*1 Fraternity alleg- fact that members ROSEN, Independent Ricki Diann alle-
edly learned of the sexual-misconduct the Estate of Daniel Executrix of If gations against Waddill at that time. Rosen, Deceased, Appellant, H. forming the the transaction or occurrence was, original petition of his as Wad- basis it, phrases dill “his involvement with the
Fraternity,” hypothetically then Waddill TEXAS, N.A., BANK FARGO WELLS could use the relation-back doctrine to Leigh Ro as Trustee of the Rachael petition amend his to add a host of other Trust, and the Dorian Rosen sen Trust having nothing injury claims to do of the Estates of and as Guardian original petition. he of in his complains Leigh Ro- Rosen and Dorian Rachael sen; and Eileen Rosen as Custodian alleged hazing preceded incidents Rosen, Leigh Appellees. of Rachael by nearly year specifically the events giving original petition; they rise to the No. 03-01-00634-CV. occurred while a student at Waddill was University Texas Tech and the Fraterni- Texas, Appeals Court of ty’s pledge. The acts to the giving rise Austin. defamation claim occurred conversations year the next while a student Waddill was July University at The of Texas at Austin.
Thus, hazing we conclude that the claim is new, distinct,
“wholly based on or differ-
ent transaction Tex. or occurrence.” Civ. 16.003(a).
Prac. & Rem.Code Ann. Be-
cause had no claim for Waddill would have negligence
defamation and until occur-
rence of the communications between the Fraternity
members of the and the individ- Austin,
uals in Waddill must show
hazing activity claim is based on this
avail himself of section 16.068 of the civil
practice and remedies code. This he can-
not do. hold that court We district granted summary judgment
properly
against hazing Waddill’s claim based
limitations.
CONCLUSION above, we overrule
For the reasons appeal. Accordingly, issue on
Waddill’s summary
we affirm the district court’s
judgment. *2 Mueller, Currier, Yacek,
Gary Garry I. Kiecke, L.L.P., Austin, for Eileen Vacek & Rosen. Vaught, A. Law Office James
James *3 PC, Green, & Vaught, A. Deborah Green Wells, LLP, Austin, McCullar, Fargo for Bank. KIDD, YEAKEL and
Before Justices PATTERSON.
OPINION PATTERSON, JAN P. Justice. in will construc- The central issue whether, di- tion case is when testator all transfer out of rects that estate but the residue con- assets, statutory ap- tains no the default portionment provisions of section 322A of Ricki probate apply. Appellant code Rosen, Daniel inde- Rosen is the widow of pri- pendent executrix of his will; beneficiary appeals she mary his issue, In she by two issues. her first court erred in contends that the allocating the tax burden to the statute, apportionment assets. Under assets, appellant argues, only taxable specifically non-probate here life insur- the children of proceeds passing ance incur the marriage, Daniel Rosen’s first issue, In she transfer taxes. her second contends that the court erred failing apportion any penal- interest and failing ties on transfer taxes and to award legal pursu- costs and fees in the estate its stated ing this matter. For reasons below, we affirm the court’s order part, judgment reverse in render part, only the taxable of Rosen’s assets burden, Golden, Golden, PC, estate bear the transfer Alvin J. Ikard & Baron, Austin, part pro- cause in for further remand this Appel- Pamela Stanton ceedings opinion. in accordance with this lant. $216,000 policy, payable AND life insurance FACTUAL PROCEDURAL the children.1 Fargo guardian BACKGROUND Wells also included Although parties disagree about $64,542 held in a Uniform Gift to Minors law, the facts in this ease application of (UGMA) for the benefit of Act account undisputed. Daniel Rosen died unex- are cus- Rachael Rosen. Because Rosen was At the time of pectedly on June account, it was includ- todian of the UGMA appellant, he was married to his See 26 purposes. ed his estate for tax children, second wife. He also had two (West 2002). U.S.C.A. 2036 Dorian, Rachael and from his first mar- Rosen that ended riage appellee Eileen applica- filed an appellant June testate, and his will 1996. Rosen died *4 declaratory judgment, seeking a tion for 1997, 28, May executed on was admitted to that, there was no re- declaration because County in the Probate probate Travis taxes, pay from to siduary estate which gross of his Court. The total value under sec- apportioned the taxes should be $2,632 approximately was million. probate code. Tex. Prob. tion 322A of (West 2003). III Article of the will left all of Rosen’s Wells