Court Opinion

ID: 2866619
Source: CourtListenerOpinion
Date Created: 2015-09-06 01:40:25.541687+00
Date Added: 2024-06-11T12:46:05.236714
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                          NO. 03-01-00634-CV

                  Ricki Diann Rosen, as Independent Executrix of the Estate of
                             Daniel H. Rosen, Deceased, Appellant

                                                     v.

Wells Fargo Bank Texas, N.A., as Trustee of the Rachael Leigh Rosen Trust and the Dorian
         Rosen Trust, and as Guardian of the Estates of Rachael Leigh Rosen and
     Dorian Rosen; and Eileen Rosen as Custodian of Rachael Leigh Rosen, Appellee

                     FROM THE PROBATE COURT NO. 1 OF TRAVIS COUNTY
                   NO. 73,960, HONORABLE GUY S. HERMAN, JUDGE PRESIDING

                                 DISSENTING OPINION

                The linchpin of the majority opinion is that Rosen=s last will & testament (Athe Will@) as

applied after Rosen=s death was entirely devoid of a residuary estate from which to pay the estate taxes. To

reach this conclusion, the majority must disregard the most basic tenets of Texas will-construction case law.

Because I believe otherwise and would affirm the probate court=s decision, I respectfully dissent.
                                              BACKGROUND

                 Under Rosen=s will, executed on May 28, 1997, appellant was the primary beneficiary. 1

Article III of the Will left all of Rosen=s personal property, as well as his interests in all employee benefit plans

and retirement accounts, to appellant. Articles IV and V placed the remainder of the estate in two trusts: the

Marital Trust and the Family Trust. Rosen provided that the income of both trusts was to be used for the

benefit of appellant during her lifetime, with the remainder of both trusts to his descendants, per stirpes. I will

refer to the gifts under Articles III, IV and V of the Will as the Aprobate assets.@ Article VIII set out the

administrative provisions. The other provisions of Rosen=s will are not at issue here.

           1
                Under the Will, some probate assets pass to Rosen=s descendants, per stirpes, upon the
death of appellant or in the event that appellant does not survive Rosen, and assets from the Family Trust
may be used to provide for Athe health, support, maintenance and education@ of the children.

                                                        2
                Rosen had substantial non-probate assets,2 some of which generated estate and inheritance

taxes: (1) a $963,000 life insurance policy, payable to appellee Wells Fargo Bank (AWells Fargo@), as

trustee for Rosen=s children;3 and (2) a Uniform Gift to Minors Act account in the amount of $54,542 for

the benefit of Rachael Rosen.4 I will refer to these gifts as the Anon-probate assets.@ The combined taxable

value of $1,017,542 from these non-probate assets produced significant estate taxes established at trial in

the amount of $132,442.

                The parties dispute which assets are liable for the payment of estate taxes: probate or non-

probate. Under Texas common law, estate taxes and other expenses were borne by the general estate.

This meant that the beneficiaries of the general estateCtypically a surviving spouse and childrenCbore all

            2
                As part of his divorce settlement, Rosen was initially required to maintain a $1 million life
insurance policy. Pursuant to a subsequent agreement, the amount of life insurance Rosen was required to
maintain was reduced to $216,000. Rosen obtained a second insurance policy in that amount. Although he
was no longer required to do so, Rosen voluntarily maintained the first policy, in addition to the second
policy.
            3
                 Because Rosen maintained an Aincidence of ownership@ in the first insurance policy, it was
included in his estate for tax purposes. Although the record is unclear as to the nature of the incidence, it
may have been a power of appointment. This would constitute a prohibited power under the Internal
Revenue Code, rendering the insurance policy part of Rosen=s gross estate for tax purposes. Such indicia
of ownership make an insurance policy part of the taxable probate estate, subject to taxation. See 26
U.S.C.A. ' 2036(a)(2) (West 2002). In addition, the parties agree that, because the second policy should
be treated as a debt of the estate, it does not produce any taxes and is not at issue here. However, if the
Internal Revenue Service were to view this policy as a transfer and not a debt, the parties agree that this
policy would also generate transfer taxes.
        4
           Because Rosen was a custodian of this Uniform Gift to Minors Act account, see Tex. Prop. Code
Ann. '' 141.001-.025 (West 1995 & Supp. 2003), it was included as part of his estate for tax purposes.
There is also a Uniform Gift to Minors Act account for the benefit of Dorian Rosen, but because Rosen was
not the custodian of this account, it is not included in his estate for tax purposes.

