CO Code § 15-12-1403 (2021)
2021 Colorado Code|Title 15 - Probate, Trusts, and Fiduciaries|Article 12 - Probate of Wills and Administration|Part 14 - Colorado Uniform Estate Tax Apportionment Act|§ 15-12-1403. Apportionment by Will or Other Dispositive Instrument

  Except as otherwise provided in subsection (3) of this section, the following rules apply:   To the extent that a provision of a decedent's will expressly and unambiguously directs the apportionment of an estate tax, the tax shall be apportioned accordingly.    Any portion of an estate tax not apportioned pursuant to paragraph (a) of this subsection (1) shall be apportioned in accordance with any provision of a revocable trust of which the decedent was the settlor that expressly and unambiguously directs the apportionment of an estate tax. If conflicting apportionment provisions appear in two or more revocable trust instruments, the provision in the most recently dated instrument prevails. For purposes of this paragraph (b):   A trust is revocable if it was revocable immediately after the trust instrument was executed, even if the trust subsequently becomes irrevocable; and    The date of an amendment to a revocable trust instrument is the date of the amended instrument only if the amendment contains an apportionment provision.       If any portion of an estate tax is not apportioned pursuant to paragraph (a) or (b) of this subsection (1), and a provision in any other dispositive instrument expressly and unambiguously directs that any interest in the property disposed of by the instrument is or is not to be applied to the payment of the estate tax attributable to the interest disposed of by the instrument, the provision controls the apportionment of the tax to that interest.       Subject to subsections (3) and (4) of this section, and unless the decedent expressly and unambiguously directs to the contrary, the following rules apply:   If an apportionment provision specifically directs that a person receiving an interest in a property under an instrument is to be exonerated from the responsibility to pay an estate tax that would otherwise be apportioned the interest:   The tax attributable to the exonerated interest shall be apportioned among other persons receiving interests in the apportionable estate passing under the same instrument; or    The deficiency shall be apportioned ratably among other persons receiving interests in the apportionable estate that are not exonerated from apportionment of the tax if the values of the other interests are less than the tax attributable to the exonerated interest.       If an apportionment provision directs that an estate tax is to be apportioned to a specific interest in property, recipients of other interests in the apportionable estate are indirectly exonerated from the responsibility to pay such tax; however, such indirect exoneration does not preclude the application of section 15-12-1404 if the value of the interest to which the tax is apportioned is insufficient to pay the tax in full.    If an apportionment provision directs that an estate tax is to be apportioned to a specific interest in property, a portion of which qualifies for a marital or charitable deduction, the estate tax shall first be apportioned ratably among the holders of the portion that does not qualify for a marital or charitable deduction and then apportioned ratably among the holders of the deductible portion to the extent that the value of the nondeductible portion is insufficient.    Except as otherwise provided for in paragraph (e) of this subsection (2), if an apportionment provision directs that an estate tax be apportioned to property in which one or more time-limited interests exist, other than interests in specified property under section 15-12-1407, the tax shall be apportioned to the principal of that property, regardless of the deductibility of some of the interests in that property.    If an apportionment provision directs that an estate tax is to be apportioned to the holders of interests in property in which one or more time-limited interests exist and a charity has an interest that otherwise qualifies for an estate tax charitable deduction, the tax shall first be apportioned, to the extent feasible, to interests in property that have not been distributed to persons entitled to receive the interests.       A provision that apportions an estate tax is ineffective to the extent that it increases the tax apportioned to a person having an interest in the gross estate over which the decedent has no power to transfer immediately before the decedent executed the instrument in which the apportionment direction was made. For purposes of this subsection (3), a testamentary power of appointment is a power to transfer the property that is subject to the power.    An apportionment provision expressly directing estate taxes to be paid from the “residue” of the subject probate or trust estate, or using language of similar effect, shall be subject to the following construction:   If the gross estate includes assets not passing under the dispositive instrument and the beneficiaries of those assets and the beneficiaries of the residue are different persons, this part 14 shall apply unless there is an express and unambiguous statement that the estate tax attributable to the assets shall also be paid from the residue.    If the dispositive instrument contains pre-residuary gifts and the residuary estate is insufficient to pay all estate taxes due, the apportionment provision directing payment from the residue shall be effective with respect to the residue as provided for pursuant to paragraph (b) of subsection (2) of this section, and this part 14 shall apply only to specify the source of payment for estate tax that cannot be paid from the residue. In this event, neither section 15-12-902 nor any other statutory or common law rule of abatement shall affect the apportionment of estate tax among the pre-residuary gifts.    When a gift qualifying for an estate tax marital or charitable deduction is made from a portion of the residue, the provisions of paragraph (c) of subsection (2) of this section shall apply, unless there is an express and unambiguous statement in the dispositive instrument of an intent to not fully utilize the available marital or charitable deduction. For this purpose, a direction to pay estate tax from the residue without “apportionment” or “right of contribution”, or language of similar effect, does not constitute an express and unambiguous statement sufficient to avoid the application of paragraph (c) of subsection (2) of this section.       