Case Title: Firstar Trust Company v. First National Bank of Kenosha

Citation: 

Docket Number: 1993AP002508

State: wisconsin

Court: Wisconsin Supreme Court

Date: 1995-12-21T00:00:00Z

Document:
No. 93-2508 
 
 
 
 
 
 
 
 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
 
 
 
 
No.  93-2508 
 
STATE OF WISCONSIN             :                IN SUPREME COURT 
                                                                   
 
 
Firstar Trust Company, Trustee of the  
Marital Trust, 
 
 
Petitioner-Appellant-Cross Respondent-
Petitioner, 
 
 
v. 
 
First National Bank of Kenosha, Personal 
Representative of the Estate of Dorothy B. 
Cooney, 
 
 
Claimant-Respondent-Cross Appellant. 
 
 
FILED 
 
 DEC 21, 1995 
 
 
 Marilyn L. Graves 
  
Clerk of Supreme Court 
  
Madison, WI  
                                                                
   
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed in 
part and reversed in part. 
 
JON P. WILCOX, J.  This is a review of a published decision 
by the court of appeals which affirmed in part and reversed in 
part a judgment entered on September 24, 1993, in the Circuit 
Court for Kenosha County, Mary Wagner-Malloy, Judge.  See Firstar 
Trust Company v. First National Bank of Kenosha, 188 Wis. 2d 468, 
525 N.W.2d 53 (Ct. App. 1994).  The court of appeals affirmed the 
portion of the judgment awarding the cross-appellant First 
National Bank of Kenosha, as Personal Representative for the 
 
No. 93-2508 
 
 
 
2 
Estate of Dorothy B. Cooney ("Estate"), reimbursement pursuant to 
26 U.S.C. § 2207A of federal estate taxes and interest from the 
cross-respondent-petitioner 
Firstar 
Trust 
Company, 
Trustee 
("Trust"), 
from 
the 
qualified 
terminable 
interest 
property 
("QTIP") Marital Trust created under the will of Daniel H. Cooney. 
 It reversed that portion of the judgment denying the Estate's 
claim for reimbursement of Wisconsin estate taxes.  
 
On review before this court, Firstar, as trustee for the QTIP 
trust, raises two issues for our consideration.  The first issue 
is whether a pay-all-taxes clause in Dorothy Cooney's will 
constitutes an "otherwise direct[ion]" within the meaning of 26 
U.S.C. § 2207A(a)(2) such that the Estate would not be reimbursed 
for payment of the federal estate taxes attributable to the 
inclusion of the trust assets in Dorothy Cooney's estate.  We 
affirm the court of appeals' holding that Dorothy Cooney's 
direction in her will to pay "all valid inheritance and estate 
taxes by reason of my death" cannot, under Wisconsin law, be 
construed as a direction to pay inheritance and estate taxes on 
the QTIP trust property, and that her estate may recover the 
federal estate tax from the Trust.  Firstar Trust, 188 Wis. 2d at 
472, 525 N.W.2d at 54.   
 
To preserve finality and ensure certainty in cases of will 
construction and the administration of trusts and estates, we 
further adopt the rule that unless the testator's intention to 
shift the tax burden on a QTIP trust is clearly expressed, a 
 
No. 93-2508 
 
 
 
3 
general pay-all-taxes clause will not constitute an "otherwise 
direct[ion]" for § 2207A(a)(2) purposes.  The Estate's right to 
reimbursement under 26 U.S.C. § 2207A(a)(1) therefore remains 
intact. 
 
The second issue before this court is whether the Estate is 
entitled to reimbursement from the Trust for Wisconsin estate 
taxes.  The court of appeals reversed the circuit court's finding 
that the Estate was not so entitled, and concluded that the 
applicable statutes and case law construing the former inheritance 
tax statute supported imposing the tax liability onto the Trust.  
Id. at 483, 525 N.W.2d at 58.  We hold that the Estate is not 
entitled to reimbursement of Wisconsin estate taxes, and reverse 
the court of appeals on this issue. 
 
I.  FACTS 
 
The relevant facts are not in dispute.  Daniel H. Cooney died 
on May 1, 1986.  In accordance with his Last Will and Testament, a 
marital trust was created wherein his surviving spouse, Dorothy B. 
Cooney, received all of the trust income for life and also 
received principal for her health, support, and maintenance.  Mr. 
Cooney's will directed that upon termination of the marital trust, 
all accrued and accumulated income from the trust was to be 
distributed to his wife's estate and the principal disbursed in 
equal shares to several cousins, as remainder beneficiaries.  For 
federal estate tax purposes, Dorothy Cooney and Firstar Trust 
Company, as personal representative for Mr. Cooney, elected QTIP 
 
No. 93-2508 
 
 
 
4 
treatment under 26 U.S.C. § 2056(b)(7) for the assets passing to 
the trust.  Due to this election, no federal or state estate tax 
was due at the time of Mr. Cooney's death.  See 26 U.S.C. § 
2056(b)(7).  The taxes were deferred until Dorothy Cooney's death, 
at which point the value of the QTIP trust property was included 
in her estate, for tax collection purposes.  See 26 U.S.C. § 2044. 
  
 
Dorothy Cooney died on December 13, 1991.  Her will provided 
for the distribution of tangible personal property to Trinity 
College, three nieces and a nephew.  Article IV of the will 
directed that 10% of the residuary estate, or $100,000, whichever 
is less, was to be placed in a trust for the benefit of her niece, 
Ms. Jane Billings.  Article V of the will provided that the 
remaining balance was to be divided equally between two charities, 
the Jesuit Seminary Guild of Milwaukee, Wisconsin, and Trinity 
College, Washington, D.C.   
 
The will did not make any express reference to Daniel 
Cooney's QTIP trust, nor did it mention 26 U.S.C. §§ 2044, 
2056(b)(7) or 2207A, which governs the tax deferral and collection 
aspects of QTIP trusts. 
Article I of the will provided a general 
pay-all-taxes clause which contained the following instruction: 
I also direct my personal representative to pay expenses of 
administration of my estate and all valid inheritance 
and estate taxes payable by reason of my death, 
including any interest or penalties, without seeking 
reimbursement from or charging any person therefor.  Any 
action taken by the personal representative as to such 
taxes shall be conclusive and binding on all persons. 
 