Code Ann. 322A his interests personal property, as well as the de- Fargo opposed and Eileen Rosen employee plans in all and retire- asserting benefit that the will claratory judgment, accounts, appellant. Articles IV ment specifically probate directed that as- placed and V the remainder of the estate It the tax burden. is sets would bear trusts: the marital trust and the two that if the assets bear undisputed in- family provided trust. Rosen that the burden, the total taxes will the transfer come of the marital trust was to be used $224,447. If non-probate be her appellant during for the benefit of burden, be bear the the total taxes will family The income of the trust lifetime. $132,442. for the benefit of both was be used July evidentiary hearing After an appellant and Rosen’s descendants. The 2001, signed court an order remainder of both trusts was to be distrib- 2001, directing that all transfer October descendants, stirpes. Arti- per uted to his taxes, to the deter- expenses attributable provi- cle contained administrative VIII taxes, plus any interest mination sions, including a directive that all transfer taxes, solely penalties paid on the taxes “shall be out of the residue of fur- The court from the assets. apportionment.” How-
my estate without party pay each its own ther ordered that ever, all of the no residue existed because pursuing and costs for attorney’s fees disposed through assets were action. It is from declaratory judgment in the will. other appeals. appellant this order that Rosen also had substantial assets, designated the bulk of which were DISCUSSION in- his children. These for the benefit of of Review Standard $963,000 policy, life insurance cluded declaratory judg Bank, review a Fargo as We payable appellee Wells standards children, action under the same and a ment trustee for Rosen’s divorce, obligations support initially was to cover child re- which 1. After his Rosen was However, Rosen larger event of his death. quired policy. Pursu- in the to maintain the larger voluntarily to maintain the subsequent agreement, only continued he was ant to a policy, policy. required to maintain the smaller
149
orders,
in a will their
judgments,
give
other
and decrees.
court must
the words
Tex. Civ. Prac. & Rem.Code Ann.
37.010
meaning,
light
normal
of the testator’s
(West 1997);
Killeen,
City
Black v.
78
Rosenthal,
intent.” Barker v.
875 S.W.2d
686,
2002,
S.W.3d
691 (Tex.App.-Austin
779,
(Tex.App.-Houston [1st Dist.]
781
denied).
pet.
uphold
judg
We must
writ).
1994, no
should construe the
We
ment of the trial
if it
court
can be sus
it,
give
every part
will to
effect to
tained on
legal theory supported by long
language
reasonably suscep
as the
Katy Indep.
the evidence. See Bell v.
Sch.
tible of that construction. See
Un
Perfect
Dist,
862,
994 S.W.2d
864 (Tex.App.-Hous
10,
Lodge
A.M.
Inter
ion
No.
A.F. &
v.
1999,
ton
pet.);
no
Hills
[1st Dist.]
Oak
Antonio, N.A.,
Bank
San
748
first
Rests., Inc.,
Props,
Saga
v.
940 S.W.2d
218,
(Tex.1988); Republic
220
Nat’l
S.W.2d
243,
1997,
(Tex.App.-San
245
Antonio
no
Fredericks,
79,
v.
155 Tex.
Bank Dallas
writ).
duty
We have a
to render the judg
(1955).
All rules of
S.W.2d
ment the trial court should have rendered.
yield
the testator’s
construction must
Giles,
City
v.
See
Galveston
902 S.W.2d
purposes
intent and
as reflected
basic
(Tex.App.-Houston
[1st Dist.]
Straach,
the entire instrument. Welch v.
1995, writ);
Corp.
Scurlock Permian
(Tex.1975).
However,
*5
478,
County,
Brazos
869 S.W.2d
488-89
we
the will or
provi
will
redraft
add
1993,
(Tex.App.-Houston [1st
writ
Dist.]
guise
sions under the
of construction to
denied).
may only
We
render judgment
presumed
effectuate some
intent of the
when,
here,
the material facts are un
10,
Lodge
testator. See
Union
No.
Perfect
disputed.
Viejo,
See Mitchell v. Rancho
220; Stahl,
to increase
added.) Because the combined
(Emphasis
purposes
mined for Federal estate
non-probate
assets
taxable value
which ... will result
largest
credit,
be the
amount
unified
there was
exceeded the
estate tax
family
in the least amount
Federal
to fund the
residue of the estate
en-
imposed
my estate.” This clause
The dis-
the transfer taxes.
pay
trust or
fund the unified
reasoning
finding
sured that assets would
rests on its
sent’s
credit,
value of the
the residue of
also deducted from the
trust contains
marital
left
“The
is what is
funding the marital
the estate.
taxable
before
legal charges
have been
after all debts
At the time of Rosen’s
trust.
testamentary gifts have
and other
$675,000.
unified credit was
See
Stahl,
at 152
(West
satisfied.”
