*1 577 Thus, I danger to the officers at the time the frisk. would Special Appeals, affirming affirm the decision of the Court of suppress. the circuit court’s denial of the motion to reasons, respectfully, For the above I dissent. me
Judge Battaglia joins has authorized to state she opinion. this
144A.3d 802 Michelle BANDY et al. v.
Alexandra CLANCY 93, Sept. Term, No. Appeals Maryland.
Court of August *2 (Sheila Sachs, Feinblatt, Thrope
Jerrold A. K. Gordon LLC Baltimore, MD; Brennen, Coyne, Robert J. S. Jennifer Lanner, Baltimore, Menachem Stockbridge, Miles & P.C. MD) brief, on for Appellants. Nusinov, Smith,
Norman L. E. Nusinov LLP (Jeffrey Smith MD; Palmer, Baltimore, Akerman, LLP Lansing R. of New NY) York, brief, Appellee. on *3 BARBERA, C.J., GREENE, ADKINS,
Argued before lynne battaglia McDonald, watts, hotten, a. (Retired, Specially Assigned), JJ.
BATTAGLIA, J. only “The avoidance of taxes is the intellectual pursuit Maynard Keynes still carries reward.”—John “The of a to decrease the amount of what legal right taxpayer taxes, them, altogether by
otherwise would be his avoid permits, means which the law cannot be doubted.”1— George Justice Sutherland (“Decedent” Jr., Clancy,
Acclaimed author Thomas L. and “Testator”) 2013, by died in October of survived his second (“Mrs. wife, a minor child Clancy Clancy”) Alexandra M. and (“The as well as four adult children Older by marriage, Children”) died, Clancy Mr. first Mr. Clancy’s marriage. 465, 469, 266, 267, Helvering, Gregory 1. v. 293 U.S. 55 S.Ct. 79 L.Ed. 596, (1935). amendments; the issue before will, various as well as leaving Will, amend- Mr. Clancy’s interpretation us involves Codicil, only the payment with to not respect a by ed Second which taxes, upon question but also of federal estate be at the placed of such taxes should the burden beneficiaries Clancy’s Mr. death.2 time of on a decedent’s may imposed estate taxes
Federal interests3 any property personal property real and dollars, adjusted annually amount five million an excess of 2010(c)(3); § 26 U.S.C. living”,4 2011 for the “cost since Certiorari, Clancy, Bandy v. 446 Md. In their Petition for 2. (2016), following presented Clancy’s children Mr. adult A.3d 507 question: finding Orphan’s that a marital deduction Did the Court err Clancy's Will had the effect of savings clause in a codicil to Mr. eliminating created overriding the fundamental structure Will? Webb, Thompson peti- Clancy’s Representative, J.W. also Mr. Personal Certiorari, granted, which we which for a Writ of tioned this Court stated: Clancy's require construing will to Orphans’ Court err in Mr. Did family prior representative trust personal to fund the taxes, children’s trusts will bear payment of estate such that the older taxes? federal and state estate the burden of all of the estate's Representative’s petition on Clancy moved to dismiss Personal Mrs. standing. Representative had We need that the Personal no the basis question presented the Older the certiorari not resolve the issue as Children is the same. addressed, Maryland Only as the the issue of federal estate taxes is 3. marital deduction is the federal such that the estate tax scheme tracks § similarly. Tax 7-302. Section 7-304 treated See Md. Code Gen. Maryland adjustment estate tax Article allows for an Tax General *4 by the value of of one million dollars owed on an estate excess qualified marital deduction terminable interest property treated as 7-309(b)(5). § property. Md. Code Tax Gen. Code, 26, which the Internal Revenue 2010 of Title embodies 4. Section part: provides, in relevant (a) applicable credit amount shall be rule.—A credit of the General every against imposed tax decedent allowed to the estate of 2001. section (c) Applicable credit amount.— (3) Basic exclusion amount.— $* [*] taxes in 2015 threshold for the Federal estate imposition.of $5,430,000.5 tax is calculated on a graduat- was Federal estate threshold, basis, on the value of the estate above ed the first ten thousand dollars.6 Which starting at 18% for (A) subsection, general. purposes In the basic exclu- this —For $5,000,000. sion amount is (B) adjustment. any dying Inflation the case of decedent in a —In 2011, (A) year subparagraph calendar after the dollar amount in equal shall be increased an amount to— amount, (i) multiplied by such dollar (ii) 1(f)(3) cost-of-living adjustment determined under section substituting year year by calendar "calendar 2010” for for such (B) year subparagraph "calendar 1992” in thereof. adjusted preceding If is not a amount as under the sentence $10,000, multiple of such amount shall be rounded to the nearest $10,000. multiple of (2013). 26 U.S.C. 2010 All hereinafter to Sections will be to references Code, 2013, year Clancy's Mr. Title the Internal Revenue death. Service, www.irs.gov,https://www.irs.gov/ 5. Internal Revenue businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax (https://perma.cc/4WRH-PTKQ). provided
6. The tax rate schedule for estates valued over the threshold is 2001(c) Code under Section of the Internal Revenue as: *5 582 of the
beneficiaries, pay portion if are or all any, obligated Del v. law, Riggs federal taxes is a matter of State al., et 95, 97-98, 109, 110, Drago 87 L.Ed. 317 U.S. 63 S.Ct. (1942), and, may Maryland, provided 110-11 7-308(k). § under the Md. Will.7 Code Tax Gen.
If to which the the amount with respect ta\ ta\ is: tentative to be is: The tentative computed Not over $10.000 [18] percent of such amount. Over $10.000 but not over $20,000 $ 1,80í). plus [20] percent of the excess of
such amount over 10,000. $ Over $20.000 but not over $40,000 $3,800, plus [22] percent of the excess of such amount over $20.000. Over $40.000 but not over $60,000 $8.200. plus [24] percent of the excess of such amount over $40,000. Over $60.000 but not over $80,000 $13,000, plus [26] percent of the excess of amount over
such $60.000. Over $80.000 but not over $100.000 $ such amount 18,200. plus over [28] percent $80.000. of the excess of Over $100.000 but not over $150,000 $23,800. plus [30] percent of the excess amount over
such $100.000. Over $150.000 but not over $250.000 $38,800, plus [32] percent excess amount over
such $150,000. Over $250.000 but not over $500.000 $70.800, plus [34] percent of the excess of amount over $250,000.