No. 93-2508 
 
 
 
5 
 
Dorothy Cooney's estate consists of $6,260,580.76 of her own, 
separate assets.  In addition, as a result of the QTIP treatment 
of the trust assets, for federal estate tax purposes, the entire 
corpus of the QTIP trust, totalling $6,634,566.48, is treated as 
though it is part of Dorothy Cooney's taxable estate.  Firstar 
Trust,  188 Wis. 2d at 474, 525 N.W.2d at 55.  Therefore, the 
total value of her gross estate was $12,895,147.24.  The 
$2,575,036.81 in federal estate tax and $612,229.17 in state 
estate tax due on the QTIP trust, was paid by Dorothy Cooney's 
estate.  Id.   
 
Pursuant to 26 U.S.C. § 2207A(a), the personal representative 
of Dorothy Cooney's estate filed a contingent claim against the 
trust beneficiaries, alleging that the Estate is entitled to 
recover from the Trust the federal estate taxes payable by reason 
of the QTIP trust assets included in Dorothy Cooney's gross 
estate.  Id.  The Estate and the Trust filed cross-motions for 
summary judgment.  The Trust argued that the tax clause in Dorothy 
Cooney's will clearly and unambiguously directed the payment of 
all estate taxes payable by reason of her death, and directed the 
personal 
representative 
to 
waive 
the 
Estate's 
right 
of 
reimbursement for such taxes attributable to assets of the trust. 
 The Estate argued that the tax clause could not be read to direct 
against seeking reimbursement from the Trust because it does not 
contain a specific reference to the trust assets and, if so read, 
 
No. 93-2508 
 
 
 
6 
would be inconsistent with the decedent's overall distribution 
plan.  The circuit court granted the Estate's motion. 
 
Shortly thereafter, the Estate filed a petition for entry of 
judgment, seeking a money judgment for $2,575,036.81 plus pre-and 
postjudgment interest.  Id.  Further, the Estate filed an amended 
claim, seeking reimbursement of Wisconsin estate taxes.  The Trust 
objected to both actions.  Following a hearing, the circuit court 
granted the petition for entry of judgment and denied the Estate's 
request for reimbursement of Wisconsin estate taxes.  Id. at 475, 
525 N.W.2d at 55.  The Trust appealed from the judgment granting 
the Estate reimbursement for federal estate taxes plus pre-and 
postjudgment interest.  The Estate cross-appealed from the 
judgment denying its request for reimbursement of Wisconsin estate 
taxes. 
 
On October 26, 1994, the court of appeals issued an opinion 
affirming the judgment ordering the Trust to reimburse the Estate 
for federal estate tax, together with pre-and postjudgment 
interest, and reversing the judgment denying the Estate's amended 
claim for reimbursement of Wisconsin estate tax.  In reaching this 
conclusion, the court of appeals cited Estate of Bauknect, 49 Wis. 
2d 392, 182 N.W.2d 238 (1971), holding that as a matter of 
Wisconsin law, a tax payment clause must specifically direct the 
payment of estate taxes on "nonprobate property" before that 
property is exempt from payment of estate taxes.  Firstar Trust, 
188 Wis. 2d at 479, 525 N.W.2d at 57.  With respect to the claim 
 
No. 93-2508 
 
 
 
7 
for reimbursement of Wisconsin estate tax, the court of appeals, 
citing an excerpt from the former inheritance tax statute, Wis. 
Stat. § 72.21(1) (1989-90), reversed the circuit court and held 
that Wisconsin estate tax, like inheritance tax, must be 
apportioned among the recipients of the property.  Id. at 483-84, 
525 N.W.2d at 58. 
 
The two issues presented to this court arise from the 
parties' motions for summary judgment.  We review a circuit 
court's grant of summary judgment de novo.  Seaquist v. Physicians 
Ins. Co. of Wisconsin, Inc., 192 Wis. 2d 530, 531 N.W.2d 437 (Ct. 
App. 1995); Weigel v. Grimmett, 173 Wis. 2d 263, 267, 496 N.W.2d 
206, 208 (Ct. App. 1992).  Pursuant to Wis. Stat. § 802.08(2) 
(1993-94), summary judgment must be entered "if the pleadings, 
depositions, answers to interrogatories, and admissions on file, 
together with the affidavits, if any, show that there is no 
genuine issue as to any material fact and that the moving party is 
entitled to a judgment as a matter of law."  Swatek v. County of 
Dane, 192 Wis. 2d 47, 531 N.W.2d 45 (1995); Bauernfeind v. Zell, 
190 Wis. 2d 701, 528 N.W.2d 1 (1995). 
 
II.  FEDERAL TAXES 
 
A 
determination 
of 
what 
constitutes 
an 
"otherwise 
direct[ion]" under 26 U.S.C. § 2207A(a)(2) requires this court to 
analyze the language within the Internal Revenue Code.  The 
Economic Recovery Tax Act of 1981 extended the marital deduction 
to property in Qualified Terminable Interest Property, or QTIP 
 
No. 93-2508 
 
 
 
8 
trusts.  See 26 U.S.C. § 2056(b)(7).  Under a QTIP trust, the 
surviving spouse does not receive outright the trust assets, nor 
are such assets subject to their power and direction.  Rather, a 
QTIP trust gives a surviving spouse all the income from the trust 
property during her life and, upon the surviving spouse's death, 
the remaining assets are distributed to remainder beneficiaries 
originally named in the trust instrument. 
 
