422 Mass. 706 | Mass. | 1996
In this action, the parties seek a determination under the will of Mary A. Buckley (Mary) concerning the power of her husband over the nonmarital deduction share of Maiy’s estate. The Probate and Family Court reported this case to the Appeals Court without a decision, and we granted the plaintiffs’ application for direct appellate review.
I
In paragraph four of Maiy’s will dated August 29, 1970, she bequeathed to her husband, Joseph D. Buckley (Joseph), “an amount equal to fifty per cent of the value of [her] adjusted gross estate as finally determined for federal estate tax purposes . . . but only to the extent that such interests are included in determining my gross taxable estate and qualify for the marital deduction for federal estate tax purposes.”
Mary died on January 29, 1973. On June 5, 1973, Joseph amended his revocable trust. Among other changes, he directed that at his death the remaining trust property shall be divided so that 60% would be held in trust for Mary Angela and her children and that 40% would be held in a separate trust for Juanita and her children. In addition, Joseph revised the list of charitable legacies by changing the charities themselves and the amounts to be paid to the respective charities at his death. On August 11, 1994, Joseph amended his revocable trust a second time. He again altered the list of charitable legacies. Joseph is alive today.
The plaintiffs, the executors of the will of Mary A. Buckley, brought this action in the Probate and Family Court seeking instructions concerning the construction of the will.
II
A
We first must determine whether it is appropriate for the court to decide the merits of this case. “We have regularly recognized the appropriateness of granting declaratory relief to fiduciaries seeking instructions concerning the manner in which an instrument making a donative disposition should be construed in connection with the possible application of Federal estate tax provisions” (citations omitted). First Agric. Bank v. Coxe, 406 Mass. 879, 882 (1990). See Sears v. Childs, 309 Mass. 337, 349-350 (1941) (“it is as well to answer [the] inquiry as to invite a return of the case to this court with the same question by not answering it now”). Here, the parties explain that the current uncertain state of Mary’s will has an
In addition, the construction of a testamentary instrument “clearly turns on questions of State law,” Dana v. Gring, 374 Mass. 109, 113 (1977), and it is appropriate to decide this case on facts agreed on by the parties “[b]ecause a question exists whether the Internal Revenue Service will abide by a decision of a lower State court, see Commissioner of Internal Rev. v. Estate of Bosch, 387 U.S. 456, 465 (1967),” Loeser v. Talbot, 412 Mass. 361, 362 (1992). See Berman v. Sandler, 379 Mass. 506, 509 (1980). For these reasons, we reach the merits of this case.
B
The sole issue concerns the construction of the last phrase of paragraph four of Mary’s will that reads “any amendments thereto.” “The fundamental object in the construction of a will is to ascertain the testator’s intention from the whole instrument, attributing due weight to all its language, considered in light of the circumstances known to the testator at the time of its execution, and to give effect to that intent unless some positive rule of law forbids.” Putnam v. Putnam, 366 Mass. 261, 266 (1974). See G. L. c. 191, § 1A (2) (1994 ed.) (“[t]he intention of a testator as expressed in [her] will shall control the legal effect of [her] dispositions . . . .”);
Acknowledging Mary’s clear intention to minimize the amount of estate taxes paid, we are faced with a conflict between that goal and the language of her will. To appreciate this conflict, it is necessary to understand some basic estate planning concepts. The Internal Revenue Code as it existed in 1970 permitted one-half of the deceased’s adjusted gross estate to be passed on to the surviving spouse without being taxed at the time of death. 26 U.S.C. § 2056. These assets, however, did not escape tax altogether. Because the deceased must leave these assets to the surviving spouse outright or must provide the surviving spouse with a general power of appointment over the assets in order to qualify them for the marital deduction, these assets will be taxed on the surviving spouse’s death. One who has a general power of appointment is considered the owner of the assets for Federal tax purposes whether he or she exercises that power or not.
The next estate planning consideration was to provide for the remainder of the estate and the goal was, as with the first
A closer examination of Mary’s will and Joseph’s revocable trust may explain how this anomaly arose.
