Opinion ID: 2274784
Heading Depth: 1
Heading Rank: 5

Heading: The Assignment of Estate Tax Liability

Text: The Steinhofs aver, with respect to the second issue on appeal, that the motion justice erred in granting summary judgment for defendants, thereby apportioning any taxes due between the trust and the residuary estate. The Steinhofs contend that the trust clearly states that all taxes were to be paid entirely by Robert's estate, unless the taxes exceeded the liquid assets of the estate. The Steinhofs further contend that the motion justice incorrectly concluded that the tax allocation provision in the 2003 will modified the tax assignment provision of the trust, because, under Rhode Island law, the terms of a will cannot modify an inter vivos trust. Here, according to the Steinhofs, the trust reserved powers for its modification, but no such power was reserved to modify the trust by the 2003 will. Moreover, the Steinhofs argue that the language of the 2003 will is ambiguous in providing for tax apportionment because it refers to other property, and not to the trust by name. Michelle argues that the motion justice did not err in apportioning taxes between the probate estate and the trust estate, and she disagrees with the Steinhofs about the appropriate analysis in which this Court should engage. She argues that the issue is not whether the trust can be modified by the 2003 will, but rather whether the 2003 will contains language opting out of the default tax apportionment rule, as required by the Uniform Estate Tax Apportionment Act, G.L. 1956 chapter 23.1 of title 44 (UETAA). According to Michelle, the UETAA provides that, unless a will states otherwise, taxes are to be apportioned among all persons interested in the estate, with estate defined to include trust assets. Therefore, Michelle contends that only explicit language in a will can override the statutory presumption of apportionment between taxes due on trust assets and probate assets passing under a will. The Ferlands did not address the issue of tax apportionment on appeal. Rhode Island has adopted the UETAA. Section 44-23.1-2 states: Unless the will provides, the tax is apportioned among all persons interested in the estate. The apportionment is made in the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate. The values used in determining the tax are used for that purpose. When interpreting a statute, our ultimate goal is to give effect to the General Assembly's intent.    The best evidence of such intent can be found in the plain language used in the statute. Thus, a clear and unambiguous statute will be literally construed. State v. Germane, 971 A.2d 555, 574 (R.I.2009) (quoting Martone v. Johnston School Committee, 824 A.2d 426, 431 (R.I.2003)). In addition, § 44-23.1-9 of the UETAA states that, [t]his chapter shall be applied and construed as to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among those states, which enact it. The plain language of the UETAA clearly requires the apportionment of state and federal estate taxes among all persons interested in the estate, unless the will otherwise provides. Other states agree, in interpreting their statutes modeled after the UETAA, that the statutes are mandatory in nature, thus requiring apportionment unless a testator directs otherwise in his or her will. See, e.g., Bushee v. Bushee, 303 N.W.2d 320, 322 (N.D.1981) (The estate taxes will be paid according to the apportionment statute unless the decedent's will directs in clear and unambiguous language a method of apportionment different from that provided by the statute.); In re Estate of Hilliar, 498 P.2d 1237, 1239 (Wyo.1972) ([A] directive against apportionment should be expressed in clear and unambiguous language.); see also 42 Am.Jur.2d Inheritance, Estate, and Gift Taxes § 312 (2000) ([I]n the absence of a clear and unambiguous direction to the contrary in a will, apportionment of estate taxes pursuant to statute will be directed, and if there is any doubt as to what the decedent intended, the statutory direction to apportion is absolute). The controlling will [5] the 2003 will  does not direct against apportionment, but to the contrary, the introductory paragraphs of the 2003 will state:  FIRST: I direct my Executrix hereinafter named to pay all of my just debts and funeral expenses as soon after my death as practicable. I direct my said Executrix to pay out of the principal of my residuary estate as hereinafter given, devised and bequeathed, any and all estate, inheritance, succession, legacy, transfer or similar death taxes, including any interest or penalties thereon, which may be levied or assessed in respect to any property or interest therein passing under this my Last Will and Testament or any Codicil thereto. I specifically direct that such taxes which shall become due and payable in respect to any other property required to be included in my gross estate for the purpose of computation of such taxes shall be apportioned against, and paid out of, such other property[.] Thus, in the 2003 will, Robert assigns tax liability consistent with the UETAA's default rule, directing that taxes arising from any other property included in his gross estate for the purpose of tax computation must be apportioned against and paid out of that property. The trust certainly falls under the umbrella of any other property included in his gross estate, and, as such, the taxes must be apportioned against and paid out of the trust. In short, the will clearly and unequivocally adopts the UETAA's presumptive estate tax apportionment rule. When, as is the case here, a will provides for the assignment and payment of tax liability, the will controls the tax assignment of the decedent's estate. See § 44-23.1-2 (providing for tax apportionment [u]nless the will provides). The Steinhofs' argument that the tax obligation should be the liability of the trust rather than the will is without merit. The Steinhofs contend that the only issue here is whether the 2003 will amended or modified the trust. [6] The UETAA, however, clearly states that the only language that can override the statutory apportionment is that of a will. The parties have provided us with no support for the proposition that a tax provision in an inter vivos trust defeats apportionment provided for in a will. The inquiry, therefore, hinges on the mandatory directive of the UETAA, § 44-23.1-2, and does not depend, as the Steinhofs assert, on whether the will modified or revoked the trust in part. Where, as is the case here, the tax allocation clause of a trust conflicts with the clear language of a will, the language of the will controls and estate taxes should be apportioned and paid in accordance with the will.