The election of QTIP treatment under 26 U.S.C. § 2056(b)(7) 
allows the surviving spouse, by means of a marital deduction taken 
by the testator's estate, to avoid payment of the federal estate 
taxes upon the testator's death.  26 U.S.C. § 2044 requires that 
upon the surviving spouse's death however, the QTIP trust is 
included in her estate for taxing purposes.  Federal law imposes 
personal liability on a personal representative for the payment of 
federal estate taxes, whether such taxes are attributable to 
probate or non-probate property.  26 U.S.C. § 2002; Treas. Reg. § 
20.2002-1; 
see 
generally 
Jeffrey 
N. 
Pennell, 
Tax 
Payment 
Provisions and Equitable Apportionment, ALI-ABA Course of Study: 
Estate Planning in Depth 869, 880 (June 19, 1994)(WL C920 ALI-ABA 
869, 880).   
 
In order to relieve the onerous burden on a decedent's estate 
of having to pay federal estate taxes on property neither owned by 
the survivor nor subject to the survivor's power, control, or 
direction, Congress has provided the general rule that an estate 
can recover from QTIP remainder beneficiaries the federal estate 
 
No. 93-2508 
 
 
 
9 
taxes attributable to the QTIP trust.  See § 2207A(a)(1).  
However, § 2207A(a)(2) provides that this right of recovery does 
not apply if the decedent "otherwise directs by will."1 
 
The first issue we consider is whether, under 26 U.S.C. 
§ 2207A(a)(2), Dorothy Cooney's tax clause "otherwise directs" 
that her estate shall pay the federal estate taxes.  Firstar 
Trust, 188 Wis. 2d at 476, 525 N.W.2d at 55.  This issue is one of 
will construction and application of that construction to a 
statute.  In the present case, there is no dispute regarding the 
written instrument, and thus, we are presented with a question of 
law and not of fact.  We therefore employ a de novo standard of 
review.  Id.; see also Mechler v. Luettgerodt, 246 Wis. 45, 55, 16 
N.W.2d 373, 378 (1944). 
 
The general tax exoneration clause utilized in Dorothy 
Cooney's will directed her personal representative to "pay . . .  
                     
     1  The text of 26 U.S.C. § 2207A(a) states as follows: 
 
(a)  Recovery with respect to estate tax.— 
(1) In General.—If any part of the gross estate consists of 
property the value of which is includible in the gross 
estate by reason of section 2044 (relating to certain 
property for which marital deduction was previously 
allowed), the decedent's estate shall be entitled to 
recover from the person receiving the property the 
amount by which—  
 
 
 
(A) The total tax under this chapter which has been  
 
 
paid, exceeds 
 
(B) The total tax under this chapter which would  have 
been payable if the value of such property had  
not 
been included in the gross estate. 
 
(2)  Decedent may otherwise direct by will—Paragraph (1) 
shall  
 
not apply if the decedent otherwise directs by 
will. 
 
 
 
 
No. 93-2508 
 
 
 
10 
all valid inheritance and estate taxes payable by reason of [her] 
death . . .  without seeking reimbursement from or charging any 
person therefor."  Firstar Trust, 188 Wis. 2d at 476, 525 N.W.2d 
at 55.  The narrow issue in this case, therefore, is whether this 
language waived the claim for reimbursement. 
 
The Trust argues that this clause unambiguously directed 
Dorothy Cooney's personal representative to pay taxes on the trust 
assets 
without 
seeking 
reimbursement, 
as 
provided 
by 
§ 2207A(a)(2).  The Trust asserts that neither federal law nor 
state law requires "that a tax clause must contain a specific 
reference to the type of property or assets involved before it 
constitutes an `otherwise direct[ion]' within the meaning of 
§ 2207A(a)(2)."2  Id., 525 N.W.2d at 56.  The Trust asserts that 
Congress knew how to require specificity in waiving an estate's 
right of recovery for federal estate taxes, and argues that if 
Congress had intended to require specificity in § 2207A, it would 
have included the appropriate language within the Internal Revenue 
                     
     2  The Trust notes that Congress has twice attempted to 
modify the waiver provision of § 2207A to include a revocable 
trust option and to clarify the necessity in an "otherwise 
direct[ion]" for a specific reference to the section.  These 
changes were included in both the Tax Simplification Act of 1991 
(H.R. 2777) and the Revenue Act of 1991 (H.R. 11), both of which 
were vetoed (for unrelated reasons) by the President.  The Trust 
relies on the Technical Explanation to the Tax Simplification Act 
of 1993 which states that "a will provision specifying that all 
taxes shall be paid by the estate is presently sufficient to waive 
the right of recovery."  However, as noted by the circuit court, a 
committee report is not intended to be an explanation of the 
legislative intention motivating new legislation.  See Merton's 
Law of Federal Income Taxation, at § 3.18 (1991).   
 
No. 93-2508 
 
 
 
11 
Code.  The Estate, on the other hand, maintains that the tax 
clause contained in the will makes no specific reference to the 
QTIP trust and therefore is not sufficient to shift the tax burden 
onto the residue of the estate.  Id.   
 
The rules for construction of provisions in a will are 
clearly established in Wisconsin.  "The paramount object of will 
construction is the ascertainment of the testatrix's intent."  In 
re Estate of Ganser, 79 Wis. 2d 180, 186, 255 N.W.2d 483, 486 
(1977).  The determination of testamentary intent is a question of 
state law.  Independence Bank Waukesha v. United States, 761 F.2d 
442, 444 (7th Cir. 1985).  When considering the language of the 
will, the words must be given their common and ordinary meaning 
unless something in the will suggests otherwise.  Will of 
Buchanen, 213 Wis. 299, 301, 251 N.W. 250, 250-51 (1934).  
Unambiguous language in a will must be given effect as it is 
written without regard to the consequences.  Estate of Berry, 29 
Wis. 2d 506, 139 N.W.2d 72 (1966).     
 
The federal tax system regularly looks to state laws for 
application of a variety of provisions of the tax code,3 and 
                     
     3  See Pyle v. United States, 766 F.2d 1141, 1143 (7th Cir. 
1985), cert. denied, 475 U.S. 1015 (1986) (federal gift tax 
statute looks to state law to determine if a gift has been made); 
First Wisconsin Trust Company v. United States, 553 F.Supp. 26, 29 
(E.D. Wis. 1982) (same); Weiner's Estate v. United States, 235 
F.Supp. 919, 920 (E.D. Wis. 1964) (whether widow has a terminable 
interest in property for federal estate tax purposes is determined 
in accordance with state law); see also Riggs v. Del Drago, 317 
U.S. 95, 97-98 (1942) (Congress intended state law to govern 
ultimate impact of federal estate taxes). 
 