                                                     3
expenses, including taxes, even if non-probate transfers to beneficiaries other than the spouse or children

produced such taxes. In place of this system, Texas adopted an equitable apportionment statute in 1987.

See Tex. Prob. Code. Ann. ' 322A (West 2003). This statute provides that beneficiaries of taxable assets,

whether probate or non-probate, will bear a pro rata portion of all estate taxes charged against the estate.

Id. ' 322A(b)(1). This equitable apportionment statute will not apply, however, if a decedent Aspecifically

directs the manner of apportionment@ in a will or similar instrument. Id. ' 322A(b)(2). To this point, it has

remained unclear what the effect of such a waiver would be if the fund from which the taxes are to be paid is

insufficiently funded. See Peterson v. Mayse, 993 S.W.2d 217, 222 (Tex. App.CTyler 1999, no pet.).

                For most decedents, the equitable apportionment method as provided in 322A(b)(1) is

suitable. However, some testators include alternative provisions for the payment of estate taxes. While

such provisions can direct that taxes be paid out of specific assets, a commonly used provision is that all

taxes should be paid Aout of the residuary estate without apportionment.@

                Article VIII of Rosen=s Will reads:

        B.   All estate, inheritance or similar taxes arising in connection with my death with respect
             to any property included in my gross estate for the purpose of calculating such taxes,
             whether or not such property passes under my Will, all funeral expenses and all
             expenses incurred in connection with the administration of my estate shall be paid out
             of the residue of my estate without apportionment; provided, however, if my wife
             fails to survive me, to the extent the residue of my estate is insufficient for the payment
             of such taxes and expenses, then any excess, except as otherwise specifically
             provided in this Section, shall be paid on a pro rate basis from all of the assets
             included in my gross estate.

                                                      4
(Emphasis added). It is apparent from this provision of the Will that Rosen has provided for the payment of

estate taxes under two different circumstances. If his wife survives him, the estate taxes are to be paid out

of the Aresidue of [his] estate without apportionment.@ (Emphasis added). On the other hand, if he

survives his wife, and the residue of his estate should be insufficient, Rosen provides for a pro rata method

of apportionment similar to section 322A of the Texas Probate Code. Thus, it is obvious that Rosen

contemplated two different methods of apportioning estate taxes.

Rosen=s Last Will and Testament

                 Both federal and state law provide certain tax credits that, if used properly, can minimize or

entirely eliminate estate and inheritance taxes. The Amarital deduction@ is a common method for transferring

assets to a surviving spouse without generating any tax liability. It consists of a portion of the estate which is

allowed to pass tax free to the surviving spouse. For over twenty years, the tax code has permitted a

married decedent to grant any property to the surviving spouse, unlimited in amount, which remains tax

free at least until the surviving spouse=s death. See 26 U.S.C.A. ' 2056(a) (West 2002).

                 Every individual is also entitled to a Aunified credit@ that allows the transfer of a fixed number

of assets free of transfer taxes. This credit belongs to the estate. At the time of Rosen=s death, the unified

credit permitted tax-free transfers of up to $675,000. See 26 U.S.C.A. ' 2010 (West 2000), superseded

by 26 U.S.C.A. ' 2010 (West 2001). All assets that do not fall under the marital deduction or the unified

credit and that are not otherwise exempt may be taxed.

                 In order to avoid taxation of the assets in the marital deduction upon the death of the

surviving spouse, it is common to divide the estate into separate parts: (1) a life estate in the assets subject

                                                        5
to the marital deduction to the surviving spouse;5 and (2) a Abypass trust@Cin the amount of the unified credit

not already used by other transfersCfor the benefit of the surviving spouse during his or her lifetime, with the

remainder passing to the children. Upon the death of the surviving spouse, the assets of the bypass trust

transfer to any children or other natural heirs free of taxes.

                   Article III, entitled ASpecific Gifts,@ made specific bequests6 of Rosen=s personal property,

as well as his interests in all employee benefit plans and retirement accounts, to the appellant, Ricki Rosen.

