplied). The will in Dewar clearly provided that all estate taxes imposed upon property passing under the will be paid out of the residual estate and "without apportionment" as to any legatee. The remainder of the will made bequests to individuals and charities and left the residuary to five charities.
¶ 20 However, in a later codicil dated June 22, 1973, the decedent increased the amount of some bequests to certain individuals previously named in her will, and further provided:
In all other respects, I hereby ratify and confirm the provisions of my Last Will and Testament dated December 4, 1972.
Dewar, 404 N.Y.S.2d at 752, 62 A.D.2d at 354. With the increase of the bequests in the codicil, it was later determined that the estate and transfer taxes would consume all of the residuary, requiring abatement of pre-residuary bequests. The residuary legatees thereafter commenced proceedings in the New York Surrogate Court to determine whether the gifts bequeathed in the codicil should receive the same tax treatment as the gifts contained in the 1972 will. Dewar, 404 N.Y.S.2d at 752, 62 A.D.2d at 354.
¶ 21 The Surrogate determined that the gifts in the codicil should receive the same tax treatment as the gifts in the 1972 will and the Supreme Court, Appellate Division, affirmed, concluding that ...
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