No. 93-2508 
 
 
 
12 
§ 2207A(a)(2) is no exception.  There are no Wisconsin cases 
interpreting what constitutes an "otherwise direct[ion]" clause 
under § 2207A(a)(2), nor has the state legislature addressed the 
issue.4  A number of jurisdictions have considered whether a 
general pay-all-taxes provision which makes no reference to non-
probate property is sufficient to shift the burden of taxes which 
would otherwise be payable by the recipients of that property.  
See Maurice T. Brunner, Annotation, Construction and Effect of 
Will Provisions Expressly Relating to the Burden of Estate or 
Inheritance 
Taxes, 
69 
A.L.R.3d 
122, 
269-72 
(1976).5 
 
An 
examination of case law reveals two cases in which courts have 
                     
     4  The court of appeals correctly noted that to prevent 
inadvertent waivers of the § 2207A right to recover from the 
persons receiving the QTIP property, some state legislatures have 
enacted provisions requiring that any tax direction in the 
surviving spouse's will must refer specifically to the estate tax 
attributable to the QTIP trust.  See, e.g., Mich. Comp. Laws Ann. 
§ 700.133a(3); N.C. Gen. Stat. § 28A-27-2; Ohio Rev. Code Ann. 
§ 2113.86(I); and N.Y. Est. Powers & Trust Law § 2-1.8(d-1).  
Firstar Trust, 188 Wis. 2d at 477 n.2, 525 N.W.2d at 56 n.2. 
     5  Two fundamental positions have emerged with respect to 
this question of shifting tax burdens on non-probate property.  
One view is that a pay-all-taxes clause is sufficient to shift the 
burden of estate taxes attributable to non-probate property to the 
probate estate, even if there is no reference to the non-probate 
property in the tax clause; see Brunner, 69 A.L.R.3d at 269-70, 
and cases cited therein.  The second view dictates that a general 
direction to pay all taxes from the residuary estate is not 
sufficient to shift the burden of estate taxes which would 
otherwise fall on non-probate property under applicable law.  Id. 
at 270-71; see, e.g., In re Will of Hammer, 362 N.Y.S.2d 753, 760 
(1974) ("Absent a clearly expressed intent by testator that non-
testamentary gifts are exonerated from the payment of estate 
taxes, 
they 
must 
bear 
their 
apportioned 
share 
of 
such 
taxes . . . .") 
 
No. 93-2508 
 
 
 
13 
taken one of two alternative approaches to construing a testator's 
intentions in a general pay-all-taxes clause. 
 
The first case we review is Estate of Gordon, 510 N.Y.S.2d 
815 (1986), which the Estate cites in support of its position.  In 
Gordon, the testatrix's will created a residuary trust for his 
wife's benefit, and upon her death, directed the remainder of the 
trust to be distributed in equal shares among four sisters.  Mr. 
Gordon's executrices elected to treat 80% of the residuary trust 
as a QTIP trust eligible for the marital deduction.  Id. at 817.   
 
The residuary clause in Mrs. Gordon's will disposed of the 
bulk of her estate to the Albert Einstein College of Medicine.  
The will contained a general tax clause similar to the one at 
issue: 
I direct that all Estate inheritance and death taxes 
(including any interest and penalties) imposed by any 
jurisdiction by reason of my death with respect to any 
property includable in my estate for the purpose of such 
taxes, whether such property passes under or outside my 
will be paid out of my Residuary Estate as an 
administration expense, without apportionment. 
Id.   
 
The issue in the Gordon case was whether this clause in Mrs. 
Gordon's will constituted a direction by the decedent for her 
estate to waive its right to reimbursement for estate taxes 
attributable to the QTIP trust.  Recognizing that its primary task 
 
No. 93-2508 
 
 
 
14 
was to search for the testatrix's intention, the New York court 
held 
that 
this 
clause 
did 
not 
constitute 
an 
"otherwise 
direct[ion]" for § 2207A(a)(2) purposes, stating that "[t]here is 
nothing in Mrs. Gordon's will that evidences an intention to 
exonerate her four sisters-in-law from contributing their share of 
estate taxes. There are, however, in her will some indicia of an 
intention not to exonerate these remaindermen."6  Id. at 819.   
 
The Gordon court recognized that the language in issue was 
"one of the formbook examples of tax exoneration clauses that 
evolved before there were QTIPs."  Id. at 818.  The court 
recommended that specific reference be made to QTIP's in drafting 
such clauses, noting that "the basis for requiring express mention 
of a QTIP trust is the presumption that most testators do not 
intend to apply a general tax exoneration clause to QTIP 
property."  Id.   
 
The Trust urges this court to follow the reasoning of the 
second case to construe a similar tax clause, Estate of Miller, 
595 N.E.2d 630 (Ill. App. 1992), a decision by the Appellate Court 
of Illinois.7  In that case, Mr. Miller created a residuary trust 
                     
     6  Reviewing Mrs. Gordon's will in its entirety, the court 
felt that it was "not conceivable that she would exonerate the 
trust from contributing its share of estate taxes recognizing that 
by doing so she would totally wipe out her residuary gift to 
charity."  Gordon, 510 N.Y.S.2d at 819. 
     7  The Estate argues that the relevance of Miller is 
questionable, given the significant differences in Illinois and 
Wisconsin probate law.  Illinois has adopted the doctrine of 
equitable apportionment of death taxes, In re Estate of Gowling, 
411 N.E.2d 266 (Ill. 1980), while Wisconsin has not.  Will of 
 
No. 93-2508 
 
 
 
15 
for the benefit of his wife, Adele, during her lifetime.  Upon his 
death, Mr. Miller's estate elected to qualify the value of the 
marital trust assets as QTIP property so as to be eligible for the 
marital deduction under 26 U.S.C. § 2056.  Miller, 595 N.E.2d at 
631.  The language of the tax exoneration clause contained in 
Adele's 
will 
read 
as 
follows: 
 
"I 
direct 
my 
Personal 
Representative . . . to pay all of my legal debts . . . without 
reimbursement or contribution, all estate taxes, inheritance 
taxes, death taxes and succession duties assessed by reason of my 
death . . . . "  Id. (emphasis added). 
 
