In re Sued
| Decision Date | 05 October 2011 |
| Docket Number | 2262/10 |
| Citation | 2011 NY Slip Op 51797 |
| Parties | 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. |
| Court | New York Surrogate Court |
Appearances: For the executor (Issac Sued): Dory Salem, Esq., Salem, Shor & Saperstein, 3000 Marcus Avenue, Lake Success, NY 11242.
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:
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.
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" ofthe 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 ...
To continue reading
Request your trial