2000),
been
superseded
U.S.C.A.
added).
disregards
The dissent
(West 2001).
(emphasis
by 26
U.S.C.A.
trust
intent to create a marital
all probate
effect of Article IV was that
from the cre-
testamentary gift separate
III
devised Article
assets not otherwise
marital
trust
of the residue. The
ation
trust,
less the
would fund the marital
designated
portion
specifically
clause
por-
to fund
unused
necessary
amount
which,
conjunction
when read
the unified credit. The amount
tion of
clause,
the residue:
family trust
would be
become
unused unified credit thus would
amount, “if
to fulfill the
any,” needed
estate.
the residue of the
credit. Because the
unified
all of the resi
placed
Article V
credit, there
satisfied the unified
in the Daniel Hunt Rosen
due of the estate
*6
no
The will contained
was no residue.
Trust,
primary
appellant
with
payment of
provision for the
alternative
beneficiary
survived Rosen. Article
she
if
or in-
if
were unfunded
taxes
the residue
paid
taxes be
VIII directed that transfer
the taxes. Thus arose
pay
sufficient to
residue,
as follows:
out of
which assets would
dispute about
parties’
of the taxes.
bear the burden
estate,
or similar taxes
All
inheritance
...,
expenses and all ex-
all funeral
section
centers on whether
dispute
administration
penses
code,
incurred with the
ap-
the default
probate
322A of the
paid
statute,
out
my
apply
estate shall
when
should
portionment
apportion-
my estate without
directive for
residue
an ineffective
the will contains
however,
ment;
my
wife
provided,
of the residue of
of taxes out
payment
me,
extent
impression
to survive
to the
of first
fails
estate. This is
issue
pro-
apportionment
insufficient for
The default
residue of
estate is
in Texas.2
expenses,
“specifically
the will
apply
of such taxes and
unless
payment
visions
excess,
apportionment
the manner of
except as otherwise
directs
then
Section,
discretionary power
grants
in this
estate tax
specifically provided
person.”
to another
apportionment
all of
on a
rata basis from
paid
pro
shall be
denied).
also
(Tex.App.-Tyler
pet.
See
holding
only
2. The
Texas case
Commissioner,
apply when a will
76 T.C.M.
code section 322A did not
v.
Estate Miller
that,
from the
pay
(1998)
all taxes
(CCH)
(holding
contained
directive
when residu-
whether
residuary
funded,
estate declined to decide
that in
aiy
similar to
estate
clause
residuary
apply
estate
if the
the section would
section
to override
instant case sufficient
pay
taxes.
the transfer
were insufficient
apportionment provisions).
default
322A
Mayse,
See Peterson
S22A(b)(2).3
pay
inheritance or similar
Ap-
Tex. Prob.Code Ann.
used to
residuary
lack of a
pellant argues
respect
that the
with
to such as-
assessed
negates any specific
direction for
sets.
apportionment and therefore the default
clause,
This
disagree
appellees.
We
apportionment provisions of section 322A
conjunction
in
with the rest of
when read
apply.
agree.
should
We
Because Ro-
will, supports appellant’s position
only
sen’s
payment of
directive —
that non-probate
because it directs
assets
residuary
taxes out of the
in-
estate—-was
taxes that those assets
may
pay
be used to
effective, and because his will did not an-
provision,
incur. The will contains no
how-
ticipate an alternative
payment
for
of taxes
ever,
mari-
payment
of taxes out of the
insufficient,
if the residue were
we hold
tal trust.
apportionment
that the default
provides
portion
322A
that “the
Section
apply.
of section 322A
To hold otherwise
charged
of each estate tax that is
to each
give
would
effect to a
provision
the will
person
repre-
interested
the estate must
that failed of its
See
purpose.
Perfect
sent the same ratio as the taxable value of
220;
Lodge
Union
No.
at
S.W.2d
person’s
interest.” Tex. Prob.Code
Stahl,
151;
610 S.W.2d at
Huffman, 339
322A(b)(l). Here,
Ann.
under
di-
S.W.2d
888.4
will,
rectives of the
assets
Subject
Payment
Assets
of Transfer
qualify for the unlimited marital deduction
Taxes
and therefore are not taxable. The non-
Now we must decide which estate
qualify
assets that did not
for the
assets bear the tax
Appellees
burden.
only
unified credit are the
taxable assets
argue that
unequivocal
Rosen’s “clear and
and must
therefore bear the burden of
intent”
was for taxes to be
without
322A(b)(l).
paying the taxes under section
apportionment
out of the
estate if
Having
assets bear the
Appellees
estate existed.
taxes,
tax burden results
less estate
support their argument with the following
parties agree,
leaving
turn
more
clause from the will:
pass
assets overall to
to the beneficiaries.