In its analysis, the court noted that "if the tax exoneration 
clause in Adele's will were given its plain and ordinary meaning 
and the disputed taxes had to be paid out of her estate, the 
estate would be exhausted."  Id. at 633.  However, the court held 
that the tax exoneration clause, by its clear and unambiguous 
terms, was sufficient to require Adele's estate to pay the estate 
taxes attributable to the QTIP property, without reimbursement.  
In reaching this conclusion, the court further stated that "[a] 
court may not distribute a testator's estate according to its own 
sense of equity and justice.  What matters is the testator's 
intent as expressed in the will, and what Adele's will says here 
is that her estate is to pay the tax."  Id. (citations omitted).8 
(..continued) 
Uihlein, 264 Wis. 362, 59 N.W.2d 641 (1953).   
     8  A third case to consider the issue of the specificity 
requirement in a tax exoneration clause for QTIP property was 
Estate of Winkler, File No. 91-2099-CPM, 15th Judicial Circuit of 
 
No. 93-2508 
 
 
 
16 
 
We agree with the court of appeals' holding in the present 
case that the Miller reasoning is both "formulaic and inconsistent 
with Wisconsin case law requiring that the intent to shift a tax 
burden be clearly indicated in a will."  Firstar Trust, 188 
Wis. 2d at 478, 525 N.W.2d at 56.  We find the New York court's 
decision in Gordon to be consistent with common law precedent in 
this state regarding the strict construction of wills, and an 
expressed reluctance to shift tax burdens in the absence of a 
clear and specific indication of testamentary intent.  See Will of 
Cudahy, 251 Wis. 116, 28 N.W. 340 (1947). 
 
The Cudahy case involved property passing under an inter 
vivos trust, the terms of which directed the trustee to pay all 
inheritance taxes on the trust property.  The question for the 
court was whether the testator had "intend[ed] that the executors 
should pay the Wisconsin inheritance tax attributable to the 
transfer of his interest in the trust estate and to absolve the 
trustee of such payment."  Cudahy, 251 Wis. at 119, 28 N.W. at 
342.  The court found that a clause in Mr. Cudahy's will directing 
his executors to pay all inheritance and estate taxes should not 
(..continued) 
Florida, Probate Division, 1992.  The court focused on the issue 
of whether a tax clause in Mrs. Winkler's will constituted an 
"otherwise direct" provision under 26 U.S.C. § 2207A(a)(2).  
Holding that specific reference to section 2207A was not required, 
the court rejected the reasoning of Gordon, stating that "[i]f we 
expect people within our society to communicate one to another 
employing the English language, courts must, by necessity, 
interpret these words as commonly accepted by our populace.  
Otherwise, sheer chaos will result in the interpretation of any 
communication."  Id. at 5-6. 
 
No. 93-2508 
 
 
 
17 
be construed to include payment of inheritance taxes on trust 
property not passing under the will, since there was no intent 
otherwise 
demonstrated 
in 
the 
will 
to 
provide 
for 
the 
beneficiaries of the trust estate: 
We see no reason why the direction to the executors should be 
construed to include the payment of inheritance taxes on 
property not passing under the will . . . .  There is no 
intent otherwise manifest in the will to provide for the 
beneficiaries of the trust estate.  And such an intent 
should not be spelled out of the direction to pay taxes 
where it will result in diminishing the estate of those 
for whom the testator intended to provide. 
Id. at 120-21, 28 N.W. at 342.  Thus, we concluded that the 
general direction to pay all taxes from the residuary estate was 
not sufficient to shift the tax burden to the estate. 
 
The holding in Cudahy was later restated in Estate of 
Bauknecht, 49 Wis. 2d 392, 182 N.W.2d 238 (1971).  In that case, 
the testator had created both a marital trust for his wife and a 
residuary trust for his children.  The facts of the case as 
applied to Wisconsin law dictated that the state inheritance tax 
burden for the marital trust would be placed on the trust.  
Bauknecht, 49 Wis. 2d at 395, 182 N.W.2d at 239-40.  The issue for 
the court was whether the Wisconsin inheritance tax assessed on 
the marital trust was to be paid from the assets of that trust or 
from the assets of the estate.  We held that the tax assessment 
was to be borne by the marital trust, and noted the following: 
It has long been the basic rule in this state that the 
intention to shift this tax burden from a beneficiary to 
another person or to the estate must be expressed in 
clear language and in case of doubt as to the meaning of 
 
No. 93-2508 
 
 
 
18 
the will, the tax burden should be left where the law 
places it. 
 
The shifting of the tax burden from one beneficiary to 
another is so important that it should not be left to 
implication . . . Circumstances of each case in the 
light of the testator's plan of distribution must be 
considered . . . The general view is that a will should 
contain specific provisions relating to the payment of 
taxes if it is intended that the tax burden should fall 
differently than as provided by law. 
Id. at 396, 182 N.W.2d at 240 (citations omitted); see also 
Firstar Trust, 188 Wis. 2d at 479, 525 N.W.2d at 57. 
 
Finally, in Estate of Joas, 16 Wis. 2d 489, 114 N.W.2d 831 
(1962), this court considered the question of allocation of 
inheritance taxes where property owned in joint tenancy by the 
decedent passed outside the will to the surviving joint tenants.  
Paragraph two of the decedent's will provided that: "[A]ll estate, 
inheritance, succession, legacy, and other death duties, or taxes, 
of any nature which may be assessed or imposed upon, or with 
respect to property passing under this will shall be paid out of 
my residuary estate as part of the expenses of administration and 
with no right of reimbursement."  Id. at 490, 114 N.W.2d at 832 
(emphasis added).  Absent a provision containing specific 
reference to the joint tenancy property, we determined that "[n]o 
clear indication is revealed relative to the payment of death 
taxes on the joint property and the tax burden must therefore be 
left where the law has placed it."  Id. at 491, 114 N.W.2d at 833. 
 