An express and unambiguous apportionment of estate tax pursuant to this section does not, by itself, affect rights of recovery that may be available to a fiduciary under federal tax law. An intent to waive a right of recovery provided in sections 2206, 2207, 2207A, and 2207B of the internal revenue code of 1986, as amended, shall be expressly stated in the dispositive instrument in the manner described in such sections.     History. Source: L. 2011: Entire part added,(SB 11-165), ch. 184, p. 700, § 1, effective August 10.    OFFICIAL COMMENT   A decedent's direction will not control the apportionment of taxes unless it explicitly refers to the payment of an estate tax and is specific and unambiguous as to the direction it makes for that payment. For example, a testamentary direction that “all debts and expenses of and claims against me or my estate are to be paid out of the residuary of my probate estate” is not an express direction for the payment of estate taxes and will not control apportionment. While an estate tax is a claim against the estate, a will's direction for payment of claims that does not explicitly mention estate taxes is likely to be a boiler plate that was written with no intention of controlling tax apportionment. To protect against an inadvertent inclusion of estate tax payment in a general provision of that nature, the Act requires that the direction explicitly mention estate taxes.   On the other hand, a direction in a will that “all taxes arising as a result of my death, whether attributable to assets passing under this will or otherwise, be paid out of the residue of my probate estate” satisfies the Act's requirement for an explicit mention of estate taxes and is specific and unambiguous as to what properties are to bear the payment of those taxes.   Whether other directions of a decedent that explicitly mention estate taxes comply with the Act's requirement that they be specific and unambiguous is a matter for judicial construction. For example, there is a split among judicial decisions as to whether a direction such as “all estate taxes be paid out of the residue of my estate” is ambiguous because it is unclear whether it is intended to apply to taxes attributable to nonprobate assets. To the extent that it is determined that a decedent failed to apportion an estate tax, then the Act will apply to apportion that amount of the tax.   If an amendment is made to a revocable trust instrument, and if the amendment itself contains an express and unambiguous provision apportioning an estate tax, the date of the amendment is the date of the revocable trust instrument. However, if an amendment to a revocable trust instrument does not contain an express and unambiguous provision apportioning an estate tax, the date of the revocable trust instrument is the date on which it was executed or the date of the most recent amendment containing an express and unambiguous provision apportioning an estate tax. An express and unambiguous provision apportioning an estate tax includes a provision directing that payment of an estate tax be made from specified property.   The statutory apportionment rules of the Act are default rules applicable to the extent that the decedent does not make a valid provision as to how estate taxes are to be apportioned. The decedent has the power to determine which recipients of decedent's property will bear the estate taxes and in what proportion. If provisions conflict, it is necessary to determine which prevails. A possible choice would permit the directions in each of decedent's instruments determine the extent to which property controlled by that instrument bears a share of estate taxes, but having the provisions for an allocation scheme scattered among a number of documents would make decedent's personal representative search multiple instruments to ascertain the decedent's directions. Instead, the Act provides an order of priority for a decedent's provisions for estate tax allocations. To the extent that a decedent makes an express and unambiguous provision by will, that provision will trump any competing provision in another instrument. To the extent that the will does not expressly and unambiguously provide for the allocation of some estate taxes, an express and unambiguous provision in a revocable trust instrument will control. If the decedent executed more than one revocable trust instrument, the express provisions in the instrument that was executed most recently will control. In determining which revocable trust instrument was executed most recently, the date of any amendment containing an express and unambiguous apportionment provision will be taken into account. In the event that the allocation of estate taxes is not fully provided for by the decedent's will or revocable trust instrument, an express and unambiguous provision in other instruments executed by the decedent controls to the extent that the provision applies to the property disposed of in that instrument. An example of a provision in an instrument disposing of property, other than a will or revocable trust instrument, is a provision in a designation of a beneficiary of life insurance proceeds either that the proceeds will or will not be used to pay a portion of estate taxes. A designation of that form will be honored if there is no conflicting valid provision in a will or revocable trust instrument.   A provision in decedent's will, revocable trust, or other instrument will not be honored to the extent that it would contravene subsection (3).   The exclusivity of the provisions of this section apply only to apportionment rules; they do not prevent a dispositive instrument from making additional gifts; nor do they prevent a governing instrument of an entity from rearranging the internal division of the assets of that entity.   