Court Opinion

ID: 9461245
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:09:37.753594+00
Date Added: 2024-06-11T17:36:57.647665
License: Public Domain

MOORE, Circuit Judge
(dissenting):
When the testator asked an attorney (and presumably he did) to draw his will, he must have told him, judging by the will, that he wished to provide for his wife and set up a marital trust which would “maximize the estate tax deduction available under § 2056 of the Internal Revenue Code.” (Majority Opinion) He also “indicated a preference as to which assets were to go to the marital trust so that his surviving spouse would not have to be involved in decisions relating to the family business.” (Tax Court Opinion) The usual clause for payment of funeral expenses, just debts, etc. was inserted but as a special directive, the testator directed that “all inheritance, estate and transfer taxes due by reason of my death shall be paid out of that portion of my estate which is not included in the Marital Trust to be administered by my Trustee . ”. The testator’s instructions to his executor, whether attorney-drawn or layman-drawn, could not have been clearer.
However, mindful of the unexpected, which it is always wise to provide for in any document, testamentary or corporate, the testator added an “unless” proviso so that if in the executor’s sole discretion and “in his best business judgment” the executor might think it advisable that “such taxes could be more prudently paid from any assets in my estate without respect to what is or is not included in the Marital Trust”, then the executor would not be accused of a breach of trust if it did so. But before doing so, it was called upon to exercise its best business judgment, which judgment was to be'exercised in its sole discretion. It was not the discretion of the Tax Commissioner, nor the Tax Court, nor the Court of Appeals.
Little comment is necessary as to the applicable principles of law. The courts are to discover and enforce the will and intent of the testator. We can speak only through the document declaring his intent. Were he here today he would undoubtedly reaffirm what he thought he had clearly expressed.
Error becomes first noticeable in the Tax Court’s opinion in its assumption that “decedent’s will directed the executor in his sole discretion to pay death taxes without respect to what was or was not included in the marital trust.” Quite to the contrary, he specifically directed that estate taxes “be paid out of that portion of my (his) estate which is not included in the Marital Trust . .” (emphasis added).
An all-important prerequisite had to occur before the executor could invade the marital trust for this purpose. It had to exercise its “best business judgment.” Had the executor been called to account for departing from the testator’s wishes, it would undoubtedly have had to show cause as to the wisdom of this exercise and by adequate proof to justify the soundness of its judgment.
I cannot understand, nor agree with, the majority’s statement that Article XII “expresses a preference for payment of the taxes from that part of the estate not included in the marital trust.” Nowhere in the Article is there any suggestion of “preference.” Quite the opposite — the testator used words of command. Thus, he wrote, “I further direct . ” and that the taxes “shall be paid out of that portion of my estate which is not included in the Marital Trust . . . ” (emphasis added). These words I cannot reconcile with the majority’s statement that “we do not have a positive expression in the will” or “a positive direction that death taxes be paid from that part of the estate not included in the marital share . . . ”.
The courts should strive to carry out the wishes and intent of testators and not decree, in effect, that only if the testator writes, in substance, that “I direct that under no circumstances whatsoever shall any estate taxes be paid out of. or *1153which in any way might diminish, the marital trust.” True, the testator gave to his executor a contingent power to apply funds of the trust if it could justify its use as its “best business judgment” but this is a far cry from saying, as do the majority, that “the existence of the authority is out of harmony with the notion that the decedent firmly directed the executor to pay taxes out of funds other than marital ones so as in all circumstances to secure the greatest possible marital deduction.”
The Tax Court judge conceded that “under Utah State law the decedent’s will must be interpreted to give effect to the decedent’s expressed intention” but at the same time said that “the decedent clearly intended that his executor possess absolute power to commit the assets of the marital trust to the payment of death taxes if he saw fit to do so.” Were the will to be properly interpreted, he should have said that the executor possessed a conditional power not to be exercised without a showing that the conditions had been met.
Furthermore, although the Commissioner is not foreclosed from making a federal assessment, the Tax Court judge acknowledged that “[wjhether any estate taxes are payable from the surviving spouse’s interest is a matter governed by state law. (citing cases)” All parties in interest were before the District Court (Utah), Probate Division, and by order of that Court the property was distributed in a manner which did not reduce the marital trust by any Federal estate or Utah inheritance tax. The federal government has received its full measure of tax from this estate. In my opinion it should honor the testator’s wishes — not seek to override and frustrate them.
The legislative purpose of the marital deduction is the equalization of treatment of surviving spouses in common-law states with those in community property jurisdictions. Furthermore, there is a presumption that the marital estate will not be burdened with Federal Tax. See Estate of Amory Haskell v. Commissioner of Internal Revenue, 58 T.C. 197 (1972). It is generally accepted that state law may determine who will pay the federal estate tax. Riggs v. Del Drago, 317 U.S. 95, 63 S.Ct. 109, 87 L.Ed. 106. Absent statutory authority from Utah placing the federal tax burden or any part of it on the surviving spouse and absent clear language in the will indicating that the testator wishes the tax to be paid from property which would otherwise be included in the marital deduction, I would hold that the presumption of no tax burden and the clear intent of the testator to bequeath the maximum marital estate be given effect.
Since I believe that the decision today departs widely from the testator’s expressed intent, I must dissent.