This court's decision in Cudahy, Bauknecht, and Joas 
therefore support the general principle that in Wisconsin, "[i]n 
 
No. 93-2508 
 
 
 
19 
the absence of a clear indication of contrary intent, the burden 
of paying the death taxes is left where the law places it."  Joas, 
16 Wis. 2d at 491, 114 N.W.2d at 833.9  The requirement of 
specificity decreases the potential for tax clause ambiguity and 
makes resort to extrinsic evidence to reveal intent unnecessary, 
thereby 
alleviating 
uncertainty 
for 
fiduciaries 
in 
the 
administration of trusts and estates.   
 
"Testamentary intent is to be ascertained from the language 
of the will itself, in light of the circumstances surrounding the 
testatrix at the time of its execution."  Firstar Trust, 188 
Wis. 2d at 480, 525 N.W.2d at 57 (citing Mahon v. Security First 
Nat'l Bank, 56 Wis. 2d 171, 176, 201 N.W.2d 573, 575 (1972)).  The 
language of the tax clause in Dorothy Cooney's will directing her 
personal representative to "pay . . . all valid inheritance and 
estate taxes payable by reason of my death . . . without seeking 
reimbursement 
from 
or 
charging 
any 
person 
therefor" 
is 
representative of the form book clause which this court has found 
to be incapable of shifting a tax burden.  Her will made no 
express reference to her husband's QTIP trust or to § 2207A of the 
Internal Revenue Code, nor does it express any indication of an 
intention to benefit the beneficiaries of the QTIP trust, or 
                     
     9  The Trust argues that these cases are not instructive 
because they involve the former inheritance tax scheme. However, 
we rely on our decision in these cases to support the general 
principle in will construction that the shifting of a tax burden 
to somewhere other than where the law has placed it, requires a 
clearly expressed indication of intent by the testator. 
 
No. 93-2508 
 
 
 
20 
exonerate them from contributing their share of the estate taxes. 
 In fact, there is no mention of the trust beneficiaries anywhere 
in her will.   
 
We agree with the court of appeals' finding that "[a]lthough 
Dorothy [Cooney's] direction did not contain specific language 
limiting payment of taxes to taxes on property passing by her 
will, we are persuaded that this language refers to the taxes 
payable only on transfers made by reason of Dorothy [Cooney's] 
death and therefore passing by the will."  Firstar Trust, 188 
Wis. 2d at 479, 525 N.W.2d at 57.  A review of Dorothy Cooney's 
will reveals no clear indication of an intent to benefit her 
husband's remainder beneficiaries at the expense of her specific 
bequests to family and charity,10 and the tax burden must therefore 
be left where the law has placed it.      
 
Accordingly, this court concludes that the pay-all-taxes 
clause in Dorothy Cooney's will does not "otherwise direct," as 
required 
by 
26 
U.S.C. 
§ 
2207A(a)(2), 
to 
exonerate 
the 
beneficiaries of the QTIP trust from contributing their share of 
the estate taxes.  We find that the Estate is therefore entitled 
                     
     10  If the Trust's tax burden were to be borne by the Estate, 
no funds would remain in the residuary estate to satisfy Dorothy 
Cooney's charitable bequests. The federal tax burden on Dorothy's 
estate would be $5,012,189,27 and the Wisconsin estate tax due 
would 
be 
$1,478,068.83, 
for 
a 
total 
tax 
liability 
of 
$6,490,258.10.  The payment of such taxes would require the 
liquidation of all estate assets, such that neither the charitable 
beneficiaries nor the specific legatees will receive anything from 
the estate. 
 
No. 93-2508 
 
 
 
21 
to recover from the Trust the federal estate taxes attributable to 
the inclusion of the QTIP trust assets in Dorothy Cooney's estate. 
  
 
 
III.  STATE TAXES 
 
The second issue raised for our consideration requires us to 
determine who bears the Wisconsin estate tax burden for a QTIP 
trust.  This question also arises from summary judgment, and our 
review of this question of law is therefore de novo.11  See Weigel, 
173 Wis. 2d at 267, 496 N.W.2d at 208; Post v. Schwall, 157 
Wis. 2d 652, 656, 460 N.W.2d 794, 795-96 (1990). 
 
The Trust argues that the court of appeals confused the 
Wisconsin estate tax with the former inheritance tax statute, and 
mistakenly relied on case law regarding who should bear the burden 
of inheritance taxes to decide the estate tax issue.  At the time 
of Dorothy Cooney's death, Wisconsin imposed an estate tax upon 
the transfer of all property subject to a federal estate tax, Wis. 
Stat. § 72.61 (1989-90),12 and an inheritance tax on the person 
                     
     11  The court of appeals noted that the parties did not 
dispute that this issue is reviewed under summary judgment 
methodology. The Estate cross-appealed from the circuit court's 
decision on summary judgment that the Estate was not entitled to 
reimbursement from the marital trust beneficiaries for the federal 
estate tax attributable to the marital trust. Although the 
judgment cross-appealed from by the Estate is not designated 
"summary judgment," the record indicates that the circuit court 
based its decision on the affidavits, pleadings and the parties' 
legal arguments. See Firstar Trust, 188 Wis. 2d at 482-83 n.5, 525 
N.W.2d at 58 n.5. 
     12  All references to Wis. Stat., ch. 72, will be to the 1989-
 
No. 93-2508 
 
 
 
22 
receiving property, § § 72.01-72.35.  See Firstar Trust, 188 
Wis. 2d at 483, 525 N.W.2d at 58.  The court of appeals relied on 
its interpretation of Wis. Stat. § § 72.62 and 72.21 to impose the 
estate tax burden on the Trust.13 
 
Section 72.62 provides that the liability for the estate tax 
"is imposed upon the same persons in the same manner as under s. 
72.21  . . . "  Wis. Stat. § 72.21 of the 1989-90 Statutes is part 
of the subchapter imposing the former inheritance tax.  The court 
of appeals relied on the following language from § 72.21 to 
support its decision:  "[E]ach personal representative, special 
administrator, and trustee of a trust in existence and containing 
property on the date of the decedent's death, is severally liable 
for the tax imposed by this subchapter . . . ." (Emphasis added). 
 