Non-probate
payable my
testa-
comports
overarching
This
with Rosen’s
*7
mentary Trustee shall not be liable for
pay
intent to have his estate
as little trans-
(but
or
pay
may
used to
be loaned for
possible.
fer taxes as
taxes,
purpose) any
liabilities,
such
debts
any
issue,
or
other
against my
Having
claims
estate:
appellant’s
sustained
first
however,
provided,
such
may
probate
be we reverse the
court’s order that
Cochran,
rev.denied);
suggests
3. One
Cal.App.3d
commentator
a directive to
Estate
30
of
pay
residuary
892, 897,
all taxes from the
estate is too
Cal.Rptr.
(Cal.Ct.App.
106
700
general
to be a
directive that circum-
Cook,
1973);
264,
Naffziger v.
179 Neb.
137
vents section 322A and that the Peterson and
804,
(1965);
N.W.2d
806-07
In re Estate of
holdings
Miller
make it "clear that [section
361,
1280,
representative Normally, review court’s we and interest. penalty amount assessed attorney’s of whether to award decision 322A(m). under an standard. 322A(q) Id. further fees discretion Section abuse 19, 21 Herring, Bocquet See provides apportionment interest (Tex.1998). “unless, mandatory Despite nature penalties application by code of the word “shall” person interested 322A(r) court provisions, section allows a proposed appor- determines that the court ac 322A(q). equitable to take considerations into equitable.” tionment is not Id. apportioning Ap count in fees costs. Appellees application made an below *8 under pellant sought also costs section appellant bear the costs of interest and practice and remedies taxes were 37.009 of civil penalties because the transfer code, to under which a court has discretion paid, not it is unclear from the timely but declaratory attorney’s fees in paid. the taxes have been award record whether Tex. Prac. Rem. action. Civ. & apportion judgment of our light decision (West 1997). § Con 322A, Code Ann. 37.009 under we reverse the section hold together, these we probate struing order that the es- probate court’s court’s dis probate it was within the penalties tate interest and and remand that pay Because to award fees and costs. this to the court for further cretion probate issue presents appeal no evidence opin- appellant with this determination accordance its discre- probate court abused ion. that the tion, probate we affirm the court’s order further determination in accordance with opinion. this that each party bear its own costs and expenses. Dissenting opinion by Justice MACK
KIDD. CONCLUSION KIDD, Justice, dissenting. MACK We hold that Rosen’s directive that all linchpin opinion The of the majority transfer taxes be residuary out of the (“the that Rosen’s last will & testament estate failed because the residue contained Will”) as after applied Rosen’s death was assets, and therefore the default statu- entirely devoid of a estate from tory apportionment provisions of section pay which to the estate To reach taxes. probate B22A of the apply. conclusion, code must majority must disre- gard the most basic tenets of Texas will- Tex. Prob.Code Ann. 322A. further We construction case law. Because I believe 322A(b)(l), hold that under only section otherwise and would affirm probate the taxable assets of the estate bear the decision, court’s I respectfully dissent. burden transfer taxes. Id. 322A(b)(l). Here, under the directives BACKGROUND will, probate qualify assets will, Under Rosen’s May executed on the unlimited marital deduction and there- 1997, appellant primary was the beneficia- fore are not taxable. non-probate as- ry.1 Article III of the left all Will sets that did qualify for the unified personal Rosen’s property, as well as his credit only are the taxable assets and must employee interests plans benefit therefore bear the paying burden of accounts, retirement appellant. Articles 322A(b)(l). taxes under section Accord- placed IV V the remainder of the ingly, we reverse the court’s order estate in two trusts: the Marital Trust and to the provided extent that it Trust. Rosen ordered the the income of both trusts was to be used estate to bear the tax burden and render for the appellant during benefit of her judgment that only the taxable assets of lifetime, with the remainder of both trusts the non-probate estate bear the tax bur- descendants, to his per stirpes. I will den. III, gifts refer to the under Articles IV affirm part We and V of the Will as the “probate assets.” court’s order directing party each Article pro- bear VIII set out the administrative