Ex. (1). On D's death, her will apportioned $100,000 of estate taxes to the holders of interests in the D Family Trust, an irrevocable trust created by D during her life. The D Family Trust is divided into two separate shares: the William Share, and the Franklin Share, each of which is for a different child of D. The William Share is for the benefit of William, and the Franklin Share is for the benefit of Franklin. The trust instrument provides that any taxes apportioned to the holders of interests in the trust or to any share of the trust are to be paid from the William Share. The effect of that trust provision is to require that taxes reduce the size of the William Share and do not reduce the Franklin Share. The apportionment provision in D's will established the amount of estate tax that the trust must bear; the amount apportioned to the D Family Trust makes all of the assets of that trust liable for that amount. Since the decedent's will did not direct how the trust's burden should be allocated between the two shares of the trust, the direction in the trust instrument is not inconsistent with the will provision and so can control the allocation of taxes between properties disposed of in the trust instrument under subsection (3). Even if the direction in the trust instrument were deemed not to be permitted by subsection (3), the direction would be effective as a disposition of trust assets as explained in Example (2).   Ex. (2). The same facts as those stated in Ex. (1) except that D's will apportioned the $100,000 of estate taxes to the Franklin Share of the D Family Trust. The trust provision placing the burden of the tax on the William Share cannot qualify as an apportionment direction since it is in conflict with the will provision allocating all of the trust's share of the estate tax to the Franklin Share. But the settlor has the power to direct trust assets to whomever the settlor pleases. The direction in the trust instrument that assets of the William Share are to be used to pay any taxes apportioned to the Franklin Share is a gift to Franklin of assets from the William Share. The direction is valid as a provision shifting trust assets from the William Share to the Franklin Share, which is a permissible disposition of a trust instrument.   The federal estate tax laws enable a decedent's personal representative to collect a portion of the decedent's federal estate tax from the recipients of certain nonprobate property that is included in the decedent's gross estate. See e.g., §§ 2206 to 2207B of the Internal Revenue Code. There is a conflict among the courts as to whether those federal provisions preempt a State law apportionment provision. Choosing the position that there is no federal preemption, the Act apportions taxes without regard to the federal provisions. The federal provisions are not apportionment statutes; rather, they simply empower the personal representative to collect a portion of the estate tax that is attributable to the property included in the decedent's gross estate and do not direct use of the collected amounts by the personal representative. The rights granted to the personal representative by federal law for the collection of assets from nonprobate beneficiaries do not conflict either with the apportionment of taxes by State law or with other rights of collection granted by State law. Since there is no conflict, this Act does not include a direction as to whether federal or State law takes priority.   The Act does not permit anyone other than the decedent to override the allocation provisions of the Act. For example, if X created a QTIP trust for Y, the value of the trust assets will be included in Y's gross estate for federal estate tax purposes on Y's death. See § 2044 of the Internal Revenue Code of 1986. If X's QTIP trust provided that the trust is not to bear any of the estate taxes imposed at Y's death, the direction would be ineffective under the Act because only Y can direct apportionment of taxes on Y's estate. In this regard, it is noteworthy that the right granted to a decedent's estate by § 2207A of the Internal Revenue Code to collect a share of the federal estate tax from a QTIP included in the decedent's gross estate can be waived only by direction of the decedent in a will or revocable trust instrument. Y is in the best position to determine the optimum allocation of Y's estate taxes among the various assets that comprise Y's gross estate. If Y fails to make an allocation, the default provisions of the Act are more likely to reflect Y's intentions than would a direction of a third person.   If an instrument transferring property that may be included in the taxable estate of someone other than the transferor directs payment from the transferred property of any part of the estate taxes of the other person, the direction affects the size of the gift, and so is a dispositive rather than an apportionment provision, and is not subject to this Act.   If a decedent makes a valid direction that a person receiving property under a particular disposition is exonerated from payment of an estate tax, the tax that would have been borne by that person will, instead, be borne by other persons receiving interests under the instrument directing the exoneration. Thus, if several assets are disposed of by a governing instrument, which exonerates one or more of those assets from bearing an estate tax, the exoneration will not reduce the amount of estate tax to be allocated to all of the assets disposed of by that instrument, including the exonerated assets. For example, if decedent's will directs that all federal estate taxes attributable to decedent's probate estate be paid from the residuary of his estate, the exoneration of the pre-residuary devises will not affect the total amount of federal estate tax apportioned to the beneficiaries of the probate estate, all of which tax will be borne by the residuary beneficiaries if the residuary is sufficient. If the value of the other interests is insufficient to pay the estate taxes, the difference will be payable by other persons receiving interests in the apportionable estate that are not exonerated from apportionment of the tax.   