such Over $500.000 but not over $750,000 $155.800. such amount plus over [37] $500,000 percent of the excess Over $750,000 but not over $1,000,000 $248,300, plus percent excess such amount over
$750,000. Over $1.000,000 $345.800. plus percent excess of amount over $1.000,000. sue!» to reduce the federal estate tax burden Deductions available *6 indebtedness,8 uncompensated certain expenses include losses,9 for charitable and reli- property public, transfers of 10 deduction,11all of which uses and the marital reduce gious by property the taxable estate the value of the allocated to deduction, the marital respect Congress deduction.12With 1948 enacted a mechanism to reduce taxes on trans- property 1948, surviving spouse. ferred death to a Revenue Act of upon (1948). 80-471, 110, Pub. L. No. 62 117 At its inception, Stat. excluded the lesser of the essentially the marital deduction from the surviving spouse value of transferred property adjusted taxable or one half of the estate.13 gross estate of the marital deduction occurred Changes computation our years significant purposes over the but the most for Act, Recovery in 1981 the Economic Tax through occurred by enabling which the marital deduction was increased under surviving value of an to be transferred to a the total estate tax Eco- consequences. without adverse federal estate spouse 1981, 97-34, Tax Act of Pub. L. 95 Stat. 172 Recovery nomic Maryland, will of federal 7. In when the does not direct taxes, liability statutorily under estate the allocation of is determined Code, Maryland Tax General Article of the Section 7-308 of the Apportionment Tax Act. Uniform Estate § 8. See 26 U.S.C. 2053. provides:
9. Section 2054 of Title 26 2001, imposed by purposes of the tax section the value of For deducting determined from the value of taxable estate shall be arising during gross losses incurred the settlement of estates casualties, theft, fires, storms, shipwrecks, or other or from compensated for insurance or otherwise. when such losses are not § 10. See 26 U.S.C. 2055. §
11. See 26 U.S.C. 2056. tax Maryland tracks that of the Federal estate 12. The marital deduction 7-309(b)(5). § Tax marital deduction. Md. Code Gen. 80-471, 110, 62 Stat. 117 13.See Revenue Act of Pub. L. No. (1948). (1981). Schain, QTIP: Marital Trust v. George also M. See (1984). Planners, L. Rev. 741 49 Mo. Advice Estate tax conse- then, can avoid adverse an estate Essentially, the use of the through of the testator upon the death quences deduction, “reflects because the marital deduction marital to assess transfer that it is strongly policy inappropriate held M. William spouses.” between property taxes on transfers al., Wills, Taxa- McGovern, Including Trusts and Estates et 2010). (4th Federal estate ed. and Future Interests tion is transferred to property be reduced when may taxes decedent, but the value of the upon death surviving spouse at the time of the death conveyed that remains subject to federal estate tax.14 surviving spouse is Vallario, The Fundamen- § M. Angela 2044. See also U.S.C. *7 (2012). Planning 251 tals Estate of deduction, the must be property for the marital qualify To gross includable in the estate that which would have been surviving passed, which or has to passes, the decedent and 2056(a). § otherwise.1526 U.S.C. of law or spouse by operation 2044, was property for which marital deduction 14. Section "Certain allowed”, previously provides: (a) gross include the value rule.—The value of the estate shall General applies in which the decedent any property to which this section qualifying life. had a (b) income interest for applies to Property applies. section to which this section —This any property if— (1) respect with to the transfer of such a deduction was allowed property to the decedent— thereof, (b)(7) (A) by under section 2056 reason of subsection thereof, (f) (B) by and reason of subsection under section estates) (2) (relating dispositions certain life did to section 2519 disposition by part or all apply respect to a the decedent not with property. of such (c) purposes having passed decedent.—For Property treated as from 13, gross estate chapter chapter property includible of this and (a) property treated under subsection shall be of the decedent passing from the decedent. etc., 2056(a), surviving spouse”, provides: "Bequests, 15. Section 2001, imposed by the value of purposes of the tax section For (b), shall, except be deter- as limited subsection taxable estate deducting gross an amount from the value of the mined interests, given surviving “Terminable” interests to a property time, however, for a limited do not spouse qualify deduction, interest as one of the qualifies marital unless the in 2056 of the Internal Revenue exceptions provided Section Code,16 Interest including Qualified Property Terminable 2056(b)(7), (QTIP), § or that property: U.S.C.
(I) decedent, which from the passes (II) qualifying in which the has a income surviving spouse life, interest
(III) to which an under this paragraph applies. election!17] 2056(b)(7)(B)(i). § “qualifying 26 U.S.C. To constitute a income property interest for life” the terms of the transfer must that: provide
(I) surviving spouse is entitled to all the income from property, payable annually frequent or at more inter- vals, in property, or has a interest for life usufruct!18] (II) person power appoint any part no has a than the property any person surviving spouse. other equal passes to the value of which or has interest surviving only passed spouse, the decedent but to the to his determining the value of the extent that such interest is included gross estate. exceptions 16. Certain of terminable interests from the exclusion provided marital deduction are under Section and include a life *8 surviving spouse, power appointment with the of life annuity payments surviving spouse the insurance or made to who also power appointment, qualified proper- the terminable interest has of (QTIPs). 2056(b)(5) (7). ty § 26 U.S.C. — QTIP property Property must be elected for treatment as on the 17. estate, "(v) the election under this Federal tax return for Election.—An paragraph respect any property the with to shall be made executor election, imposed by the 2001. an once on made, return of tax section Such 2056(b)(7)(B)(v) § shall be irrevocable.” 26 U.S.C. having legal right using enjoying 18. defined as “the Usufruct is profits something belonging Merriam- the fruits or to another.” Webster, http://www.merriam-webster.com/dictionary/usufruct (https:// perma.cc/942S-X4NM). (II) only exercisable to a apply power not shall Subclause the spouse. To surviving of the or after the death at shall be treated annuity an regulations, extent provided in property an income interest similar to in a manner which the annu- property of whether the (regardless identified). be separately is can ity payable 2056(b)(7)(B)(ii). QTIP property Treatment of § 26 U.S.C. the property executor elect that the requires property return for the tax on the federal QTIP property treatment as irrevocable. 26 U.S.C. estate, is a decision 2056(b)(7)(B)(v). § may qualify treatment QTIP elected for
Property deduction, outright placed it transferred whether is marital 20.2056(a)-l. A structured properly § Reg. in a trust. Tax trust, requirements meets the Section one that QTIP in trust for inclusion 2056(b)(7)(B), the qualifies property to a deduction, specify allows the testator yet marital the trust QTIP of the for the remainder beneficiary different 26 U.S.C surviving spouse. the death upon assets supra, also 2056(b)(7)(B)(i)-(ii). Vallario, at 261. The See § deduction when for the marital QTIP qualifies Trust of the trust for to all of the income is entitled surviving spouse at least life, surviving spouse income is to paid appoint part to power and no one has annually surviving spouse. other than the any person estate, surviving addition, a traditional life In unlike Trust, QTIP only a not beneficiary who is spouse, may request the Trust but also the income from receives to meet from the Trust principal disburse the trustee 20.2056(b)-7(d)(6). § It is Tax Reg. needs.19 surviving spouse’s 20.2056(b)-7 Regulation provides Treasury Title 26 of the 19. Section surviving principal power distribute with the the trustee spouse: qualifying will not fail to constitute interest in a trust An income power to solely the trustee has a life because income interest for surviving spouse. The principal for the benefit of the distribute to or surviving spouse may be trans- property distributed to a fact that result in a failure to spouse person does not ferred to another *9 therefore, the bene- principal that distributions of for possible, could have the Trust such surviving spouse depleted fit of the minimal assets are left for the remainderman identi- only the testator.20 by fied taxes, however, will used to federal estate
Any property pay the marital deduction. 26 U.S.C. qualify not 2056(b)(4)(A). § If allocated to the marital deduction property tax, federal estate the marital deduction is pay is used to made, thereby the increas- by reduced the amount of estate tax on the estate. Id. See also ing imposed the federal (7th Planning A. on Estate 14-18 Manning, Manning Jerome 2015). ed. tax way to the marital deduction adverse protect
