In re Estate of Larson, 311 Neb. 352

Background

Decedent Blain Larson’s will left specific devises to his son Matthew and to Cindy Svoboda, and devised the residuary estate to Cindy; the will directed that debts, administration expenses, and "all estate, inheritance, succession and transfer taxes" be paid from the residue.
Cindy was nominated and appointed personal representative; Matthew and Amber challenged the will in district court, lost, and Cindy recovered costs for vexatious litigation.
The residuary estate proved minimal and was exhausted paying administration expenses, funeral expenses, and federal income taxes; inheritance taxes assessed exceeded the residue.
Cindy’s distribution schedule charged inheritance taxes and some expenses to the estate and sought payment of attorney fees she incurred defending the will; the county court approved the schedule, found Cindy acted in good faith, and apportioned remaining administration expenses between Cindy and Matthew.
Matthew objected, arguing (inter alia) that inheritance taxes must be borne by the beneficiaries when the residuary estate is insufficient, and that certain expenses (real estate taxes, a headstone, Cindy’s attorney fees) should not be paid from estate funds.
The Nebraska Supreme Court affirmed the county court on real estate taxes, attorney fees, headstone, and apportionment issues, but reversed and remanded on the question of charging inheritance taxes to the estate, holding the tax clause fails when there is no sufficient residue and the statutory default assigns the tax to beneficiaries.

Issues

Issue	Matthew's Argument	Cindy's Argument	Held
1) Can inheritance taxes be charged to the estate when the will directs payment from residue but the residue is insufficient?	The tax clause cannot be effectuated; beneficiaries should pay their own inheritance taxes under statute.	The will clearly shifts taxes to the residue and that direction should control.	Where the residuary estate is nonexistent or insufficient, the testator's direction fails and the statutory default applies—beneficiaries must pay their own inheritance taxes (reversed in part).
2) May predeath real estate taxes for the tax year be charged to the estate?	Real estate taxes should not be charged to the estate.	Blain's share of 2016 real estate taxes were a predeath debt of the decedent and properly paid from estate funds.	Affirmed: the decedent’s share of 2016 real estate taxes were a predeath debt and could be paid from the estate.
3) May Cindy’s attorney fees for defending the will be paid from the estate?	Cindy defended primarily to protect her bequest; thus she lacked good faith and fees should not come from the estate.	Cindy defended in good faith to carry out decedent’s wishes; fees were necessary and reasonable.	Affirmed: county court did not abuse discretion in finding Cindy acted in good faith and fees were necessary and reasonable under §30-2481.
4) May the estate be charged for a headstone Cindy purchased?	The headstone was not necessary or in beneficiaries’ best interests and should not be charged to the estate.	Under §30-2223, Cindy, as personal representative, could purchase a headstone when heirs failed to act; purchase was reasonable.	Affirmed: court did not abuse discretion in allowing the headstone expense where heirs had not timely acted.

Key Cases Cited

In re Estate of Hutton, 306 Neb. 579, 946 N.W.2d 669 (Neb. 2020) (probate-code matters reviewed for error on the record)
In re Estate of Shell, 290 Neb. 791, 862 N.W.2d 276 (Neb. 2015) (testator intent can shift tax burden but clause must be clear)
In re Estate of Graham, 301 Neb. 594, 919 N.W.2d 714 (Neb. 2018) (apportionment and probate accounting principles)
In re Estate of Odineal, 220 Neb. 168, 368 N.W.2d 800 (Neb. 1985) (good faith standard for allowance of personal representative expenses)
Rosen v. Wells Fargo Bank Texas, N.A., 114 S.W.3d 145 (Tex. App. 2003) (lack of residuary estate negates testator's tax direction; statutory default governs)