If a decedent directs that estate taxes be paid from properties, some of which qualify for a marital or charitable deduction, the provision making that direction may designate the extent to which the charitable or marital interests will or will not bear a portion of the tax. If the decedent makes no provision as to whether the marital or charitable interests bear a portion of the tax, the Act provides a default rule that exempts the marital or charitable interests from payment of the tax to the extent that it is feasible to do so. An example of when this circumstance arises is when the decedent's will makes a residuary devise, a portion of which qualifies for a marital or charitable deduction and a portion of which does not. If the decedent provides that estate taxes are to be paid from the residuary, unless directed otherwise, the default provision of the Act will require the payment to be made first from the nondeductible interests in the residuary. The default rule does not apply to an allocation of tax to a holder of an interest in property in which there is a time-limited interest; the tax allocated to any interest in that property is to be paid from the principal of the property unless the decedent expressly directed otherwise or unless section 15-12-1407 applies to the property.   If a decedent created a trust during life the value of which is included in the decedent's gross estate at death, if immediately after decedent's death, there were one or more time-limited interests in the trust that did not qualify for an estate tax deduction, and if one or more charities held a remainder interest in the trust that otherwise qualified for an estate tax charitable deduction, the charitable deduction for the remainder interests may be lost if the estate taxes generated by the nondeductible time-limited interests are to be paid from assets in the trust. See Rev. Rul. 82-128, Rev. Proc. 90-30 (§§ 4 and 5), and Rev. Proc. 90-31 (§§ 5 and 6). It is possible that if the payment of an estate tax is made from funds that, while directed to be added to the trust's assets, had not been distributed to the trust before payment of the estate tax, the payment will not disqualify the charitable deduction. There are numerous instances in which estate taxes are required to be paid from a charitable remainder trust that was created inter vivos. Subsection (2)(e) is an attempt to protect the deduction in such cases by establishing a rule of construction requiring that funds directed to be added to the trust be used to pay any required estate tax before assets already in the trust itself are used. It seems unlikely that a decedent would wish to negate this construction of decedent's direction, but the decedent has the power to do so by including an express statement to that effect in a will or revocable trust instrument.   If a decedent had made an irrevocable transfer during his life, over which the decedent did not retain a power to make a subsequent transfer, and if that transfer is included in the decedent's gross estate for estate tax purposes, a portion of the estate tax will be apportioned to the transferee unless the decedent effectively provides otherwise in a will, revocable trust or other instrument. While, by an express provision in the appropriate instrument, a decedent can reduce the amount of tax apportioned to such inter vivos transfers, the decedent is not permitted to increase the amount of tax apportioned to such a transferee. If a decedent attempts to do so, whether directly by apportioning more estate tax to the inter vivos transfer or indirectly by insulating some person interested in the gross estate from all or part of that person's share of the estate tax, the amount of estate tax that is apportioned to the transferee of an irrevocable inter vivos transfer will not be greater than the amount that would have been apportioned to that transferee if the decedent had made no provision for apportionment in another instrument.   Subsection (3) does not apply to a decedent's provision that no estate tax be apportioned to the recipient of an interest who would be excluded from apportionment by this Act in the absence of a contrary direction by the decedent. For example, a decedent's provision that no estate tax be apportioned to the recipient of property that qualifies for a marital or charitable deduction is not subject to subsection (3).   If a decedent transferred property to a revocable trust prior to executing a will that directs the apportionment of taxes to that trust, the apportionment direction will be valid even if the decedent subsequently released the power of revocation so that the trust became irrevocable prior to the decedent's death. In such a case, subsection (3) does not invalidate the will's direction.   If, immediately before the decedent's death, the decedent had a power of appointment, whether inter vivos or testamentary, the decedent had the power to transfer the property interest within the meaning of this provision.   COLORADO COMMENT   General Comments:   This section addresses a myriad of issues involved in tax apportionment analysis. This section recognizes that a decedent may specify directions for the apportionment of estate taxes in a variety of instruments, including a will, a revocable trust which the decedent established or some “other dispositive instrument” such as a beneficiary designation for non-probate assets.   The section also specifies default rules for the apportionment of estate taxes when a decedent (a) exonerates a beneficiary from the responsibility to pay estate taxes; (b) directs that property which qualifies for a marital or charitable deduction is to bear the burden of some or all of the estate taxes; and (c) directs that estate taxes are apportioned to split-interest gifts.   Limits are placed on the effectiveness of tax apportionment clauses that attempt to increase the estate tax borne by persons having interests in property over which the decedent had no power to transfer.   As the Commissioners point out in their comments, only the decedent can override the statutory tax apportionment provisions. C.R.S. § 15-12-916 (2009) does not contain an express statement to this effect.   There are a number of other issues implicitly addressed by this section. These include the distinctions between (a) tax apportionment clauses and property disposition clauses and (b) federal estate tax reimbursement provisions and tax apportionment clauses.   Subsection (1):   This section prioritizes, among multiple instruments executed by a decedent, which instrument will govern the apportionment of estate taxes.   