The court of appeals reasoned that the Wisconsin estate tax, 
like the inheritance tax, must be apportioned among the recipients 
of the property, concluding that because the QTIP trust was in 
existence and contained property on the date of Dorothy Cooney's 
death, the "plain meaning of this section [§ 72.21] imposes tax 
liability on the trustee of the trust."  Firstar Trust, 188 
(..continued) 
90 statutes unless otherwise indicated. 
     13  Effective January 1, 1992, the sections in Chapter 72 were 
renumbered, after the elimination of the inheritance tax. Chapter 
72 now only imposes an estate tax. Section 72.62 of the 1989-90 
Statutes, which provided a cross-reference to § 72.21 has been 
eliminated. Section 72.21 of the 1989-90 Statutes, regarding 
personal liability for the tax, has been retained in § 72.21 in 
the current statutes, with slight modifications. The language in 
§ 72.21 relevant to this appeal has been retained. 
 
No. 93-2508 
 
 
 
23 
Wis. 2d at 484, 525 N.W.2d at 59.  We disagree with this 
interpretation. 
 
The Trust argues that the court of appeals construction of 
Wis. Stat. § § 72.21 and 72.62 fails to recognize the distinction 
between who is legally responsible for collecting and remitting 
the state estate tax, and who is ultimately liable for paying the 
state estate tax.  The trustee, as charged with "several 
liability" for the tax in Wis. Stat. § 72.21, serves only a 
fiduciary role under this section to ensure that the tax is paid. 
 The Trust maintains that § 72.21 does not deal with the relative 
apportionment of the tax burden.   
 
The Estate, on the other hand, argues that Wis. Stat. § 72.62 
imposes liability for the Wisconsin estate tax "on the same person 
and in the same manner as Wis. Stat. § 72.21."  The Estate claims 
that given the fact that the estate tax statute explicitly adopted 
the inheritance tax statute's collection, accounting, liability, 
lien rules, time for payment, and interest provisions, those cases 
which discuss liability for the inheritance tax are relevant for 
determining the liability for the estate tax.  See Wis. Stat. 
§ § 72.61-72.63.  According to the Estate, application of the 
inheritance tax cases confirms the appellate court's conclusion 
that the ultimate liability for the Wisconsin estate taxes should 
fall on the Trust beneficiaries. 
 
Our decision in Estate of Cullen, 231 Wis. 292, 285 N.W. 759 
(1939) supports the Trust's contention that Wis. Stat. § 72.21(1) 
 
No. 93-2508 
 
 
 
24 
was intended to serve a limited purpose.  In Cullen, we noted the 
following with respect to Wis. Stat. § 72.05(1) (1939), the 
predecessor to § 72.21(1):  "[T]he statute merely indicates what 
persons are initially liable, and is not controlling on the 
question as to where the tax shall finally rest. It makes 
provision for personal liability in order to protect the state and 
to insure collection of the tax."  Id. at 300, 285 N.W. at 763 
(emphasis added). 
 
We find that the Trust's argument that the legislature 
clearly intended there to be a fiduciary chargeable with personal 
responsibility for seeing that the applicable death tax is paid 
and not with apportioning the burden of the estate tax is 
supported by reference to our interpretation of Wis. Stat. 
§ 72.05(1) (1939) in Cullen.  Since the allocation of the estate 
tax is not explicitly mandated in the statute, we resort to case 
law to determine what party will bear this tax burden. 
 
The fundamental differences between the estate tax and the 
former inheritance tax are reflected in the manner in which the 
tax burden is directed.  Unlike an estate tax, which is a tax upon 
the right to transfer property, the inheritance tax was a tax upon 
the right to receive property from a decedent.  Bauknecht, 49 
Wis. 2d at 395-96, 182 N.W.2d at 240; Joas, 16 Wis. 2d at 492, 114 
N.W.2d at 833; see generally 2 James B. MacDonald, Wisconsin 
Probate Law and Practice, § 14.2, at 190-92 (1988)(contrasting the 
respective theories underlying the Wisconsin inheritance tax and 
 
No. 93-2508 
 
 
 
25 
the Wisconsin estate tax).  In construing the former inheritance 
tax statute, this court concluded that Wisconsin law has placed 
the burden of payment of the inheritance tax upon the beneficiary 
of the property.  Cullen, 231 Wis. at 301, 285 N.W. at 763; Joas, 
16 Wis. 2d at 491-92, 114 N.W.2d at 833; Bauknecht, 49 Wis. 2d at 
395-96, 182 N.W.2d at 240.  To the contrary, the handling of the 
estate tax burden differs significantly.  Our decision in Will of 
Uihlein, 264 Wis. 362, 376, 59 N.W.2d 641, 648 (1953) and Will of 
Kootz, 228 Wis. 306, 307, 280 N.W. 672, 672 (1938) has established 
that Wisconsin follows the common law burden-on-the-residue rule 
for purposes of estate taxes.   
 