visions. The other provisions its own of Rosen’s expenses. costs and Finally, we will are not at issue here. remand the issue of who bears the burden paying any penalties interest and on the Rosen had substantial as- sets,2 transfer taxes to the probate court for generated some of which estate and Will, pass 1. Under the policy. some subsequent insurance Pursuant to a descendants, per stirpes, upon agreement, the amount of life insurance Ro- appellant death of appel- or in the event that required sen was to maintain was reduced to Rosen, lant does not survive and assets from $216,000. Rosen obtained a second insur- *9 may provide Trust be used to for policy Although ance in that amount. he was health, support, "the maintenance and edu- so, longer required voluntarily to do Rosen cation” of the children. policy, maintained the first in addition policy. second settlement, part 2. As of his divorce Rosen was initially required to $1 maintain a million life (1) $963,000 or in apportionment” inheritance a life insur- of in a will similar taxes: 322A(b)(2). § policy, appellee Far- strument. Id. To this payable ance Wells (“Wells point, for it has remained unclear what the go Fargo”), Bank as trustee (2) children;3 would if fund effect of such a waiver be Gift a Uniform paid which taxes are to be is in from to Minors Act account the amount of insufficiently $54,542 funded. See Peterson for of the benefit Rachael Rosen.4 217, 222 Mayse, (TexApp.- gifts I will refer to these as the “non- 1999, no Tyler pet.). The taxable assets.” combined $1,017,542 non-probate value of from these decedents, ap- most the equitable For produced significant taxes es- estate provided in portionment method tablished trial in amount of 322A(b)(l) However, is tes- suitable. some $132,442. tators include alternative for the pro- of estate payment taxes. While such parties are dispute which assets be of paid visions can direct that taxes out for taxes: payment liable of estate assets, commonly provision a used non-probate. or Texas Under paid that all be “out of the is taxes should law, taxes ex- common estate and other apportionment.” estate without by the estate. penses were borne general This meant that the beneficiaries of the Article VIII Rosen’s Will reads: of ' general typically surviving a estate — estate, B. All inheritance or similar spouse expenses, and children —bore all my taxes in arising connection taxes, if including even trans- respect any property death with spouse fers to other than the beneficiaries my for the gross included estate place or children such In produced taxes. taxes, purpose calculating of such system, adopted equitable of this Texas property such whether or not Tex. apportionment statute 1987. See Will, funeral passes my under all 2003). (West Ann. § 322A Prob.Code. expenses expenses all incurred of provides This statute beneficiaries with the administra- connection assets, non- taxable whether out my tion of estate shall be pro portion bear á rata of probate, my will estate without residue however, against charged provided, estate taxes the estate. apportionment; 322A(b)(l). me, This appor- my Id. wife to survive equitable fails however, if tionment statute will not extent the residue estate apply, payment the manner insufficient for the of such “specifically a decedent directs However, Because if the Internal Revenue Service 3. Rosen maintained an "incidence ownership” policy, the first it policy insurance as a not were to view this transfer and purposes. debt, estate tax was included in his for agree policy parties Although the na- the record is unclear as to generate also transfer would taxes. incidence, may ture of it have been a power of appointment. This would constitute Because Rosen was a custodian of this Uni- prohibited power under Internal Reve- account, Gift to Act see Tex. form Minors Code, policy part rendering the nue insurance (West Prop.Code §§ Ann. 141.001-.025 purposes. gross estate Rosen's Supp.2003), part & it was included as ownership Such make an insurance indicia of purposes. for tax There is also a Uni- estate, part sub- policy taxable Gift to Act account for the bene- form Minors 2036(a)(2) ject to taxation. See U.S.C.A. Rosen, but because Rosen was fit of Dorian addition, (West 2002). agree parties account, not of this it is not custodian that, policy the second should because purposes. in his estate for tax included not it does treated as a debt of produce any and is at issue here.