One full federal estate tax benefit for consequences and receive the surviving spouse transferred to the is to use property clause, savings in the will. That of often “savings type clause” clause”, an aide restricts “interpretive savings referred to as reduce representative actions taken the could personal However, 2056(b)(7)(B)(ii)(II). satisfy requirement if the of section surviving spouse legally the is bound to transfer distributed property person adequate to another without full and consideration worth, money money’s requirement or of section 2056(b)(7)(B)(ii)(II) is not satisfied. 20.2056(b)-7(d)(6). Reg. § Tax Similarly, spouse may principal given power of 20. invade if QTIP principal when the trust was created al- withdrawal over withdrawal, given, greater though power of when is limited to the such $5,000 2514(e), 2041(b)(2). percent §§ or five of the trust. 26 U.S.C. Appointment provides: Section 2514 of Title 26 entitled Powers of 21, 1942, power appointment after lapse The of a created October during possessing power the life of the individual shall be consid- power. preceding The sentence shall ered a release of such rule of the lapse powers during any year apply respect with calendar only appointed which have been to the extent that the could lapsed powers greater exercise of such exceeds value following amounts: $5,000, (1) or which, (2) aggregate percent value of the assets out of which, lapsed powers could be proceeds the exercise of the satisfied. 2514(e). language § contained in Section 26 U.S.C. 2041(b)(2) Identical is Code, Appointment. Revenue Powers of of the Internal *10 with the marital and assists deduction the tax benefit with the testator’s intent interpretation explanation and consequences. Eugene tax See to adverse respect preventing Journal, Clauses, Stoler, (April The CPA Lyle Redd, will 1999); Savings Clauses Types A. What Charles (1987). The Deduction?, 14 Plan. 72 Est. Preserve the Marital to elucidate savings “attempts aide clause interpretive to regard intentions with prevailing grantor’s testator’s or deduction,” and is “a provi- marital Redd at securing that is provision a away power changes that takes a or sion is, therefore, in the instrument and elsewhere expressly given or express power provision.” with that other in direct conflict Parsons, Testa- 25; at see also William Stoler Lifetime (9th 1983). The Planning, interpretive ed. mentary Estate clause, therefore, the testator’s intent express can savings aide is personal representative any authority granted that of the marital deduction. efficacy void should it reduce validity has recognized The Internal Revenue Service (1975). in Rev. Rui. 75-440 savings an aide clause interpretive a in which in Revenue 75-440 was situation Ruling Addressed a trust residuary a marital trust and a will for both provided to invest trust authority principal to the trustees granted life The will also included in non-income insurance. producing that stated: savings a clause contrary, contained to the anything herein
Notwithstanding authority my to duty, discretionary granted or any power, the extent absolutely be void to Fiduciary hereunder shall thereof, shall exercise or the exercise right that either the affect, lose all my or cause estate to any way jeopardize in tax afforded or benefit part Laws. Deduction under either Federal State Marital producing are not income policies Id. at 2. life insurance Since paid, that a beneficia- require premiums and often property would not be marital trust that owned such ry of a income, the marital thereby eviscerating all of the entitled to invest- in such question permitted Id. The trusts deduction. ment, applied whether that question permission and the was and, therefore, it from inclusion disqualified the marital trust
589’ concluded, in the marital deduction. The Revenue Ruling however, in will interpretive savings that the aide clause was the testator’s intent not to authorize helpful interpret the trustees to invest marital trust assets non-income life producing qualify insurance order to for the marital deduction:
The savings savings clause is not a clause in the strict sense term, but is an aid in the testator’s determining intent; is, the existence savings clause would a disqualifying ‘void’ to the trustees of the power given marital only deduction trust is relevant here because it helps give indicate the testator’s intent not to those trustees *11 a disqualifying power. result,
Id. at 3. As a the marital deduction under Section 2056 was allowed with to the marital respect trust.21 Will, 11, 2007,
Mr. Clancy’s executed June contained four- teen items that named his instructed personal representative, taxes, with to the of estate left Mr. respect Clancy’s and, personal property Clancy respect and real to Mrs. with to estate, three a residuary remainder of his created trusts: Marital Clancy representing Trust benefit of Mrs. one residuary; third of the a Trust for the benefit of Mrs. Clancy and their minor child to one half of the residue equal Trust; that remained after the creation of the Marital and the final, two into which the remaining Older Children’s Trusts one half of the residue after the creation of the Marital Trust savings 21. One commenter on has noted: clauses Although adopted posture savings the IRS has an adverse towards carefully, taxpayers and will review them will have the clauses most difficulty subsequent with those clauses that include condition and transfer, transaction, attempt completed to revoke a alter a or are Alternatively, with connected a determination of value. clauses document, interpretation explain parties' serve to assist in intention, of a or However, though generally acceptable. will even be more valid, savings may always they clauses not be deemed are recom- they may day if mended because cannot hurt and in fact save the and unexpected qualification when issues arise. Staler, Clauses, Journal, 1999). Eugene Lyle (April The CPA deposited.22 to be
was
ITEM THIRD inheritance, and transfer estate, succession legacy, AllA. thereon) any penalties interest and (including taxes in all includible property to lawfully respect with payable ... death my in consequence or taxable my gross estate my out of my Representative Personal paid by shall be however, herein- estate, provisions subject, residuary respect with to in Item hereof contained SIXTH after created .... therein Marital Share ITEM FOURTH Wife, me for if survives my she bequeath
A. I and give of domestic property my tangible personal all of thirty days, use. personal or
v v [*] ITEM FIFTH Wife, if survives me for my she
A. I and devise give title, to my and interest thirty days, my right, all of known as Per- Maryland, County, property real Calvert all Cliff, contiguous residence and my which includes egrine ... land, improved unimproved, whether parcels Wife, if she survives me for my B. I and devise give title, interest in and to days, my right, all of thirty Massa- County, Dukes Vineyard, on Martha’s real *12 chussetts ...
ITEM SIXTH my all of the rest and residue and devise give, bequeath,
I (hereinaf- estate, wheresoever situate personal, real and estate”), including all “residuary my referred to as ter may any power appointment, I have over which as follows: singular as the Older which we shall refer
22. The two trusts to Trust”, equal "Exempt Residuary Children's Trust include the United States 2010 of Title 26 of credit under Section allowable Code, Trust”, equal to the "Non-Exempt Older Children’s and the Residuary funding Exempt Trust. residuary after balance me, apart A. If survives there shall first be set my Wife separate as set out below a fund promptly transferred Share) (hereinafter as the Marital sometimes referred to estate, pursuant net as calculated equal my one-third 3-20S(c) and Trusts Article of the to Section of the Estates Maryland. Annotated Code of
1.... be included in the proceeds any 2. No asset or asset shall not be Marital Share as to which a marital deduction would if included. allowable charged
3. The Marital shall not be with or reduced Share estate, inheritance, succession or other tax of by any the laws of by any kind or nature assessed State or under by any taxing authority or other whatso- United States ever. be over and transferred to paid
8. The Marital Share shall trustees, hereinafter named and by my and held trustee sometimes, convenience, referred to in the singular Trust,” neuter, trust, which as a called the “Marital separate in Item shall be administered as set out below SEVENTH. my residuary B. I direct that one-half of the remainder of my and distributed to trustee as a paid estate shall over trust, “NonExempt Family Residuary called the separate Trust,” shall be as set our below Item which administered EIGHTH. my I that the other one-half of the remainder of
C. direct estate shall be administered as follows: residuary credit equal applicable 1. I direct that an amount 2010 of my amount allowed to Estate to Section pursuant (“IRC”), Revenue as amended Internal Code my trustee as paid shall be over and distributed Trust,” trust, which Residuary called the separate “Exempt in Item NINTH. shall be administered as set out below estate, after my residuary I that the balance of 2. direct Trust, over and Residuary paid shall be funding Exempt trust, trustee as a called separate distributed to *13 Trust,” which Residuary Older Children’s “Non-Exempt below in Item TENTH. as set out shall be administered ITEM EIGHTH net income from the over the entire My pay