In order for any instrument to govern tax apportionment, the ACT requires that the instrument contain an “express and unambiguous” tax apportionment clause. The Commissioners' comments recognize that determining whether a decedent's directions on tax apportionment are “express and unambiguous” will be the subject of judicial construction.   The Colorado Committee believes that no substantive difference exists or was intended by the Commissioners when they use the phrase “expressly and unambiguously” in the Act and the phrase “specific and unambiguous” in their comments.   This section provides exclusive rules for determining when statutory apportionment or a tax apportionment clause in a decedent's will, revocable trust or other dispositive instrument will govern. However, if a purported tax apportionment clause fails to so qualify, the clause may nonetheless create a gift for federal gift tax purposes. As noted in the article authored by Douglas A. Kahn, , 38 Real Property, Probate and Trust Journal 613 (Winter 2004), it is “critical” to differentiate between a tax apportionment clause and a clause disposing of the decedent's property. As Mr. Kahn writes,  The 2003 Revised Uniform Estate Tax Apportionment Act  “[t]he shifting of the tax burden from one person to another is one means of affecting the amount of the decedent's property that passes to those persons. But, while the decedent's apportionment of taxes may be regarded as a subcategory of property disposition, it is a special category with specific rules and should be isolated when analyzing issues that arise.”   The Commissioners spend considerable space in the comments addressing this distinction by illustrating, in two examples, that a clause in a trust that was presumably intended to serve as a tax apportionment clause, did not so qualify due to a conflict with a will, but was given effect as a dispositive direction, resulting in a gift between trust beneficiaries.   Subsection (2):   Subsection (b) of the Model Act (subsection (2) of this section) refers to the apportionment of estate tax to, alternatively, “property,” an “interest in property,” a “person receiving an interest in property,” and a “holder of an interest in property.” As recognized in the Colorado committee's definition of “apportionment provision” ( section 15-12-1402 (2) ), apportionment may be accomplished by the allocation of estate tax to a certain property or recipient, or by exonerating a certain property or recipient from liability. For purposes of this section, no substantive distinction is to be drawn between apportionment to the recipient of property (or an interest therein) and the property being received.  See  The NCCUSL Comments to subsection (2) also require some further elaboration, because they do not distinguish between property that is specifically exonerated from an estate tax obligation and property that is indirectly exonerated from such an obligation by the allocation of estate tax to another source of payment. Subject to the rules of construction set forth in subsection (4), paragraph (c), property that is specifically exonerated may be used for the payment of estate tax only after all other sources of payment have been exhausted. On the other hand, property that is only indirectly exonerated remains subject to the provisions of section 15-12-1404 (the statutory provisions for apportionment of estate taxes) if the property to which estate tax has been apportioned is insufficient to pay the tax in full; this is set forth in new section 15-12-1403 (2)(b) .   By way of further explanation, often a testator will make pecuniary or specific devises (which may or may not have significant value); the scrivener needs to determine the client's intentions as to whether these devises are exonerated from estate taxes and if so, who will pay the estate taxes on the exonerated devises. If the decedent directs that certain property dispositions are to be exonerated from estate taxes, section 15-12-1403 (2)(a)(I) specifies that the taxes attributable to the exonerated interest must be apportioned among other persons receiving interests (i.e., “inside” apportionment). Notice, however, that section 15-12-1403 (2)(a)(I) does not specify the method of apportionment (i.e., proportionality vs. some other method, however, Section 4 of the Act fills this gap (section 15-12-1404 )). As Mr. Pennell suggests in his article at page 17, when addressing “inside” apportionment of estate taxes for dispositions made within a decedent's single dispositive instrument and when pre- residuary pecuniary or specific devises are made, the “common law abatement and apportionment rules are likely to be directly contrary to the intent of the client in the sense that, if anyone should suffer for insufficient assets in the estate, it should be these takers.”  passing under the instrument  If the value of the other interests is insufficient to fully pay all of the estate taxes on the exonerated interests, then section 15-12-1403 (2)(a)(II) fills the gap and apportions the tax ratably among other recipients receiving interests in the (i.e., “outside” apportionment not just among the recipients of interests under the instrument). This language requires that the apportionment rules will apply over statutory abatement rules, to the extent the abatement rules might otherwise have been applicable. Note that section 15-12-1403 (2)(a)(II) apportions the tax ratably; if the decedent desired a different apportionment (perhaps based upon marginal rates or some other means), the decedent would need to so direct in the dispositive instrument.  apportionable estate  A recipient of an interest in property may be indirectly exonerated from the payment of estate taxes by a provision that apportions estate tax to one or more other recipients of interests in other property. Section 15-12-1403 (2)(c) addresses the determination of the source of payment of estate taxes in this situation where the value of the property received by a recipient to whom estate tax is apportioned is insufficient to pay the estate tax in full. In this situation, the statutory apportionment provisions of section 15-12-1404 will apply (rather than rules of abatement) if the value of the interest in property to which estate tax is apportioned is insufficient to pay the estate tax in full.   