155 free transfer expenses, taxes and then ex- a fixed number of assets of cess, except belongs otherwise to the estate. specifical- as taxes. This credit Section, provided in this be ly shall At time of the unified all of paid pro up a rate basis from of permitted tax-free transfers to credit (West assets included in es- my gross $675,000. § See 26 U.S.C.A. § tate. 2000), by 26 superseded U.S.C.A. (West 2001). not fall All assets that do added). from (Emphasis apparent It is or unified under marital deduction of provision this that Rosen has Will and exempt credit that are otherwise provided for the payment of estate may taxed. be If under two different his circumstances. him,
wife survives the estate taxes are to to avoid taxation of the assets order be out of the of “residue estate [his] marital of upon deduction the death apportionment.” add- (Emphasis without it to surviving spouse, is common di- ed). hand, On other he survives (1) separate vide the estate into a parts: wife, and the residue of his estate should subject life estate the assets to the insufficient, provides pro Rosen for a surviving spouse;5 marital deduction to the rata of apportionment method similar to (2) “bypass and trust” —in the amount section Texas 322A the Probate Code. already the unified credit not oth- used Thus, is contemplat- it obvious that Rosen er transfers —for benefit of the surviv- ed two different methods of apportioning lifetime, or ing spouse during his her estate taxes. passing the remainder to the children. Upon surviving spouse, the death Rosen’s Last Will and Testament of the trust to bypass transfer Both federal and state cer- provide law free any children or other natural heirs that, tain tax credits if used can properly, taxes. entirely minimize eliminate estate and III, Gifts,” “Specific Article entitled inheritance taxes. The “marital deduc- person- specific bequests6 made of Rosen’s tion” transferring is a common method for property, al as well as his interests a surviving assets to without spouse gener- employee plans benefit ac- retirement any tax ating liability. It of a consists counts, to appellant, Ricki Rosen. portion of the which is allowed to pass free surviving spouse. tax to the For Article IV of Rosen’s Will established twenty years, over tax per- code (the has the Daniel Hunt Rosen Marital Trust grant any mitted a married decedent to Trust”): “Marital surviving property spouse, unlimit- me, my If I give A. wife survives amount, ed in which remains tax free at Trustee, TRUST, IN to be adminis- surviving spouse’s least until the death. Article, tered as provided (West 2002). 2056(a) See 26 U.S.C.A. (includ- property such an amount Every ing any non-probate individual is also assets payable entitled Trustee) will my testamentary “unified credit” that allows the transfer surviving prop- guished 5. A life estate for the benefit of the from all of the testator’s other spouse exempt, pur- (2) is considered erty; the testator intended for the poses, part item, marital deduction. beneficiary particular to receive 2002). 2056(b) (West U.S.C.A. property than cash or other from his rather Smith, general estate. Hurt (1) bequest 6. A if: it is described (Tex.1987). particularity that with such it can be distin- *11 added). Family The (Emphasis marital Trust was equal to the maximum be bypass trust. Be- by ... the meant to be Rosen’s deduction diminished all-encompassing of nature the cause the of pur- for Federal estate tax value Trust, only possible of Marital the source in my gross of all other items poses the funding Family for the Trust would be qualify for the marital estate which amount, any, by which the monetary have pass and which or deduction if to Trust would be reduced take Marital pro- my to wife under other passed of tax credits. The advantage allowable otherwise; this visions of Will tax are limited to allowable credits issue however, gift provided, prop- of credit, in amount of Rosen’s unified by reduced an erty ... shall be $675,000. amount, to increase any, needed if my estate determined for taxable Controversy purposes Federal tax to which, taking largest specific after makes be- amount Rosen’s Will first Next, gifting to all deductions al- in Article III. quests into account other an amount of tax the Marital Trust of “such my lowed estate for Federal credits, equal ... as to the maxi- property will be and all allowable purposes mum has the effect of marital deduction” in the least amount of will result remaining proper- all of placing Rosen’s being tax imposed Federal estate have ty specific bequests been the estate. —after Trust. This made—into Marital added). Trust (Emphasis The Marital reduced, however, by be amount shall represents the marital deduction and cre- amount, any, advantage to take needed if appellant’s ates a life estate for benefit (the tax “potential of “allowable credits” money real remaining all of Rosen’s amount”). Finally, credit reduction property. Because marital deduction Family “the Trust funded with residue unlimited at the time of Rosen’s was Due the unlimited estate.” [Rosen’s] to Mar- gifting see U.S.C.A. deduction, property, marital all of Rosen’s property ... ital Trust “such an amount of except potential tax reduc- for the credit marital equal as will be maximum bequests, was specific