A. trustee shall Wife, to at least Family Residuary my Trust Non-Exempt her lifetime. during quarter-annually, Trust, trustee my of the Marital B. the exhaustion Upon discretion, to or for pay apply full in its to power, shall have by my or Wife my or child children my the benefit of Wife time, out of the principal are from time to living who Trust, amounts and Family Residuary such Non-Exempt discretion, trustee, my its absolute proportions such may proper time deem advisable and from time to maintenance, support, her or their continued provide health, college, post- (including secondary, and education education). or other graduate, professional whether, when, any and for whom such determining InC. made, B hereof shall be Paragraph payments pursuant thereof, hereby if trustee is any, my the amounts needs respective to take into consideration requested duty or the beneficiaries without and best interests of over my pay equal children to obligation respect with Nevertheless, all them. the decisions amounts to or for on all binding parties. trustee shall be final and my Wife, remarriage, her my upon D. the death of Upon occur, trustee shall divide the my whichever event shall first Trust, Family Residuary NonExempt then remainder of the Trust, the Marital with all additions from any, together if income, into a sufficient net principal both undistributed shares, one, if than so that there shall number of more equal my by my for each of children Wife be set one share apart for the descendants are then and one such share living who (as are not by my children Wife who of each of group) be one or more then but of whom there shall living, then living descendants. *14 in ITEM TWEL- Clancy “Savings
Mr. also included Clause” Will, directing “payment YETH of his that no or distribution my or trustee” should be made by personal representative that would “in any way prevent my receiving benefit of the marital deduction”:
ITEM TWELVETH in Anything contrary notwithstanding, D. this Will to the whether not in other any any or reference is made by of this Will to the limitations this provision imposed D, Paragraph my representative my neither nor personal any authority, trustee shall have or exercise or power, Share, thereof, discretion over the Marital or the income or Share, the Marital nor shall property constituting any or by my personal representative distribution my any trustee be limited or restricted of this by provision any way my that would in estate from receiv- prevent Will ing the benefit of the marital deduction as hereinbefore set forth. 18, 2007, Clancy Mr. executed a codicil September
On (“First Codicil”) that Trust to amended Older Children’s any gifts include the value of made to of the Older later, during Clancy’s years Children Mr. lifetime.23Six how- ever, 25, 2013, on Mr. executed a second codicil July Clancy (“Second Codicil”), review, subject of our which contained Family a series of amendments to the Trust as well as in “Savings included the Trust Clause” explicitly the benefit of the marital deduction.24The designed protect amendments to ITEM following Second Codicil made EIGHTH: my by
... I amend B of ITEM of Will Paragraph EIGHTH by children deleting my therefrom words “or child or September 23. The First Codicil executed in of 2007 is not in issue present case. The ITEM FOURTEENTH to reinstate 24. Second Codicil also amended Thompson Clancy’s Representative. J. W. Webb as Mr. Personal time,” and the words time to living from who are
my Wife unchanged. leaving paragraph said their” and otherwise “or of Will my EIGHTH of ITEM Paragraph I amend C thereof place entirety inserting in its its text deleting “[Intentionally omitted.]” of Will ITEM EIGHTH D of Paragraph
I amend remarriage, her upon words “or therefrom the deleting occur,” leaving and otherwise event shall first whichever unchanged. paragraph said as follows: ITEM EIGHTH reading resulted
Which *15 ITEM EIGHTH income from the the entire net over My pay
A. trustee shall Wife, at least my Trust to Family Residuary Non-Exempt lifetime. during her quarter-annually, Trust, trustee my the Marital exhaustion of B. Upon discretion, for apply to or pay in its power, have full shall Wife, of the Non- out of the my principal benefit of Trust, and in such such amounts Residuary Exempt Family discretion, from trustee, in its absolute my proportions proper provide advisable and may to time deem time health, maintenance, and education support, her continued or professional secondary, college, postgraduate, (including education). other Intentionally omitted.
C. my trustee shall divide my the death of Wife Upon D. Family Residuary Non-Exempt then remainder of Marital all additions from the Trust, if with any, together income, net into a Trust, and undistributed principal both one, shares, if than so that more equal number of sufficient by children my for each of be set one share apart there shall such share for and one living who are then my Wife (as by my children Wife my of each of group) descendants or there shall be one then but of whom living, who are not living more then descendants.
The also made additions to D of Paragraph Second Codicil Twelveth, entirety the former text in its deleting Item following: it with the replacing any
D. No asset or assets shall he included in proceeds of or the Non-Exempt Family Residuary Marital Share Trust as to which a marital deduction would not be included. in this Anything contrary allowed Will if notwithstanding, any and whether or not reference is made in other of this to the limitations any provision Will D, this neither imposed by Paragraph my personal repre- my any sentative nor trustee shall have or exercise au- discretion the Marital or the thority, power or over Share or the income Non-Exempt Family Residuary Trust thereof, or the the Marital or property constituting Share Trust, Non-Exempt Family Residuary any nor shall by my personal representative or distribution my any trustee be limited or restricted by provision Will, that, event, my this such such estate would be any of the marital prevented receiving the benefit deduc- My tion as hereinbefore set forth. shall have the Wife any compel my at time written direction to power trustee to convert held in the unproductive property Likewise, producing property. Marital Trust into income power shall have the at time written Wife unproductive direction to trustee to convert compel my *16 Non-Exempt Family Residuary held in the Trust into income producing property. added).
(emphasis 1st, After Mr. death on his Will was Clancy’s October the First and for along pro submitted with Second Codicils City. Clancy bate in Baltimore In Mrs. September Declaratory Judgment in the for a petitioned Orphans’ Court Family in which a determination that the Trust sought she hearing taxes.25A as to obligated pay any was not and the interpretation the construction and Will Second Clancy sought personal representative 25. Mrs. also to have the re- moved. Judge of 2014 before Chief was held December Codicil the Court. Orphans’ Lewyn Scott Garrett thereafter, Garrett, a Memorandum and Order issued Judge was resolution of the issue that the in which he determined in ITEM TWEL- Savings whether the Clause dependent upon Codicil, the VETH, prohibited the Second as amended Family that the Trust requiring from representative personal Judge estate taxes. Garrett to the contribute Will, as amended Savings that the Clause determined aid Codicil, interpretive a “valid the constituted Second clause”: savings view, interpretive is a valid aid
In the Clause Savings is to the Savings applicable clause. The Clause savings on a court or IRS ruling will and is not dependent entire Instead, of the testa- expression it is a clear determination. the marital Trust Family qualify tor’s intent to have deduction. that, savings there are two types
He generally, noted (1) deduction, “condi- the marital designed preserve clauses (2) clauses; aid” “interpretive subsequent” savings tion clauses, clause savings an aid interpretive and that savings purpose on its own with “designed was to stand of a perceived intent in the event clarifying the testator’s or contradiction.” ambiguity concluded, focus of singular as a result of
Judge Garrett Family Trust for qualifying Codicil on Second deduction, reflected Mr. Clan- marital that the Clause be free of Family that the Trust intent cy’s predominant liability: Federal estate tax will, incidental to construe a jurisdiction
In exercise of our
Estate,
that the
this Court finds
to the administration of
requiring
Representative]
Will restricts the [Personal
of estate
Trust
to contribute
residuary
and division of the
the Tax Clause
Although
taxes.
that the Testator intended
some evidence
provide
trusts
liability with the
share in the estate tax
Family Trust to
*17
lan-
Trust,
express
finds the
this Court
Older Children’s
predom-
the
as the clearest and the
guage
Savings
Clause
intent,
can
only
inant evidence of the Testator’s
which
liability.
free of
tax
Family
achieved if the
Trust is
language
also finds that the
plain
This court
Clause, which
prevents
Representative]
[Personal
Trust from
prevent
Family
action that would
taking
deduction, necessarily
of the marital
receiving the benefit
of estate taxes as each
restricting
includes
of the estate
of estate tax causes a recalculation
Furthermore,
tax
a loss of the marital deduction.
...
and
overwhelming
finds that
purpose
this court
Family
is to
Trust for
marital
qualify
Second Codicil
liability.
the overall estate tax
This
deduction and reduce
rule,
is also bound
where if there is a conflict
Court
codicil,
expres-
between a will and a
“the codicil as the last
will
intention must be given
sion of
testator’s
and
63, 71,
effect.”
v.