Subsection (3):   This section specifies that a provision in an instrument which apportions estate tax with respect to property that the decedent did not have any power to transfer immediately before the decedent executed the instrument is ineffective to increase estate taxes apportioned to any person having an interest in such property. The Colorado Committee discussed at least one situation in which subsection (3) would have direct application. For example, assume that wife created a testamentary QTIP trust for the benefit of her surviving husband, granting husband a special power to appoint the QTIP trust property remaining at his death among wife's children from a prior marriage. In the governing instrument creating the QTIP trust, wife also provided that estate taxes attributable to the inclusion of the QTIP trust in husband's estate at his later death are to be paid from the QTIP trust unless husband waives that right of reimbursement in the manner provided in Internal Revenue Code § 2207A. Under subsection (3), any provision in husband's governing instrument that would exercise the special power of appointment over the QTIP trust property in a manner that purports to apportion estate taxes imposed with respect to the husband's personal estate, to the property of the QTIP trust (and thereby attempt to increase the amount of estate taxes borne by the QTIP trust beyond the amount specified in Internal Revenue Code § 2207A) would be ineffective.   The second sentence is necessary to avoid unintentionally invalidating an otherwise enforceable apportionment clause contained in a decedent's Will simply because the apportionment clause apportions estate tax to property (or an interest in property) over which the decedent holds a testamentary power of appointment. Hence, this section clarifies that if a decedent has a testamentary power of appointment over property which is validly exercised by the decedent's Will and the decedent's Will contains a provision apportioning estate taxes to the appointment property, the apportionment clause will be effective (assuming it is otherwise effective under the provisions of this section) notwithstanding that the decedent had no power to transfer the appointment property immediately prior to executing his or her Will.   Subsection (4):   Even though a dispositive instrument may direct payment of estate taxes from a specific source, often the residuary estate, at times the direction cannot be carried out or becomes ambiguous due to circumstances existing at death that the decedent did not contemplate. Subsection (d) (subsection (4) of this section) has been added to the Act to assist in resolving certain of these situations which arise with some frequency by providing rules of construction designed to address common situations when estate taxes are directed to be paid from the residue of the probate or trust estate. This addition reflects the notion that principles of equitable apportionment, and the provisions of the Act, should be superseded only by clearly intentional statements for that purpose a notion that is consistent with Colorado case law. In re Estate of Kelly, 41 Colo. App. 316, 584 P.2d 640 (1978).   Three situations (or a combination of them) often cause ambiguity or impossibility of performance with respect to an estate tax payment direction in a dispositive instrument:    When the gross federal estate contains substantial non-probate assets, the dispositive instrument directs payment from the estate residue, and the non-probate beneficiaries and residuary beneficiaries are different persons.    When the dispositive instrument contains substantial pre-residuary gifts, the dispositive instrument directs payment from the residue, and the residue is insufficient to discharge the estate tax liability.    When a marital or charitable gift is made from the residue and the dispositive instrument directs payment from the residue without recognizing the potential diminution of an available estate tax deduction.     Each of these situations is addressed below.   1.  Residuary Estate / Non-Probate Assets Conflict  In the first situation, when (a) the dispositive instrument directs payment of estate taxes from the residuary estate but substantial non-probate assets exist, and (b) the residuary and non-probate beneficiaries are different, the NCCUSL comments indicate that the question of whether the direction is “specific and unambiguous” is a matter for judicial construction, because it is unclear whether taxes attributable to property not passing under the dispositive instrument also shall be paid from the estate residue. The Colorado committee has adopted a rule of construction that relieves courts from the need to determine the intent of such a direction, by requiring an express and unambiguous acknowledgment that non-probate assets are covered by the apportionment provision. Examples of such express and unambiguous language might include, but are not limited to, the following:   “All taxes payable by reason of my death, whether attributable to assets passing under this instrument or otherwise, shall be paid out of the residue of my probate estate.” (This language is identified by NCCUSL as specific and unambiguous as to the proper source of estate taxes).   “All estate tax shall be paid from the residuary estate, without apportionment to other assets.”   “All estate tax shall be paid from the residuary estate, without right of contribution from recipients of other assets.”   “All estate tax shall be paid from the residuary estate, without apportionment to other assets or right of contribution from recipients of other assets.”   However, even where a dispositive instrument directs apportionment to the residue in an express and unambiguous manner, federal estate tax laws present a complicating factor that the NCCUSL comments do not adequately address. See Comments to subsection (5) below.   2.  Pre-Residuary / Residuary Conflict (No Marital or Charitable Gift)  As noted above, the NCCUSL comments suggest that, under some circumstances, a direction that “all taxes arising as a result of my death, whether attributable to assets passing under this instrument or otherwise, be paid out of the residue of my probate estate” is specific and unambiguous. There may be some question as to whether this is true where estate taxes exceed the assets of the residuary probate estate. Subsection (2), paragraph (a) and the corresponding NCCUSL comments indicate that an apportionment provision such as the one described above effectively “exonerates” the preresiduary interests and forces the residuary beneficiaries to bear all taxes if the residue is sufficient. However, the Colorado committee believes that situations in which the residue is not sufficient to bear all taxes should be addressed more directly in the statutory text.   