                   Article IV of Rosen=s Will established the Daniel Hunt Rosen Marital Trust (the AMarital

Trust@):

           C. If my wife survives me, I give to my Trustee, IN TRUST, to be administered as
              provided in this Article, such an amount of property (including any non-probate assets
              payable to my testamentary Trustee) as will be equal to the maximum marital
              deduction . . . diminished by the value for Federal estate tax purposes of all other
              items in my gross estate which qualify for the marital deduction and which pass or
              have passed to my wife under other provisions of this Will or otherwise; provided,
              however, this gift of property . . . shall be reduced by an amount, if any, needed to

             5
                A life estate for the benefit of the surviving spouse is considered exempt, for tax purposes,
as part of the marital deduction. 26 U.S.C.A. ' 2056(b) (West 2002).
             6
                  A bequest is specific if: (1) it is described with such particularity that it can be distinguished
from all of the testator=s other property; and (2) the testator intended for the beneficiary to receive that
particular item, rather than cash or other property from his general estate. Hurt v. Smith, 744 S.W.2d 1, 4
(Tex. 1987).

                                                        6
             increase my taxable estate as determined for Federal estate tax purposes to the largest
             amount which, after taking into account all other deductions allowed to my estate for
             Federal tax purposes and all allowable credits, will result in the least amount of
             Federal estate tax being imposed on the estate.

(Emphasis added). The Marital Trust represents the marital deduction and creates a life estate for

appellant=s benefit in all of Rosen=s remaining money and real property. Because the marital deduction was

unlimited at the time of Rosen=s death, see 26 U.S.C.A. ' 2056, gifting to the Marital Trust Asuch an amount

of property . . . as will be equal to the maximum marital deduction@ has the effect of placing all of Rosen=s

remaining propertyCafter the specific bequests have been madeCinto the Marital Trust. However, this

amount shall be reduced by an amount, if any, needed to take advantage of Aallowable credits@ (the

Apotential tax credit reduction amount@).

        Article V of Rosen=s Will, entitled AFamily Trust,@ establishes the Daniel Hunt Rosen Family Trust

(the AFamily Trust@):

        If my wife survives me, I give all of the residue of my estate to my Trustee, IN TRUST, to
        be administered as provided in this Article.

(Emphasis added). The Family Trust was meant to be Rosen=s bypass trust. Because of the all-

encompassing nature of the Marital Trust, the only possible source of funding for the Family Trust would be

the monetary amount, if any, by which the Marital Trust would be reduced to take advantage of allowable

tax credits. The allowable tax credits at issue are limited to Rosen=s unified credit, in the amount of

$675,000.

                                                     7
The Controversy

                Rosen=s Will first makes specific bequests in Article III. Next, the gifting to the Marital

Trust of Asuch an amount of property . . . as will be equal to the maximum marital deduction@ has the effect

of placing all of Rosen=s remaining propertyCafter the specific bequests have been madeCinto the Marital

Trust. This amount shall be reduced, however, by an amount, if any, needed to take advantage of

Aallowable credits@ (the Apotential tax credit reduction amount@). Finally, the Family Trust is funded with

Athe residue of [Rosen=s] estate.@ Due to the unlimited marital deduction, all of Rosen=s property, except

for the potential tax credit reduction amount and specific bequests, was granted to the Marital Trust. This

meant that the only possible source of funding for the Family Trust was the potential tax credit reduction

amount.

                This potential tax credit reduction amount was meant to account for Rosen=s unified credit.

However, the combined taxable value of the two non-probate assets, $1,017,542, greatly exceeded

Rosen=s unified credit of $675,000. Once the non-probate assets absorbed the entire unified credit, there

were no potential tax credits left which would reduce the Marital Trust. Because the Marital Trust was

reduced by zero, there were no assets left to fund the Family Trust.

                On June 20, 2001, appellant, individually, as Independent Executrix of Rosen=s estate, and

as Trustee of the Marital Trust and Family Trust, sought a declaratory judgment as to which property in

Rosen=s estate would bear the burden of paying federal estate tax and state inheritance tax. Appellant

argues that, because Rosen stated the Family Trust would contain Athe residue of my estate,@ his direction to

pay estate taxes Aout of the residue of my estate without apportionment@ meant that taxes should be paid out

                                                     8
of the Family Trust alone. Because the Family Trust remained unfunded, appellant argues that the Will fails

to Aspecifically direct the manner of apportionment,@ required by section 322A(b)(1) of the probate code,

and therefore the default Texas apportionment statute must apply regardless of Rosen=s express waiver.7

Under section 322A(b)(1), the estate taxes would be borne by the beneficiaries of the assets that gave rise

to the taxes. The trusts established for the benefit of Rosen=s children, represented by Wells Fargo and

Eileen Rosen, respond that requiring the non-probate trusts to pay the estate taxes would be contrary to

Rosen=s intent to avoid apportionment under section 322A.