tion amount all of placing deduction” has the effect of This to the Marital Trust. meant granted remaining property Rosen’s —after funding only possible source of bequests have been made—into tax Family potential Trust was the However, this amount the Marital Trust. credit reduction amount. amount, any, by an shall be reduced This tax credit reduction potential advantage to take “allowable needed to account for amount was meant Rosen’s (the “potential credit reduction credits” However, the combined unified credit. amount”). two as- taxable value Will, V entitled Article sets, $1,017,542, greatly exceeded Rosen’s Trust,” the Daniel establishes “Family $675,000. the non- Once unified credit (the “Family Hunt Trust Rosen unified absorbed the entire probate assets Trust”): credit, potential tax credits there were the Marital Trust. me, left which would reduce give If I my wife survives Trustee, the Marital Trust was reduced my IN Because estate to residue of zero, to fund the were no assets left TRUST, there provided administered Family Trust. in this Article. *12 20, 2001, the The Contentions of Parties individually,
On June appellant, Independent es- Executrix Rosen’s In two ar- appeal, appellant this raises tate, and as Trustee of the Marital Trust (1) guments: because the estate taxes Trust, Family sought and declaratory a probate of a paid specified were to be out judgment as to which property Rosen’s Trust, asset, Family the unfund- which is estate would bear burden of paying the ed, appor- section 322A should control the federal estate and state inheritance (2) taxes; tionment estate and the claus- that, argues tax. Appellant because Rosen regarding es in Rosen’s will maximization Family stated the Trust would contain of marital deduction and the minimiza- the estate,” my “the residue of his to direction gross equita- tion of mandate
pay
estate taxes “out of the residue of
estate without
ble
in order
fulfill
apportionment”
apportionment
meant that
to
the
Family
taxes should be
out of the
testator’s intent.8
Trust
the Family
alone. Because
Trust
Fargo and Eileen
join
Wells
Rosen
issue
unfunded, appellant argues
remained
that
on whether section 322A is
be-
applicable,
the Will fails to
the
“specifically direct
Rosen
that
specifically
cause
directed
es-
apportionment,”
manner of
required by
tate taxes be paid
apportion-
“without
322A(b)(l)
code,
section
and
They
that
urge
ment.”
the
apportionment
therefore the default Texas
charged
assets should not be
statute must apply regardless of Rosen’s
portion of the estate and inheritance taxes.
express
waiver.7
Under
section
However, I
this
believe
case can be re-
322A(b)(l),
the estate taxes would be
without
resorting
statutory
borne
solved
con-
beneficiaries of the assets
gave
rise
upon plain reading
to the taxes.
struction based
a
The trusts
for
established
the benefit of
chil-
intent
plain
testator’s
as manifested in the
dren, represented by
Ei-
Fargo
Wells
and
language
Notwithstanding ap-
the Will.
Rosen,
leen
respond that requiring the
pellant’s
regarding
applica-
contentions
non-probate trusts
pay
estate taxes
tion
of section 322A situations where a
contrary
would be
to Rosen’s
intent
fund
designated
specific
testator has
avoid apportionment under section 322A. bear the tax
and
burden
that fund remains
unfunded,
completely
I do not reach that
court ruled that appellant,
Executrix,
issue. Under the
plain language
Independent
all
pay
must
applied
Will as
taxes out
to Rosen’s estate
assets and that
the non-probate
are
I
for
time of
conclude that
liable
payment
of any taxes.
Trust
meant
Marital
was
to bear
es-
hers,
parties
7.
majority
Both the
and the
cite nu-
the unified credit is not
but
bene-
rather
out-of-state
merous
cases relevant to the issue
fits Rosen’s estate.
of whether section 322A of the Texas Probate
apply
Code should
case.
All of these
Appellant’s argument
equitable appor-
for
clearly distinguishable.
cases are
Both I and
tionment fails to account for the fact that
majority
single
have been unable to find a
appellant
primary beneficiary
was the
under
case,
one,
specific bequests
like this
where the
Family
both the Marital
Al-
Trust
Trust.
single beneficiary.
trusts
favored a
though the
would
children
inherit the remain-
Furthermore,
effect,
appellant argues,
Trust,
der of Marital
and income from the
that due to the
nature
taxable
of the non-
Family
provide
Trust could
used to
assets,
she has been denied an addi-
education,
their
the income from both trusts
property
tional amount of
that would have
primarily
appellant
was
for the benefit of
dur-
through
Family
been available to her
ing her lifetime.
argument
Trust. Her
overlooks the fact
they actually
on the facts as
existed at the
tate tax burden.9
of Rosen’s
time
death.
DISCUSSION
argument
premised on
Appellant’s
will,
construing
the court’s focus is
assumption that
the Marital Trust
is a
on the testator’s intent. San Antonio
*13
the
Trust is a
bequest and
Found,
636,
Lang,
Area
v.
35 S.W.3d
639
law
residuary bequest.
long
Texas
has
(Tex.2000);'
Huffman,
v.
161
Huffman
bequests fall into four
recognized that all
(1960).
267,
885, 888
This
Tex.
339 S.W.2d
categories: specific,
functional
demonstra-
from the lan-
intent must be ascertained
tive,
residuary. Hurt v.
general, and
within the
corners of the
guage found
four
(Tex.1987).