In such an instance, while the apportionment directive is not fully operative (due to deficient residuary assets), the directive can be followed to the greatest extent possible; and any shortfall in the tax payment sources is adequately addressed through the default rules of 15-12-1404 . The rules of abatement set forth in 15-12-902 and any corresponding distinctions drawn between classes of pre-residuary devises are not to be applied with respect to the apportionment of estate taxes. Thus, the provision described above is “specific and unambiguous” and should be given effect with respect to residuary assets, but the Act should be applied to resolve the uncertainty created by the apportionment provision's failure to contemplate exhaustion of the residue.   3.  Apparent Specific Allocation to Marital or Charitable Property  A more difficult dilemma arises when the dispositive instrument (a) directs that estate tax be paid by all recipients pro rata, including a surviving spouse or a charity; or (b) provides that payment of estate taxes shall be made from the residue “without apportionment or contribution” and a marital or charitable gift is made from the residue. Subsection (2), paragraph (c) and the accompanying NCCUSL comments address these situations by apportioning estate tax ratably among property interests that do not qualify for a marital or charitable deduction, unless there is an “express and unambiguous” direction to the contrary; however, there is no indication as to what constitutes an adequate contrary direction.   The Colorado Committee believes that the Act should apply to shield the surviving spouse or charity from the tax burden in all of the instances described above, unless there is a clear and unambiguous statement in the dispositive instrument of an intent not to benefit from an available marital or charitable deduction. See, e.g., Restatement (Third) of Property, Wills, and Other Donative Transfers § 11.3, subsection (c)(4), which states that “the construction that gives more favorable tax consequences than other plausible constructions” is preferred, as most donors would prefer that their dispositions receive “as favorable a tax treatment as is consistent with their general dispositive plan.” Id., Comment k.   In this light, the Colorado committee concludes that, absent unusual circumstances, the Act should insulate a charity or spouse from estate tax liability notwithstanding a direction in the dispositive instrument against apportionment or contribution, or a direction that taxes are to be borne pro rata. An exception to this general rule exists only where the instrument states explicitly that the decedent is aware of the increased tax burden that results if a charity or spouse is burdened with any tax liability, or that a named spouse or charity is to contribute to such liability. Examples of such clear and unambiguous language (as mandated by Sections 3(b) and (d)(3) of the Act (subsections (2) and (4)(c) of this section) might include, but are not limited to, the following:   In a Tax Allocation Provision:   “I specifically recognize that the allocation of estate taxes provided above could result in the apportionment of estate taxes to the gift to [spousal / charitable beneficiary], and that the estate taxes imposed against my estate could thereby be increased” or   “Even if the allocation of estate taxes provided above does not fully utilize the marital or charitable deductions otherwise allowable to my estate, I intend that the gift to [spousal / charitable beneficiary] shall bear a proportionate share of estate taxes payable by reason of my death.”   In a Provision for Disposition of Residue:   “I intend that the devises of my residuary estate shall be calculated and distributed after the payment of all estate taxes, without regard to whether any such devise would result in a federal estate tax charitable or marital deduction, and despite any increase in estate taxes as a consequence of this intent” or   “Each devise of my net residuary estate provided herein shall bear its proportionate share of estate taxes, even if the federal estate tax marital or charitable deduction allowable by reason of such devise is thereby reduced.”   Such language clearly indicates that the fiduciary must reduce the spouse's/charity's share by means of a circular calculation in determining the available deduction.   Subsection (5):   Additional uncertainty may arise out of the inconsistencies between the Act and federal estate tax recovery statutes (sometimes referred to as “reimbursement” statutes). This problem is only cursorily addressed in the NCCUSL comments. Subsection (e) (subsection (5) of this section) has been added to ensure that an estate tax apportionment provision is not confused with or viewed as necessarily effecting a waiver of federal tax recovery rights.   Internal Revenue Code §§ 2206 to 2207B authorize a personal representative to collect a portion of the decedent's federal estate tax from the recipients of non-probate property that is included in the decedent's taxable estate. § 2206 covers life insurance proceeds includible under § 2042; § 2207 covers power of appointment property includible under § 2041; § 2207A covers qualified terminable interest property (“QTIP property”) includible under § 2044; and § 2207B covers prior transfers in which the decedent retained a life interest as described by § 2036. The right of recovery granted under each of these statutes may be waived by a contrary direction in the decedent's will. Under §§ 2207A and 2207B, a waiver of the recovery rights must specifically express an intent to waive the right. Courts have indicated that similar specificity may be required to effectively waive the provisions under §§ 2206 and 2207, although those statutes do not, by their terms, require such specificity.   