                The probate court ruled that appellant, as Independent Executrix, must pay all taxes out of

the probate assets and that the non-probate assets are not liable for the payment of any taxes.

The Contentions of the Parties

          7
                Both the parties and the majority cite numerous out-of-state cases relevant to the issue of
whether section 322A of the Texas Probate Code should apply in this case. All of these cases are clearly
distinguishable. Both I and the majority have been unable to find a single case, like this one, where the
specific bequests and trusts all favored a single beneficiary.

          Furthermore, appellant argues, in effect, that due to the taxable nature of the non-probate assets,
she has been denied an additional amount of property that would have been available to her through the
Family Trust. Her argument overlooks the fact that the unified credit is not hers, but rather benefits Rosen=s
estate.

                                                      9
                  In this appeal, appellant raises two arguments: (1) because the estate taxes were to be paid

out of a specified probate asset, the Family Trust, which is unfunded, section 322A should control the

apportionment of estate taxes; and (2) the clauses in Rosen=s will regarding maximization of the marital

deduction and the minimization of gross estate taxes mandate equitable apportionment in order to fulfill the

testator=s intent.8

                  Wells Fargo and Eileen Rosen join issue on whether section 322A is applicable, because

Rosen specifically directed that estate taxes be paid Awithout apportionment.@ They urge that the non-

probate assets should not be charged with any portion of the estate and inheritance taxes. However, I

believe this case can be resolved without resorting to statutory construction based upon a plain reading of

the testator=s intent as manifested in the plain language of the Will. Notwithstanding appellant=s contentions

regarding the application of section 322A in situations where a testator has designated a specific fund to

bear the tax burden and that fund remains completely unfunded, I do not reach that issue. Under the plain

language of the Will as applied to Rosen=s estate at the time of his death, I conclude that the Marital Trust

was meant to bear the estate tax burden. 9

           8
                 Appellant=s argument for equitable apportionment fails to account for the fact that appellant
was the primary beneficiary under both the Marital Trust and Family Trust. Although the children would
inherit the remainder of the Marital Trust, and income from the Family Trust could be used to provide for
their education, the income from both trusts was primarily for the benefit of appellant during her lifetime.
           9
                 One of my concerns with the majority opinion is that it fails to thoroughly analyze the
question of whether the equitable apportionment statute, once waived, can be resurrected solely on the
ground that the fund from which the will directs that taxes be paid is insufficient to meet the estate=s entire
tax obligation. While the majority opinion tacitly concedes that, under Texas law, Rosen=s will expressly
waives the statute=s application, see Peterson v. Mayse, 993 S.W.2d 217, 222 (Tex. App.CTyler 1999,
no pet.); Estate of Miller v. Commissioner, 76 T.C.M. (CCH) 892 (1998), it simply assumes that an

                                                      10
insufficiency of funds automatically triggers the statute=s reinstatement despite a valid express waiver to the
contrary. This determination is not only a question of first impression, but a complex legal issue requiring, in
my opinion, more analysis than it is given by the majority.

                                                      11
                                                DISCUSSION

                 In construing a will, the court=s focus is on the testator=s intent. San Antonio Area Found.

v. Lang, 35 S.W.3d 636, 639 (Tex. 2000); Huffman v. Huffman, 339 S.W.2d 885, 888 (Tex. 1960).

This intent must be ascertained from the language found within the four corners of the will. Lang, 35

S.W.3d at 639; Shriner=s Hosp. v. Stahl, 610 S.W.2d 147, 151 (Tex. 1980). The court should focus not

on what the testator intended to write, but the meaning of the words actually used. Stahl, 610 S.W.2d at

151; Rekdahl v. Long, 417 S.W.2d 387, 389 (Tex. 1967); Kirk v. Beard, 345 S.W.2d 267, 273 (Tex.

1961). In this light, courts must not redraft wills to vary or add provisions Aunder the guise of construction

of the language of the will@ to reach a presumed intent. Stahl, 610 S.W.2d at 151; Welch v. Straach, 531

S.W.2d 319, 322 (Tex. 1975); Huffman, 339 S.W.2d at 888. It is therefore our duty to determine the

effect of Rosen=s will based on the meaning of the words Rosen actually used; we must not speculate as to

the words Rosen might have used with the benefit of hindsight and thereby redraft the will. Stahl, 610

S.W.2d at 151; Huffman, 339 S.W.2d at 889. Finally, a will speaks at the time of the testator=s death,

and it is the estate he then possessed that passes according to the terms of his will. Stahl, 610 S.W.2d at

150. We must therefore determine the correct application of Rosen=s Will based on the facts as they

actually existed at the time of Rosen=s death.