170 Md.
We review the Court’s conclusions 643, a v. 397 Md. Cyphers, under de novo standard. Pfeufer (2007). 641, will, 648, a our construing 919 A.2d 644-45 When Court, well that of the is ascertain emphasis, Orphans’ as testator: ing effectuating the intent of the will, the court concern of construing “paramount When in- expressed the testator’s is to ascertain and effectuate words, for the testator’s tent.” In other the search is not ” expressed but for his intention. Gen- “presumed [intention] from the four corners of the erally, “gathered that intent is meaning will their given ‘plain will with the words of the ” however, “will be import.’ having legal significance, Words clearly unless the will indicates construed that sense otherwise.” omitted). (internal at 645 citations
Id. at 919 A.2d father assert that their Clancy’s Mr. Older Children taxes should be out of the paid intended that federal estate estate, allocated to the that which was residuary including Will, Trust, his because ITEM when he executed *18 598 estate, inheritance, that, “All directed of the Will
THIRD my by ... be paid taxes shall and transfer succession legacy, residuary They estate[.]” out of representative personal Family be out of the paid taxes can that federal estate argue to that trust allocated property preserve Trust and still the marital deduction. THIRD of the Will that ITEM dispute does not Clancy
Mrs. express- Savings that the Clause it but asserts says says, what to residuary estate allocated from the any ly excepts bear the burden of having to the marital deduction taxes. then, of impact centers on the disagreement,
The parties’ for the Family Trust of qualification Codicil’s the Second moreover, of the and, the interpretation marital deduction by the as amended Second Savings Clause restrictions Will, of the which Codicil, ITEM THIRD against juxtaposed from the paid are to be federal estate taxes indicated that residuary estate. codicils, will “[t]he a will and construing
When instrument, and effect as one must be construed and codicils Lederer v. must, to of them.” given every part if be possible, Baltimore, 422, 428, 85 182 Md. & Trust Co. Deposit of Safe & Trust Co. Deposit Hutton v. 166, (1943); A.2d 169 of Safe (1926) (“The 551, 308, Baltimore, 539, A. 312 150 Md. meaning give us requires rule of construction general codicil”). “It ais settled of the will and every part purpose codicils must that a will and its of construction rule will instrument, of the provisions as one interpreted only they extent to which to the except are to be effect given clear codicils, in terms either are revoked expressions and later the earlier inconsistency between College Loyola Associated testator’s intention.” Professors 545, 552, 113 A. Dugan, Baltimore v. 137 Md. City (1921). well as the Clancy, personal and Mrs.
The Older Children qualified that the Second Codicil agree all representative, election, Clancy because Mrs. QTIP Trust Family life; Family Trust for beneficiary became the income a limited given could not transfer her income nor was she she but she could that the trustee appointment, request power needs, her which would corpus invade the of the trust for value of the her death. passing upon reduce the Trust All that the contained a agree also Second Codicil parties in the Will to Savings Clause that amended Clause and trustee representative restrict the actions of the personal qualify portion residuary trust allocated the marital Family Trust for deduction. *19 not, however, address, in specifically
The Second Codicil did the that instructed that taxes were to any way, provision Will Family the estate of which the Trust paid residuary be out of part. was a conflict, on rely
To the and we ambiguity apparent resolve to elucidate Mr. interpretive Savings aide of Clause determine, intent. In we as did the Clancy’s doing, Orphans’ so Court, that the Clause contained the Second Codicil exercising which from prevented personal representative “authority, disqualify any portion or discretion” to any power, deduction, such as the Trust from the marital taxes, ITEM THIRD of “trumps” of federal estate payment residuary of taxes from the relating Will reasons, the reach this conclusion for a number of estate. We circum- first of which is because of the decisions similar courts, as the Internal Revenue stances other as well in Revenue 75-440. Ruling Service’s decision Nat. & Trust v. Pennsylvania In Northeastern Bank Co. U.S., (M.D.Pa.1973), court the federal district F.Supp. was that a marital trust created the will judge determined any to bear the burden of estate taxes based on not intended retain the “maxi- clause in the will which intended to savings in issue provisions provided: mum marital deduction.” The will (1) are to be paid that the inheritance and estate taxes (2) estate; is be residuary that the residuary wife, and grandchildren, held in trust for decedent’s son in the trust for his placed with 50% of the residue to be (3) wife, for his grandchildren; for his son and 25% 25% will, notwithstanding any provision other that if or authority any shall not have duties Executor from the the wife’s trust disqualify extent that such would marital deduction. maximum Id. at 117. The will’s clause stated: savings provi- other notwithstanding
I and direct provide herein, ... sions contained
(b) any rights, not have the Executor and trustee shall That immunities, duties, or discre- authority, powers, privileges, this, Last tion, Will by any provision other given Testament, disqualify if the extent that such would or to marital deduc- Marital for the maximum Trust A [the Trust] tion.” assessed a
Id. at 119. The Internal Revenue Service had the marital deduc- because of the exclusion under deficiency The conveyed spouse. Commissioner tion of the testator Internal Revenue Service contended trusts for his between split intended that the residue the estate after the grandchildren son and spouse, court judge disagreed taxes. Id. at 118. The federal district case to the instant stated: equally applicable and in language *20 to the the taxes charge generally If the executor were to a residue, portion in residue would bear the wife’s share it from the maximum disqualify the taxes which would of taxes from residue payment marital deduction. Such ¶ VIIIA3(b), the testator in with would be direct conflict HVIIIA3(b) prevails. that in such an event has directed Likewise, monthly 2:1:1 of the minimum if the ratio of up to set to the executor interpreted require were payments taxes charging 2:1:1 the death by in a ratio of corpora distributive computing before to residue generally obtain the maximum shares, direction to conflicting precedence. marital trust would take deduction for the maximum marital deduction is to obtain the The direction Rodgers’ evidence of predominant the clearest and the objective only intent. His can be achieved here if primary residuary the wife’s share is free of federal estate tax. Id. at 119. determination that the
Our Clause Second Clancy’s Family Codicil clarifies Mr. intention that the Trust taxes charged any supported not be with federal estate also is 75-^40, case, by Ruling Revenue In that the Service supra. that, that its clause that “Notwith- savings provided concluded herein to the standing anything contrary, any pow- contained er, duty, discretionary my Fiduciary to authority granted extent that either the absolutely hereunder shall be void to the thereof, in right any way to exercise or the exercise shall affect, or cause estate to lose all or jeopardize my any part by the tax benefit afforded the Marital Deduction Laws.”, under either Federal or State Rev. Rui. 75-440 at operated any power given to void to the trustees would clause, savings the marital deduction. Id. at 3. The disqualify Service, it interpreted by permitted displace paid of the will that had directed estate taxes to be provision residuary from the estate of which the marital qualifying part. for the deduction was case to bear the Were the Trust the instant tax, of the federal estate any portion burden of the marital as noted in would reduce deduction the tax regulation:26 20.2056(b)-4 Treasury Regulation,
26. Section of Title 26 of the Marital Deduction; passing surviving spouse, provides a valuation of interest the marital deduction discussion of the reduction the value of paid: amount of estate tax estate, it, bequeaths residuary portion If the decedent his or a surviving spouse, and his will contains a direction that all death his estate, residuary payable out of the the value of the taxes shall be deduction, upon bequest, purpose based for the of the marital is direction, pursuant if the of the residue as reduced to such amount estate, it, residuary surviving portion bequeathed or a is payable tax spouse, and the local law the Federal estate is out estate, residuary bequest, purpose the value of the *21 deduction, may reduced the Federal marital not exceed its value as estate tax. 20.2056(b)-4(c)(4). Reg. § Tax interest any property the value of the determination of In surviving spouse, to his from the decedent passed which the effect which taken into account there must be succession, estate, or tax, legacy, or Federal estate tax, surviving the net value to the has upon inheritance interest. property spouse 20.2056(b) 4(c)(1). indicates The itself Regulation § Reg. Tax — out of of estate taxes payment benefit from the effect on the deduction: to the marital allocated property surviving to the only bequest assume that the example, For a State $100,000 required pay is spouse is and the spouse $1,500. death If no other tax in the amount inheritance value, for the of the bequest, affect the net value taxes $98,500. deduction, is of the marital purpose 20.2056(b)-4(c)(2). §Reg. Tax Codicil, nevertheless, in the Second The Clause Savings act to explicitly not personal representative that the directs the marital deduction the benefit of adversely impact Family Trust. To burden the Marital Trust and at the time of Mr. federal estate taxes Trust with payment conveyed is trust when the Clancy’s death of Mr. derogation in direct Clancy would be benefit of Mrs. Clause. intent manifested Clancy’s however, Children, Estate A. rely on James The Older (1988), C.I.R., argument their to bolster Fine v. 90 T.C. avoid necessarily not that a clause does savings Fine, marital share. In taxes from the federal estate and that directed in Articles One leaving died a will testator expenses” funeral of “debts and prompt payment Two the residuary out of the of estate taxes Article Three of the at 1070. apportionment.” “without T.C. go was to residuary that one-half of the will directed residuary wife the remainder surviving testator’s to other beneficiaries. Id. equal into three shares divided stated, duty “Any power, Article 17 of IV Subsection void to the Executor shall be discretionary authority granted all my estate to lose that its exercise shall cause to the extent *22 by afforded the marital deduc- of the tax benefit any part or argued The wife had tion under federal or state laws.” Id. by payment should not be burdened the marital share the benefit of the estate tax which would reduce federal marital deduction. will expressly pro-
The court concluded that the testator’s out of the paid residuary vided that estate taxes were to be estate, stat- Virginia apportionment without reference to marital deduction and ute which would have maximized the marital share. 90 limited of estate taxes T.C. payment The court also concluded that the limitation of the at 1075. part discretion contained as a personal representative’s did not affect the of estate taxes because payment Article IV Virginia apportionment inapplicable pursuant statute was to the terms of the will. Id.