Smith,
1,4
lega-
A
744 S.W.2d
639;
35
Lang,
will.
S.W.3d at
Shriner’s
(1)
if:
it
cy
specific
is
is classified as
(Tex.
Stahl,
147,
v.
151
Hosp.
610 S.W.2d
so that it
particularity
described with such
1980). The court should focus not on what
distinguished from all of the testa-
can be
write, but
the
the testator
intended to
(2)
property;
other
and
the testator
tor’s
meaning
actually
of the words
used.
beneficiary
the
to receive that
intended for
Stahl,
151;
at
Rekdahl v.
610 S.W.2d
item,
particular
than cash or other
rather
387,
(Tex.1967);
389
Long, 417 S.W.2d
Id.; see
property
general
from his
estate.
Beard,
144,
v.
Tex.
S.W.2d
Kirk
162
345
Campbell,
also
Land
v.
Houston
Trust Co.
(1961).
267, 273
In this
must
light, courts
430,
(Tex.Civ.App.-El
105 S.W.2d
433
Paso
vary
not redraft wills to
or add
d).
1937,
legacy
ref
A
is demonstra-
writ
guise
“under the
of construction of the
(1) it
bequest
tive if:
a
sums of
is
presumed
of the
to reach a
language
will”
having
money, or
or
a
quantity
amounts
Stahl,
151;
at
v.
intent.
610 S.W.2d
Welch
measure,
in them-
pecuniary value
and
Straach,
(Tex.1975);
322
531 S.W.2d
(2)
specific;
testator intend-
selves
and
the
It is there-
Huffman,
which is unlimited. Because S.W.2d n.r.e.) being, (paragraph Trust never came into Marital writ refd Fourth was contingent residuary all of Rosen’s not property Trust contains clause be effective effect, only bequests otherwise devised. this includes made paragraphs ineffective); may not property provid- Rosen have Second became Third Fain (Tex.Civ. Fain, ed for in will. The Marital v. Trust then S.W.2d refd) (residu- only definition, App.-Fort meets not but writ also Worth purpose, ary prede- residuary of a estate. Due clause was conditioned on wife testator, all-encompassing ceasing nature of failure of the Marital wife Trust, I it predecease residuary conclude that contains “the resi- testator meant failed, due it though [Rosen’s] estate.” clause even had effect dying testator intestate to some proper- My even though conclusion stands Ro- ty). Family Trust was conditioned on sen did not use the word “residue” potential existence of a credit re- establishing the Marital Trust. Texas amount, duction condition and this never courts have determined estates occurred. Consequently, the Trust to exist even where the word “residue” Therefore, never caine into existence. be- See, Sewell, e.g., used. Sewell *15 created, the Family cause was never Trust 924, (Tex.Civ.App.-Texarkana S.W.2d language by used the testator in that sec- n.r.e.) (general gift writ refd of “rest nullity. tion of the aWill is following of property,” spe- all the several clause); cific residuary Indeed, “if gifts, any” created the the “re- words Wolf by” v. Hartmangruber, 116 duced clause indicate Rosen’s aware- writ) (Tex.Civ.App.-Fort possibility might Worth no ness the that there (phrase my property equally by “all shall fact be no credits be available which reduce the and the among divided all was Marital Trust fund children” clause). Family non-probate -the Trust. Because residuary sufficient to constitute credit, leaving assets the unified “this exceeded phrase [Marital Trust] Absent the no amount, ... allowable credits and therefore if reduc- by any, shall be reduced zero, ing by the Marital Trust this is exact- advantage of] [take needed allowable ly the situation that confronts this credits,” Court. question [tax] there be would no Marital Trust satisfies the defini- To hold will that is under Rosen’s there residuary tion phrase, of a estate. This does, residuary majority combined with Rosen’s use of the word requires disregard completely us to all- Family constructing “residue” encompassing nature functional Trust, question of raises the whether Trust, purpose Marital as the well Family residuary Trust constitutes es- according definition of a tate. to Texas law. Because the Marital case Trust contains the residue Rosen’s es- phrase “all of the
Rosen uses the residue tate, I court’s would affirm granting in the creat- my estate” clause ruling that the not are However, ing Family Trust. is of the estate any portion hable First, by dispositive. itself creation majority inheritance Because the taxes. contingent upon Trust otherwise, I respectfully concludes dissent. credits existence of available which be reduced. A Marital Trust would resid-
uary may contingent bequest; clause fails, contingency bequest fails as See, e.g.,
well. v. Haggard, Betts