                 Appellant=s argument is premised on the assumption that the Marital Trust is a specific

bequest and the Family Trust is a residuary bequest. Texas law has long recognized that all bequests fall

into four functional categories: specific, demonstrative, general, and residuary. Hurt v. Smith, 744 S.W.2d

1, 4 (Tex. 1987). A legacy is classified as specific if: (1) it is described with such particularity so that it can

                                                       12
be distinguished from all of the testator=s other property; and (2) the testator intended for the beneficiary to

receive that particular item, rather than cash or other property from his general estate. Id.; see also

Houston Land Trust Co. v. Campbell, 105 S.W.2d 430, 433 (Tex. Civ. App.CEl Paso 1937, writ ref=d).

A legacy is demonstrative if: (1) it is a bequest of sums of money, or of quantity or amounts having a

pecuniary value and measure, not in themselves specific; and (2) the testator intended such bequests to be

charged primarily to a particular fund or piece of property. Hurt, 744 S.W.2d at 4; Campbell, 105

S.W.2d at 433. A legacy is a general bequest if: (1) it bequeaths a designated quantity or value of property

or money; and (2) the testator intended for it to be satisfied out of his general assets rather than disposing of,

or being charged upon, any specific fund or property. Hurt, 744 S.W.2d at 4. Finally, a legacy should be

classified as a residuary bequest if: (1) the testator intended for the gift to bequeath everything left in the

estate, after all debts and legal charges have been paid, and after all specific, demonstrative and general gifts

have been satisfied. Id.; see Stahl, 610 S.W.2d at152.

                 Appellant argues that because the Marital Trust is a specific bequest, the Family Trust

therefore constitutes the Aresidue@ of the estate. According to appellant=s argument, because Rosen

directed that estate taxes be paid Aout of the residue of my estate,@ his direction must fail because the Family

Trust is unfunded. Therefore, appellant argues that the apportionment scheme of section 322A must then

apply.

                 I disagree with appellant=s characterization of the Marital and Family Trusts. When

classifying bequests in a will, we must consider the testator=s intent by looking at the application of the

provisions of the will rather than by reaching an arbitrary determination based upon a ritualistic classification.

                                                       13
Hurt, 744 S.W.2d at 4; Jacobs v. Sellers, 798 S.W.2d 24, 27 (Tex. App.CBeaumont 1990, writ

denied). Rosen=s specific bequests were contained in Article III of the Will. Although appellant contends

that the Marital Trust constitutes an additional specific bequest, the Marital Trust fails to meet either part of

the definition of a specific bequest. First, specific bequests are described with such particularity so as to

distinguish them from all of the testator=s other property. The effect of the unlimited marital deduction,

however, is to bequeath all of Rosen=s other propertyCexcept for the potential tax credit reduction

amountCto the Marital Trust.         Bequeathing Asuch an [unlimited] amount of property@ cannot be

characterized as describing with such particularity as to distinguish the gift from all of the testator=s other

property. See Hurt, 744 S.W.2d at 4; Campbell, 105 S.W.2d at 433. The Marital Trust, in fact, is all of

Rosen=s other property. Second, with a specific bequest, the testator intends the beneficiary to receive a

particular item, rather than cash or other property from his general estate. Hurt, 744 S.W.2d at 4;

Campbell, 105 S.W.2d at 433. Here, again, all particular items have been disposed of in Article III, and

Rosen leaves all remaining cash and other propertyCexcept for the potential tax credit reduction

amountCto the Marital Trust. By definition, the Marital Trust is not a specific bequest.