The drafters of Mary’s will and Joseph’s revocable trust, however, failed to consider fully the implications of this same language in the provisions of Mary’s will that concern the possibility of Mary predeceasing Joseph. The drafters appear to have copied the troubling language from paragraph five where, as we explain, it is harmless, into paragraphs four and six, the provisions that deal with the situation where Mary predeceases Joseph. By doing so, the drafters incorporated both the trustees’ administrative power to amend and, more significantly, gave to Joseph a general power of appointment. Joseph’s power, however, would not be limited by his death because these provisions assume that Mary dies before Joseph and, therefore, his amendments no longer just affect the assets in his trust but also the nonmarital deduction share of Mary’s
“This court has held that, where a settlor executes a trust instrument which, because of the mistake or inadvertence of the scrivener, fails to embody the settlor’s intentions, the trust instrument may be reformed. Berman v. Sandler, 379 Mass. 506, 510 (1980). Such a mistake will be reformed upon ‘ “full, clear, and decisive proof’’ of mistake.’ Mickelson v. Barnet, 390 Mass. 786, 792 (1984).” Loeser, supra at 365. See id. at 365-367 (reforming trust by reversing specific and general powers of appointment with respect to income and principal of the trust); Berman, supra at 508-511 (recognizing that the words “the first paragraph of’ were mistakenly dropped, reformed instrument to accomplish minimization of estate tax). Mary’s obvious tax planning intentions and a close examination of Mary’s will and Joseph’s trust demonstrate that there must have been an error. The guardian ad litem for Juanita’s issue argues that the phrase “any amendments thereto” in paragraph four should be excised from the document thereby denying Joseph any power to alter the distribution of Mary’s nonmarital deduction assets. Joseph and the guardian ad litem for Mary Angela’s issue argue that the court would do less damage to the will and be more consistent with Mary’s intentions if the troubling phrase were construed to mean that Joseph has a limited power to amend rather than no control at all. This would allow him to favor one child over another without incurring any unwanted Federal tax consequences. If, as we conclude, the phrase “any amendments thereto,” giving Joseph a general power of appointment, were copied into paragraph four of Mary’s will by a scrivener’s error, the proper response here is to eliminate the power of appointment rather than engage in a more fine-tuned speculation about her possible intentions. We construe Mary’s will as denying Joseph any power of appointment over Mary’s nonmarital deduction share while allowing the trustees to retain such administrative powers of amendment as set out in paragraph thirteen of Joseph’s revocable trust. In this manner, we give the language in Mary’s will a meaning that does not interfere with Mary’s clear intention to minimize Federal estate taxes. In reaching this result, we make no judgment as to the actual tax implications of the will as reformed but simply reform the will to effectuate the testator’s
So ordered.
This portion of her bequest was not taxed at the time of Mary’s death because § 2056 of the Internal Revenue Code (26 U.S.C. § 2056) allowed for a deduction of up to fifty per cent of the adjusted gross estate.
If the Joseph D. Buckley Revocable Trust was not in existence at the time of Mary’s death, paragraph six of her will provided:
“I . . . direct that the principal and accumulations on the residue of my estate . . . shall be held and administered in exactly the same*708 manner and upon the same trusts prescribed for the Residuary Share in said instrument of revocable trust, as amended, and by the same trustees or successors therein named who are to serve hereunder . . . and for that purpose only I do hereby incorporate said instrument of revocable trust, as amended by reference into this my last will.”
Joseph’s revocable trust provided for the division of his assets into two parts if he should predecease Mary:
“One part shall be known as the Maty A. Buckley Marital Share and shall consist of a sum equal to one-half of the Donor’s adjusted gross estate, as defined by the Federal Revenue Law, less the value of any other property not part of the trust fund but which is includable in the gross estate of the Donor for Federal Estate Tax purposes and which has passed to his said wife under the Donor’s will or in any form of survivorship, life insurance, transfer, or any other manner, provided that property interest is a deductible item under the Federal marital deduction provision.”
The second part would consist of the remainder of his estate and the trustees were directed to hold the remainder in a separate discretionary trust for Mary’s benefit and at her death to distribute it as he provided for in his trust.
The plaintiffs remain neutral as to which construction Mary intended. See Watson v. Erickson, 276 Mass. 185, 187 (1931) (plaintiff who brings action for instructions precluded from filing brief supporting either one of alternative instructions suggested). In addition, the Internal Revenue Service is not a party in this action and according to the plaintiffs’ brief has not been notified of it.
The guardian ad litem for Juanita’s issue points out that the will as drafted makes no provision for the issue of a deceased child of Juanita or Mary Angela and that the trust as drafted violates the rule against perpetuities. Because these issues are not now presented and may never have to be addressed if Mary’s grandchildren survive until the termination of the trust, and because these issues do not require a resolution by the State’s highest court, we do not reach them now.
Paragraph nine further evidences Mary’s intent to make full use of the marital deduction by prohibiting the executors from allocating expenses between income and principal “in such a manner as would deprive my husband of the full benefits of paragraph 4 which shall take precedence.”
A further indication that the “any amendments thereto” language is inconsistent with Mary’s intent is that if the will grants Joseph a general power of appointment, the assets would be subject to the claims of Joseph’s creditors, see State Street Trust Co. v. Kissel, 302 Mass. 328, 335 (1939). Yet Mary’s will gives Joseph no rights to either the income or the principal of the nonmarital deduction share.
To the extent provisions of Joseph’s revocable trust are incorporated in Mary’s will, they are not extrinsic evidence and may be considered by the court. Furthermore, the court is permitted, “for the purpose of removing ambiguity and illuminating meaning or intention,” McKelvy v. Terry, 370 Mass. 328, 334 (1976), to look to the circumstance existing and known to
An indication that she might have disapproved of Joseph’s amendments appears in paragraph one of her will: “I bequeath all my personal effects and other articles of tangible personal property ... to my husband . . . and if he does not [survive me], to my daughters . . . in equal shares . . .” (emphasis added).