Fine, however, in the instant case because Mr. unavailing is expressly Clancy Savings pro- in the Second Codicil’s Clause adversely affecting from Representative hibited his Personal to benefit from the martial deduc- ability Trust tion, any when it stated “nor shall or distribution re- trustee be limited or my personal representative my that, Will, in such any of this such by any provision stricted event, receiving prevented estate would forth.” the marital deduction as hereinbefore set benefit of Clancy’s The also to Mr. Will Savings expressly applied Clause Savings sentence of the entirety in its when second contrary “Anything it in this Will specified Clause any or not reference is made notwithstanding, and whether ” added). .... The (emphasis other of this Will provision Clancy’s to Mr. Personal power granted restriction on the contained in the Codicil Clause Representative Second Will, THIRD, ITEM including to all applies provisions out of the for of federal estate taxes provides which residuary. addition, to Estate Posner v. point
In Children Older (T.C.2004), C.I.R., proposition 87 T.C.M. CCH were it to rewrite a that a clause would be ineffective savings Posner, who had received surviving spouse, In will. tax purposes federal estate of a marital deduction for benefit subsequently her husband conveyed to her when three children. The two died, two of her having disinherited then, of their disinheritance children, efficacy disputed will, their father’s will and to “resurrect” sought the mother’s the three chil- among residuary had divided his which whether the upon depended Resolution of the issue dren. wife an inter vivos or had his granted husband’s will *23 property over the marital appointment of testamentary power for the marital deduction. qualified that Court, had no general in that Mrs. Posner deciding The Tax that: found notable power appointment, to a referring no language ... Mr. Posner’s will contains indeed, and, contains no appointment” “general power Item property. of the marital trust dispositions substantive provide not expressly II of Mr. Posner’s will does trust, and it of the marital principal of income or disposition principal the distribution of regarding contains no direction It to the Federal only of the trust. refers upon termination Item XIV also refers estate tax marital deduction. we language might no marital deduction but contains general power to decedent a reasonably interpret grant marital deduction alone The references to the appointment. general to create a II and XIV are insufficient items in decedent’s favor. appointment power omitted). (internal clause to which the citation The Id. at 7. ineffective in case to as present point Children Older Posner stated: any authority, exercise
... Trustee shall not have or my or the income over the Marital Trust or discretion power same, thereof, any nor shall constituting property re- Trustee be limited or by my or distribution Will, any which would of this provision stricted wife to all income right my ... affect the said way principal right dispose therefrom or her to to necessary to the extent in the amount and income thereof the Marital Trust for the marital deduction for qualify purposes provisions Federal estate tax under of the law to estate. applicable
Id. at 1. will,
The of Mr. distinguishing characteristics Posner’s how- ever, to Mr. in the instant case is that compared Clancy’s Will Clancy Mr. did in his Codicil that everything Will Second Mr. Posner did not. In order to Trust for qualify election, QTIP Clancy Clancy Mr. directed that Mrs. had a life, qualifying income interest for that she was entitled to all of the income from the that no property payable annually, had the person power appoint any part other than her as well as that was anyone Clancy Mrs. with the distribution of provided power request corpus the trustee. with the agree
We
Older Children
it is clear that a
testator could direct that the burden of inheritance taxes could
placed
legatees
on
who otherwise would not have to pay
taxes,27 well
the marital
such
as
of estate taxes on
*24
643,
(2007),
Cyphers,
27.
In
v.
397 Md.
Finally, Older Children them, to the benefit taxation on being placed federal estate intended, however, by the clearly Clancy. Clancy, Mrs. Mr. Trust, Clancy benefit Mrs. QTIP establishment of Child, could be whose remainder Younger detriment need. As a corpus invasion of for by Clancy’s Mrs. diminished are burdened for the result, Clancy’s Mr. children all of federal estate tax. Clancy and to avoid benefit of Mrs. conclusion, conveyed that the property In we hold and Clancy’s in Mr. Will Second Trust as identified of federal estate cannot be burdened Codicil taxes. AFFIRMED; THE ORPHANS’ COURT
JUDGMENT OF BY APPELLANTS. BE PAID IN THIS COURT TO COSTS McDonald, JJ., Barbera, C.J., dissent Greene and Barbera, C.J., McDonald, J., which Dissenting Opinion by Greene, J., join and premise to be based on the Majority opinion appears
The testator is the avoidance that the value for pre-eminent so, one would are like that. If people taxes. there Perhaps years ago scrupulous- have and bought Yugo them to expect thereafter avoid the automo- maintained it to minimize and ly bile excise tax. is fact, necessary no more taxes than paying
In
while
that also inform
have other values
people
most
significant,
their heirs. In the
their lives—and for
decisions for
important
function,
car,
reliability,
example,
of a
interests
purchase
comfort,
person
purchasing
dissuade a
safety may
car,
may
mean
although
least
cheapest
taxed—
—and
an
devising
more in tax. So also is
case
paying
observed,
“[mjinimizing estate
As this
has
plan.
Court
... may
always
inheritance taxes for beneficiaries
not
be the
driving
regard-
ultimate
force behind the testator’s decisions
Bruce,
contained in his or her will.” Noble v.
ing
provisions
(1998).