                 I next address how the Marital Trust should be characterized. The Marital Trust in fact

constitutes the residue of Rosen=s estate. Because the marital deduction was unlimited at the time of

Rosen=s death, see 26 U.S.C.A. ' 2056, gifting to the Marital Trust Asuch an amount of property . . . as will

be equal to the maximum marital deduction@ has the effect of placing all of Rosen=s remaining

propertyCafter the specific bequests have been madeCinto the Marital Trust. This amount shall be

reduced, however, by an amount, if any, needed to take advantage of the potential tax credit reduction

                                                      14
amount. Because the Marital Trust was reduced by zero, it encompasses all of Rosen=s property after the

specific bequests have been made. In other words, the Marital Trust comprises Aeverything left in the

estate, after all debts and legal charges have been paid, and after all specific, demonstrative and general gifts

have been satisfied@; this is the definition of a residuary estate. Hurt, 744 S.W.2d at 4. Because the

Marital Trust satisfies the effect, as well as the language, of a residuary bequest, the residue of Rosen=s

estate is within the Marital Trust.

                 My characterization of the Marital Trust is bolstered by the basic purpose of a residuary

estate, to prevent partial intestacy. Wright v. Greenberg, 2 S.W.3d 666, 673 (Tex. App.CHouston [14th

Dist.] 1999, no pet.). The Marital Trust is constructed so as to maximize the marital deduction, which is

unlimited. Because the Family Trust never came into being, the Marital Trust contains all of Rosen=s

property not otherwise devised. In effect, this includes any property Rosen may not have provided for in his

will. The Marital Trust then meets not only the definition, but also the purpose, of a residuary estate. Due

to the all-encompassing nature of the Marital Trust, I conclude that it contains Athe residue of [Rosen=s]

estate.@

                 My conclusion stands even though Rosen did not use the word Aresidue@ in establishing the

Marital Trust. Texas courts have determined residuary estates to exist even where the word Aresidue@ is not

used. See, e.g., Sewell v. Sewell, 266 S.W.2d 924, 926 (Tex. Civ. App.CTexarkana 1954, writ ref=d

n.r.e.) (general gift of Arest of all the property,@ following several specific gifts, created residuary clause);

Wolf v. Hartmangruber, 162 S.W.2d 112, 116 (Tex. Civ. App.CFort Worth 1942, no writ) (phrase Aall

my property shall be equally divided among all of my children@ was sufficient to constitute residuary clause).

                                                      15
Absent the phrase Athis [Marital Trust] . . . shall be reduced by an amount, if any, needed to [take

advantage of] all allowable [tax] credits,@ there would be no question that the Marital Trust satisfies the

definition of a residuary estate. This phrase, combined with Rosen=s use of the word Aresidue@ in

constructing the Family Trust, raises the question of whether the Family Trust constitutes the residuary

estate.

                 Rosen uses the phrase Aall of the residue of my estate@ in the granting clause creating the

Family Trust. However, this is not by itself dispositive. First, creation of the Family Trust is contingent upon

the existence of available credits by which the Marital Trust would be reduced. A residuary clause may be

a contingent bequest; if the contingency fails, the bequest fails as well. See, e.g., Betts v. Haggard, 495

S.W.2d 602, 606 (Tex. Civ. App.CTyler 1973, writ ref=d n.r.e.) (paragraph Fourth was contingent

residuary clause to be effective only if the bequests made in paragraphs Second or Third became

ineffective); Fain v. Fain, 335 S.W.2d 663, 665 (Tex. Civ. App.CFort Worth 1960, writ ref=d) (residuary

clause was conditioned on wife predeceasing testator, and failure of wife to predecease testator meant

residuary clause failed, even though it had effect of testator dying intestate as to some property). The

Family Trust was conditioned on the existence of a potential tax credit reduction amount, and this condition

never occurred. Consequently, the Family Trust never came into existence. Therefore, because the Family

Trust was never created, language used by the testator in that section of the Will is a nullity.

                 Indeed, the words Aif any@ in the Areduced by@ clause indicate Rosen=s awareness of the

possibility that there might in fact be no available credits by which to reduce the Marital Trust and fund the

                                                      16
Family Trust. Because the non-probate assets exceeded the unified credit, leaving no allowable credits and

therefore reducing the Marital Trust by zero, this is exactly the situation that confronts this Court.

                 To hold under Rosen=s will that there is no residuary estate, as the majority does, requires

us to completely disregard the all-encompassing functional nature of the Marital Trust, as well as the

purpose and definition of a residuary estate according to Texas case law. Because the Marital Trust

contains the residue of Rosen=s estate, I would affirm the probate court=s ruling that the non-probate assets

are not liable for any portion of the estate and inheritance taxes. Because the majority concludes otherwise,

I respectfully dissent.

                                                  __________________________________________

                                                  Mack Kidd, Justice

Before Justices Kidd, Yeakel and Patterson

Filed: July 30, 2003

                                                     17