Relying upon the language provided in Will of Uihlein and 
Will of Kootz, this court held in Joas that: "[i]n Wisconsin the 
law has placed the burden of paying the federal estate tax on 
[non-testamentary property] on the residuum of the probate 
estate."  Joas, 16 Wis. 2d at 492, 114 N.W.2d at 833.14  These 
fundamental principles have remained constant throughout our case 
law, and we have cautioned against judicially legislated changes.15 
                     
     14  See generally Carolyn B. Featheringill, Estate Tax 
Apportionment and Nonprobate Assets: Picking The Right Pocket, 21 
CUMBERLAND L. REV. 1, 8 n.29 (1990)(including Wisconsin among the 
states that prescribes the burden of estate taxes on the residue 
of the decedent's estate). 
     15  This court has consistently rejected the notion of 
judicially legislated estate tax apportionment rules.  In Will of 
Uihlein, we stated: 
 
This court in Will of Kootz . . . rejected the theory that 
our court should invoke its equity powers to achieve an 
apportionment of federal estate taxes which would 
 
No. 93-2508 
 
 
 
26 
 The Wisconsin allocation of the burden of the two, distinct death 
taxes is compatible with the common law of American jurisdictions. 
 As stated by one reporter: 
Inheritance taxes, by virtue of their nature, generally can 
be and are easily collected by withholding the amount 
thereof from the distributive share of the beneficiary. 
But, as a general rule, in the absence of statutory 
provision and in the absence of testamentary directions 
to the contrary, the payment of estate taxes is made out 
of the residuary estate or the estate as a whole, with 
no apportionment . . . . 
 
As a result of the common law rule described above, the 
payment 
of 
estate 
taxes, 
in 
the 
absence 
of 
a 
testamentary direction to the contrary, results in the 
reduction of the residuary estate and sometimes in its 
extinction. Because it is generally the decedent's 
nearest relatives who are the residuary legatees, it is 
they who bear the burden of the tax and thus suffer a 
hardship not necessarily intended or anticipated by the 
decedent. 
5 Inheritance Estate and Gift Tax Rep. (CCH) ¶ 2030C (citations 
omitted).  Although some states have altered the burden-on-the-
residue rule by statutory or judicially-created apportionment 
rules, Wisconsin is among the states that have not done so.  See 
discussion, supra, n.4. 
(..continued) 
prevent inequities . . .  We deem that it would be 
unwarranted judicial legislation for this court to 
attempt to apportion the impact of the federal estate 
tax. 
 
Will of Uihlein, 264 Wis. at 374-76, 59 N.W.2d at 647-48; see also 
Estate 
of 
Mouat 
v. 
Commissioner, 
23 
T.C.M. 
(CCH) 
1717 
(1964)(noting Wisconsin Supreme Court decisions rejecting the 
adoption of equitable apportionment rules in the absence of 
legislative action). 
 
No. 93-2508 
 
 
 
27 
 
In the present case, although the burden-on-the-residue rule 
is avoided by a reimbursement right at the federal level under 26 
U.S.C. § 2207A(a)(1), it remains intact at the state level.16  The 
QTIP marital trust assets are includable in Dorothy Cooney's gross 
estate by virtue of § 72.61 for state estate tax purposes, absent 
a testamentary indication to the contrary.  The state tax issue 
presents essentially the same question as we discussed above: Does 
the pay-all-taxes clause in Dorothy Cooney's will exhibit a clear 
testamentary intent to shift an established tax burden?  We have 
previously held that such a clause is incapable of shifting any 
established tax burden from where the law has placed it, and 
conclude that absent an express intention to reimburse the Estate 
for Wisconsin estate taxes, the burden cannot be shifted in this 
case to the Trust. 
 
It is our intention to preserve finality and maintain 
consistency in the interpretation and application of testamentary 
tax clause provisions.  Thus, because Wisconsin adheres to the 
rule that payment of the estate tax is to be borne by the 
decedent's probate estate, and Dorothy Cooney's will has not 
shifted that burden, it necessarily follows that the burden shall 
remain on the Estate in this case.  We therefore hold that the 
Estate is not entitled to reimbursement from the Trust for the 
                     
     16  The Wisconsin statutes do not contain any reimbursement 
provisions with respect to the Wisconsin estate tax which are 
analogous to the federal estate tax reimbursement provisions under 
26 U.S.C. § § 2206, 2207, 2207A or 2207B. 
 
No. 93-2508 
 
 
 
28 
Wisconsin estate taxes paid, and reverse the court of appeals on 
this issue. 
 
By the Court.—The decision of the court of appeals is 
affirmed in part and reversed in part. 
 
No. 93-2508 
 
 
 
 
SUPREME COURT OF WISCONSIN 
 
                                                              
 
Case No.: 
 
93-2508 
                                                              
 
Complete Title 
of Case: 
In the Matter of the Marital Trust Created 
 
 
 
Under the Will of Daniel H. Cooney, Deceased: 
 
 
 
 
Firstar Trust Company, Trustee of the  
 
 
 
Marital Trust, 
 
 
 
 
Petitioner-Appellant-Cross Respondent- 
 
 
 
 
Petitioner, 
 
 
 
 
v. 
 
 
 
First National Bank of Kenosha, Personal 
 
 
 
Representative of the Estate of Dorothy B. Cooney, 
 
 
 
 
Claimant-Respondent-Cross Appellant. 
 
 
 
______________________________________________ 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
 
 
 
Reported at:  188 Wis. 2d 468, 525 N.W.2d 53 
 
 
 
 
 
 
 
(Ct. App. 1994) 
 
 
 
 
 
 
 
PUBLISHED 
 
 
 
 
 
                                                              
 
Opinion Filed:  
 
Submitted on Briefs: 
 
Oral Argument: 
October 3, 1995 
 
                                                              
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Kenosha 
 
JUDGE: 
MARY WAGNER-MALLOY 
 
                                                              
 
JUSTICES: 
 
 
Concurred: 
 
 
Dissented: 
 
 
Not Participating: 
 
                                                              
 
No. 93-2508 
 
 
93-2508  Firstar Trust Company v. First National Bank of Kenosha 
 
 
ATTORNEYS:  
For 
the 
petitoner-appellant-cross 
respondent-
petitioner there were briefs by Allan E. Iding, Barbara J. 
Janaszek, Philip J. Halley and Whyte Hirschboeck Dudek, S.C., 
Milwaukee and oral argument by Philip J. Halley. 
 
 
For the claimant-respondent-cross appellant there was a brief 
by Andrew J. Willms and Willms Anderson, S.C. and Christopher T. 
Kolb and Halling & Cayo, S.C., of counsel, all of Milwaukee and 
oral argument by Andrew J. Willms.