730, 757,
349 Md.
What is is the effect on that estate of an dispute plan will, amendment of that known In the Second Codicil. view of Mr. Personal that amend- Clancy’s Representative,1 ment had the effect of reduction in tax achieving significant (from million) liability retaining million to while $26 $15.7 - 50%) (50% distribution of the residual of the estate. equal The of the will achieve reading urged by Clancy Mrs. would (from a smaller additional tax reduction million to $15.7 $11.8 million), equal but would cast for distributions plan aside from the the fact that the despite language residual will distributions was not amended—and skew directing equal - 37%). (63% the distributions from the residual in her favor Clancy’s The for Mrs. Majority opinion opts interpretation savings of the will—an in which an amended interpretation original is construed to contradict basic terms of the clause However, we read unchanged. ordinarily will that remained there is no to do way of wills to be consistent unless provisions view, consistently savings so. In clause can be read interpretation Majority opinion that the ascribes to the Older 1. The placed will and the Mr. Children is the construction on the codicil Clancy's Representative. defend that Personal The Older Children also interpretation will codicil. which savings tax achieve the will to original with the plan. basic estate discarding the intended without codicil was the will offered reading adopt I would Accordingly, Clancy’s Representative. Mr. Personal
Background back- Majority opinion’s following supplement The understanding this dissent. will aid information ground Deduction, Estate, Taxable Estate Marital Gross all property dollar value of refers to the total A estate gross interest at the time of individual had an in which an and assets are assessed on estate taxes death. Federal the individual’s estate, estate minus gross which is the of the taxable the basis relevant The deduction primary deductions.2 any allowable of the marital The value the marital deduction. here is property value of all is the full generally deduction surviving to a from the decedent gross passes does spouse passing that the interest provided spouse, A interest § 2056. terminate or fail. 26 U.S.C. not *28 the terminate, would not for ordinarily qualify and that does if marital deduction deduction, may qualify marital still 26 (“QTIP”).3 interest property” terminable “qualified it is 2056(b)(7). § U.S.C.
QTIP Savings Clauses trust, pass the must QTIP property a as a
To trust qualify trust, must have surviving spouse the the testator to that life, election necessary and the income interest for qualifying a 26 U.S.C. personal representative. the by must be made 2056(b)(7)(B)(i). income qualifying has a surviving spouse A § life if: interest for they are relevant here. adjustments, but not
2. There can be other passing a terminable interest may reasons for 3. A testator have various require may example, the testator want to spouse. a For in a trust to spouse the assets in the trust so administer that other than someone deplete but cannot the income from the assets spouse receives that those assets.
611 (I) is entitled to all the income from surviving spouse more inter- annually frequent or at property, payable vals, property, a interest for life usufruct[4] has (II) no has a to person power appoint part other than the property any person surviving spouse. 2056(7)(B)(ii). QTIP, § In order to treat as 26 U.S.C. QTIP an irrevocable must make personal representative tax return. 26 appropriate election on the U.S.C. 2056(7)(B)(v). § may wills often include conflict with provisions
Because guidance but that for other QTIP requirements provide a testator will often qualify QTIP, trusts not intended to as ensure that a trust savings include a clause order to in fact does so. Edward C. qualify QTIP intended to Cf. Can a Marital Deduction Clause Renenger, State’s Estate Davis v. Marital Deduction? Reform Defective (2004) (“The Commissioner, 615, require Tax Law 2056(b)(5) the non- exception ments to meet the section are ... deductibility rigorous [W]here of terminable interests may and the stakes extremely the rules are often technical risks it is not that advisers seek to minimize high, surprising clause is Using savings a marital deduction disqualification. risks.”). way to minimize such one Taxes
Apportionment Obligation Pay tax is determined While the amount of federal estate law, tax responsibility paying federal the allocation 95, law. v. Del 317 U.S. Riggs Drago, is determined state (1942). 97-98, L.Ed. 106 63 S.Ct. generally the tax of an estate is Maryland, liability
In under the among parties apportion- interested apportioned (“TG”), Code, Article Maryland ment statute. Tax-General *29 default, “in the § that is made By apportionment 7-308. person that the value of the interest of each proportion context, right refers to a to use the 4. In this the term “usufruct interest” resulting profits the trust. fruits or of the income from 612 the interests to the total value of in the estate bears
interested § 7- estate.” TG interested persons [taxable] of all the 308(b)(1). interest if a has a 45% differently, person Stated estate, 45% of the person pay then that must the taxable statute, Therefore, a under the apportionment tax due. estate that property qualifies who receives surviving spouse taxes based on would not estate pay marital deduction because share covered the marital deduction 308(e)(1) (in of the taxable estate. See §TG part is not 7— tax, allowance is to be for federal estate liability apportioning deductions). Similarly, under any exemptions made for statute, those taxes paying responsibility apportionment QTIP allocated to a trust. would not be AppoHiomnent Out Opting however, taxes are testator, customize how the estate may
A
will,
in the
may,
the fact that the testator
as is evident
paid,
7-308(k);
§
scheme.5 TG
opt
general apportionment
out of
(2007) (“the
643, 655,
613 (“The codicil shows a desire to of the residue qualify one-third It as a marital deduction. does not disclose an intention to part have this of the residue in effect tax free and grossly to the other two-thirds. That which the testa- disproportionate not the during tor did choose to do his lifetime courts should death.”). not do after his out of a a
By opting apportionment, may qualify testator of the estate the marital larger portion deduction —with the resulting computation the benefit of tax —but still allocate of estate tax to a of the estate portion intended to benefit a surviving spouse thereby pass of the estate to all of the estate’s beneficia- larger proportion ries, well the surviving spouse. as as
Discussion The Text andWill Codicil will,
Construction of a
like
other
interpretation
legal
text,
with the
of the words
begins
plain meaning
649,
Pfeufer,
document.
Resolution of this case thus with the text of the will forth, the will Majority opinion and codicils. As the sets (the is “set provides portion apart” that a Share”) “Marital of taxes to fund a before 589-93, at at Majority op. Marital Trust. A.3d 810-12 (Item (A)). Third, that, Item The will then after provides Sixth related taxes are to estate and apart, is set
the Marital Share estate, not subject to limitations residuary out of the paid Third). (Item to be no appears There here. Id. relevant taxes that, how estate directing parties among dispute of the apportionment out Clancy opted Mr. paid, are to be *31 of the remain- that “one-half The will then provides statute.6 and distributed over paid estate shall my residuary der of “the other one-half Family Trust]” my [the to trustee be” over residuary paid estate shall my remainder of Trusts. the trustee as the Older Children’s distributed to (Item (C)). concerning the (B), the provision Unlike Id. Sixth Share) (the the Marital used to fund Marital of the estate part Trust Family used to fund the Trust, of the estate parts the apart” “set are not to be Trusts and the Older Children’s of taxes. payment before the that the to ensure Savings will contained a Clause
The also deduction when for the marital qualify would Marital Share Personal limited the explicitly It computed. estate taxes are anything to do authority or trustees’ Representative’s the benefit receiving the estate “from would prevent (Item Id. Twel- set forth.” as hereinbefore marital deduction (D)).7 veth respects the will several Codicil8 amended
The Second for the marital deduction qualify Trust Family allow the example, that codicil are For computed. when estate taxes Mrs. that terminated Clan- of the will provision eliminated length at some in this case discoursed Orphans' Court decision 6. The applied accepting the apportionment before the statute on whether apply. did not apportionment statute proposition that the Specifically, provided: 7. it my have or representative nor trustee shall my personal [N]either Share, authority, over the Marital power, or discretion exercise representa- by my personal any payment or distribution shall nor any provision of this my limited or restricted tive or trustee be receiving the any way prevent estate from
Will that would in
forth.
as hereinbefore set
the marital deduction
benefit of
is not at issue
the will. The First Codicil
There were two codicils to
8.
here.
provision
if
remarried and also eliminated a
cy’s interest
she
the
discretion to use the funds
of the will that allowed
trustee
during
for the benefit of the minor child
Family
Trust
593-95,
lifetime.
at
144 A.3d at
Clancy’s
Majority op.
Mrs.
See
(amendments
593-95
of Item
Consistent with those
Eighth).
amendments,
Codicil also amended the
Second
Trust,
to ensure that
like the Marital
Family
Clause
Share,
qualify
comput-
would
for the deduction when taxes are
However,
taxes,
ed.9
with
respect
did not amend Item Third to
that the
provide
Second Codicil
set
of taxes.