Technically, Code §§ 2206 to 2207B are not apportionment statutes. These statutes do not expressly compel the exercise of available reimbursement rights or any particular application of collected amounts; they simply grant recovery rights to the personal representative. NCCUSL adopted the position that there is no conflict between the Act and the Code's recovery provisions, hence no federal “preemption” of state estate tax apportionment. The uniform Act does not reference the federal statutes; and the NCCUSL comments are non-committal as to the effects of federal recovery rights on state apportionment laws. Thus, the uniform Act leaves open the possibility that a dispositive instrument could require apportionment from the residue of the decedent's probate estate, notwithstanding the personal representative's lingering federal “right to recover” taxes from certain non-probate property. Conversely, a dispositive instrument could effectively waive the personal representative's right of recovery under federal law, but still expressly or under the Act's default provisions provide for the apportionment of taxes against QTIP property. In both situations, the personal representative (or a court) would be left to ascertain how the ultimate burden of tax payments is to be borne.   NCCUSL may be correct as to the theoretical difference between estate tax apportionment and federal recovery rights. However, certain case law and standard practice in estate administration supports the notion that such recovery rights even though they may be couched in discretionary terms -- create a “duty” to collect taxes in the manner contemplated by Code §§ 2206 to 2207B. In that light, the federal provisions may be viewed as tantamount to federal estate tax apportionment laws.   Further, courts have blurred the distinction between federal recovery statutes and state tax apportionment laws. In Colorado, for instance, the decision of , 113 P.3d 150 (Colo. 2005) directly holds that Internal Revenue Code § 2207A preempts the state's estate tax apportionment laws. Under Klarner , absent a specific waiver of the statute's application, § 2207A requires both federal and state estate taxes to be apportioned against a QTIP trust that is includible in the decedent's taxable estate. The Act and the NCCUSL comments leave continuing room for argument as to (a) whether the holding of Klarner would remain intact after the Act's adoption, and (b) how discrepancies between the Act's apportionment principles and federal recovery provisions will be managed in the future.   Beyond the fundamental question as to whether the federal recovery provisions effectively preempt state apportionment laws, there are numerous other issues that arise out of incongruity between the federal scheme and the Act. For example: What kind of specificity is required to deflect recovery rights/apportionment from non-probate property? What kind of instrument can be used to direct the apportionment? (Internal Revenue Code §§ 2206 and 2207 do not permit rights of recovery to be waived in a trust instrument.) How can the incremental allocation of estate taxes to QTIP property under Section 4 of the Act (section 15-12-1404 ) and Internal Revenue Code § 2207A be altered to create a pro rata burden?   Subsection (5) expressly preserves the distinction between state estate tax apportionment laws and federal statutes granting estate tax recovery rights to personal representatives. However, the Colorado committee suggests that the tensions between these two sources of authority may be significantly minimized through some standardized drafting precautions.   With respect to non-probate assets that are included in a decedent's taxable estate, practitioners must recognize that language which may be sufficient to override the Act's default apportionment rules is not necessarily adequate to waive the personal representative's federal right to collect from the recipients a proportionate share (under Internal Revenue Code §§ 2206, 2207 or 2207B) or an incremental share (under Internal Revenue Code § 2207A) of the taxes attributable to such property. Thus, for instance, if the estate tax burden is intended to be borne by the decedent's residuary probate estate, rather than by QTIP property includible in the decedent's taxable estate, the following direction would be sufficient: “All taxes payable by reason of my death, whether attributable to assets passing under this instrument or otherwise, shall be paid out of the residue of my probate estate without apportionment to or right of contribution from any person; and I waive any right of recovery otherwise available to my personal representative under Internal Revenue Code § 2207A.” Practitioners should consider including similar references to other federal estate tax reimbursement statutes providing rights that are intended to be waived in conjunction with tax apportionment even where the statutes or applicable regulations do not require such express acknowledgments.   Similarly, if apportionment to QTIP property is to be obtained on a proportionate basis, instead of an incremental basis, the calculation mechanics provided under the Act and Internal Revenue Code § 2207A should be specifically superseded by a reference to and expressed intent to deviate from the federal statute. Otherwise, the federal recovery scheme could result in a different and preemptive apportionment computation.   The Colorado committee notes that the Act's maintenance of a distinction between estate tax apportionment and federal recovery rights may conflict with the rationale applied by the Colorado Supreme Court in , 113 P.3d 150 (Colo. 2005). However, the committee believes that the distinction is in keeping with federal law and the uniformity sought by NCCUSL.   In this context, federal recovery statutes must also be distinguished from the power of a fiduciary under section 15-12-1409 to collect estate taxes due from recipients of a decedent's property. Such authority, while also sometimes referred to as a right of recovery, arises out of the need to ensure that the responsible fiduciary has the means to pay the taxes due in a timely manner. Thus, this collection power will be exercised in a manner that is consistent with the Act. Federal recovery rights, on the other hand, create burdens on beneficiaries and entitlements in fiduciaries that are independent of state laws of apportionment.