Family
apart
Trust was to be
before
Thus,
will,
of the text of the
as amended
plain meaning
Codicil,
that the Marital Share and the
requires
Second
Family
qualify
Trust both
for the
funds intended
however,
are
computed;
marital deduction when taxes
those
apart”
pay
Marital Share is “set
funds used
residuary
taxes while the one-half of the
estate used to fund
Trust is not.
*32
the Will and Second Codicil
Reconciling
short,
the
Trust and the
Family
In
the will
that
provides
Trusts receive
shares of the residual
equal
Older Children’s
provides
the estate after
of taxes. The Second Codicil
the
receive the benefit of the marital
that
estate should
Marital
and the
respect
deduction with
to both the
Share
in
tax
If these
Family
computation
liability.
Trust
the
of estate
reconciled,
ordinary principles
two
can be
then
provisions
that we read them to be consistent.
require
will construction
provides,
pertinent part:
portion of the Second Codicil
in
9. That
my personal representative
my
have or
nor
trustee shall
[NJeither
any authority, power
over the Marital Share
exercise
or discretion
thereof,
Family Residuary
Non-Exempt
Trust or the income
or the
Non-Exempt
constituting
Share
the
property
or the
the Marital
or
Trust,
by
Residuary
any payment
Family
nor shall
or distribution
by
my personal representative my
or restricted
trustee be limited
Will,
that,
event,
any provision
such
in
such
of this
receiving
prevented
the benefit of the marital
would be
deduction as hereinbefore set forth.
matter,
that
these two
expect
we
to
ought
As an initial
operative language
reconciled. While the
can be
provisions
Codicil,
comes from the Second
Savings
the amended
Clause
Here,
nearly
language.
identical
the
will contained
original
Savings
All that the
of a textual conflict.
there is no evidence
the
after its amendment
before and
requires
Clause
—both
the benefit
“receiv[e]
that the estate
Second Codicil—is
forth.” In order
as hereinbefore
set
marital deduction
deduction,
the estate’s
of the marital
receive the benefit
form so as to
appropriate
must file the
representative
personal
Clancy
the
in which Mrs.
QTIP
treatment
qualify for
here,
Family
relevant
the
have a terminable interest —as
will
au-
discretionary powers
various
not exercise the
Trust —and
Thirteenth)
that
way
Item
(e.g.,
under the will
thorized
Thus,
can
that election.
Clause
would undermine
fill
the Personal
merely
Representative
read to
that
require
changes
abide
the other
form and
appropriate
out
QTIP
Trust
Family
Trust
Family
qualify
with
the taxes
way
paying
so in no
conflicts
Doing
treatment.10
Trust and Older Chil-
the residual before the
out of
maintaining
equal
thereby
Trusts are funded and
dren’s
in the will.
specified
distributions
Majority Opinion’s Approach
The
the Ma-
Clancy’s preferred interpretation
In
Mrs.
adopting
it by
an
conflict”11and resolves
“apparent
finds
jority opinion
di-
“trumps”
specific
Second Codicil
holding
(in
Third)
concerning
in the will
Item
rections
op.
acknowledge
Majority
Majority opinion appears to
this. See
10. The
("The
Clancy,
and Mrs.
as well
at
617 taxes, even though the Second Codicil made no change 599-600, those at 144 Majority op. directions. A.3d at 815-16. view, In Majority opinion is mistaken and there is no need to resort to surgery. such radical
The reasoning Majority opinion appears to be that Clause, itself, the Savings mandates that the residual obtain the maximum marital estate be distributed so as Trust, deduction with to the respect Family despite the fact that Item prescribes only Third such treatment for the Mari- tal “setting Share. This entails one-half of the apart” residual taxes, destined for the Trust payment before with the result that the half of the residual devoted to the Older Children’s Trusts absorbs all of the for responsibility Thus, of taxes. an the will amendment of that on its computation only face affected of taxes being is construed the to alter the directions in the will of taxes and the relative radically changes distributions to the beneficiaries. essence, In the Majority opinion, explanation, without reads the Second Mr. intent expressing Clancy’s Codicil as that the distribution his estate maximize marital deduction at all costs. There is no basis for this The simply interpretation. provides Second Codicil the estate must receive “the forth,” benefit of the marital deduction as hereinbefore set not “the benefit of the maximum marital deduction,” so the text no to the As provides support Majority opinion’s reading. justification Majority for its relies interpretation, opinion a that it specifically provided on case which the "will was maximum deduction.” See “the marital preserve Majority op. 599-600, Pennsylvania Northeastern at 144 A.3d at citing U.S., Nat. Bank & Trust v. Co. 360 F.Supp.
(M.D.Pa.1973) (“The direction to obtain the maximum marital deduc predominant Rodgers’ tion is the clearest and the evidence intent.”) added).12 contrast, By Clause (emphasis Majority ruling opinion 12. The also cites an IRS revenue is 600-01, similarly distinguishable Majority op. from this case. See at (1975)). ruling (citing A.3d at 816-17 Rul. 75-440 That concerned Rev. equal in an a will that directed the creation of trust amount *34 that the specify not in this case does the Codicil of Second marital deduc- receive the maximum possible estate should tion.13 that, out paid if taxes are also reasons Majority opinion
The
Trust
is
Family
the
residual estate before
of the
any part
of
might
that
otherwise
funded,
on funds
paid
estate tax will
have had the
Trust and would
Family
the
part
have become
601-02, 144
at
Majority op.
the marital deduction.
benefit of
time a
to
likely
happen
But that appears
at 816-17.
A.3d
and elects to
the
statute
apportionment
out of
opts
testator
that
of the tax to assets
part
of some
payment
allocate the
that would
for
qualify
a distribution
otherwise fund
could
here referred
that the testator
telling
It is
marital deduction.14
“set
before
being
apart”
Marital Share
in relation to the funds
taxes,
language
but did not use
Item
in that
Trust —nor amend
Sixth
intended
Codicil.
part
Second
respect
gave
detailed directions as
further
marital deduction”
"maximum
the maximum amount
computation
to ensure that
of that amount
savings
provisions,
with those
a
the trust. Consistent
was transferred to
Fiduciary
by
any action
the testator's
in the will limited
clause
my estate
any part
the tax benefit afforded
all or
would "lose
contrast,
Clancy's
in Mr.
By
Clause
Marital Deduction.”
concerning
marital de-
language
the maximum
will does not contain
"any part”
marital deduction.
duction or the loss
582-84,
true,
(Majority op.
Majority opinion
at
observes
13. It is
as the
805-06)
years
amended over the
that federal law has been
144 A.3d at
deduction. Of
statutory cap
the maximum marital
a
on
to remove
course,
longer
deduction
no
a "maximum”
that does not mean there is
particular circumstances.
for
Commissioner,
(1988),
Conclusion by Majority opin- Clancy’s interpretation adopted Mrs. — of the residual estate signifi- ion—would skew the distribution *35 in her to basic of the will cantly contrary provisions favor tax somewhat more than reducing liability while estate’s by interpreting what it would otherwise be. It does so in the estate change plan Clause to effect a radical Savings The Personal any explicit Repre- without direction to do so. construction of the will and codicil would treat sentative’s for what it is—a clause—and maintain savings Clause will, of the residual both equal specified distribution amended, significantly and as while originally achieving tax is the evident aim of the liability reduced Second Codicil. the Second Codicil could mean what assuming
Even it mean —which far from Majority opinion reads is ordinarily ambiguities clear —we resolve textual favor of not there are two consistency, inconsistency. possible Where codicil, of a of a one which conflicts interpretations provision not, precedents with the will and one which does our original that does not conflict. adoption interpretation favor Thus, if were it ambiguous, ought even the Second Codicil will rather original to be consistent with the interpreted than to contradict it. have advised that Judge Judge
Chief Barbera Greene they join opinion. this