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Gesner v. Roberts

Decided: May 13, 1966.

JULE ROBERTS GESNER AND EDWARD ROBERTS, JR., EXECUTORS UNDER THE WILL OF EDWARD ROBERTS, DECEASED, AND INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
v.
MARIE B. ROBERTS, EXECUTOR UNDER THE WILL OF EDWARD ROBERTS, DECEASED, AND INDIVIDUALLY, DEFENDANT-RESPONDENT



Conford, Kilkenny and Leonard. The opinion of the court was delivered by Conford, S.j.a.d.

Conford

[91 NJSuper Page 257] This case involves a controversy between a testator's widow and his children by a prior marriage as to whether she should share the burden of federal estate taxes with the children, all three being equal beneficiaries of the residuary estate left under the will. The trial court held in favor of the widow, relying principally upon the marital deduction provisions of the federal tax code. On the particular set of facts here presented we disagree, and reverse.

Testator, apparently a successful businessman who at his death in 1964 left a gross estate, including insurance, of about $925,000, made his will in 1947, about six months after marrying defendant. The testament was simple. In material part, after providing for payment of debts and funeral expenses, it left a $34,500 home and contents thereof to the wife, certain personal objects of small value to the children, and then declared:

"THIRD: I give, devise and bequeath all the rest, residue and remainder of my estate of any nature, whether real, personal or mixed, and wherever the same may be located, to my wife, MARIE B. ROBERTS, my son, EDWARD ROBERTS JR., and my daughter, JULE ROBERTS GESNER, in equal parts share and share alike * * *."

The residuary beneficiaries were made co-executors.

Since testator died subsequent to the effective date of the 1948 amendments of the federal revenue code enacting the marital deduction provisions of the federal estate tax law this estate became entitled to a deduction of the one-third share of the residuary estate passing to the wife under the will (the maximum such permissible deduction being 50% of the value of the adjusted gross estate). 26 U.S.C.A. (1954 Internal Revenue Code) § 2056. The controversy in the present case implicates the circumstance that the federal tax act reduces the marital deduction by the amount of any inheritance or estate tax, including federal estate taxes, to which the share of the qualifying spouse is subject, thus increasing the estate tax. 26 U.S.C.A. § 2056(b)(4). The computation for that purpose is made by algebraic formula set forth in the regulations.*fn1

Accordingly, here, if defendant-wife's share in the residuary estate is made subject to payment of a pro rata portion of the federal estate tax, the amount of that tax will rise from about $150,000 to about $165,000, according to plaintiffs'

representations to the court. Under the trial court's judgment defendant would pay no part of the tax and plaintiffs would pay about $75,000 each. Under our reversal the widow and each child will share the burden of the tax to the extent of about $55,000 each.

Preliminarily, it may be noted that the so-called apportionment statute, N.J.S. 3A:25-30 et seq., does not affect this litigation for two reasons: (1) the will was executed prior to January 1, 1951, N.J.S. 3A:25-38; and (2) the act applies only to property passing outside, not under the will, N.J.S. 3A:25-30, subd. d., 3A:25-31; and see National State Bank of Newark v. Nadeau, 57 N.J. Super. 53, 56, 62 (App. Div. 1959).

The problem here presented should be approached, in the first instance, on the basis of the fundamental concept that the courts seek to effectuate the intent of the testator. That philosophy has been strongly reinforced by recent decisions. In re Cook's Estate, 44 N.J. 1 (1965); Fidelity Union Trust Co. v. Robert, 36 N.J. 561 (1962). Thus, if we had express provisions in the will specifying whether or not the widow should participate in payment of the tax, they would control. See Case v. Roebling, 42 N.J. Super. 545, 559, 560 (Ch. Div. 1956), where the court found the directions of the will on the same issue controlling. Absent such provision in the will, our cases indulge the presumption that federal estate taxes, being excises on the passing from the decedent of his interest in the property rather than on the privilege of the beneficiary of succeeding to that interest, are payable along with debts and administration expenses out of the residuary estate prior to its distribution. Turner v. Cole, 118 N.J. Eq. 497, 501-502 (E. & A. 1935). The rule was reiterated in Morristown Trust Co. v. McCann, 19 N.J. 568, 573 (1955), the opinion in which is notable for the fact that in a case where a tax apportionment provision of a will was not clear the court was influenced by the circumstances attendant upon the making of the will and the

nature of the decedent's relationships with the parties affected as casting light upon his hypothetical intent.

It should be noted, and with some emphasis in view of the nature of defendant's arguments, that it is thoroughly settled that the federal estate tax law is, with minor qualifications,*fn2 quite unconcerned with the ultimate incidence of estate tax burdens as between legatees, devisees and beneficiaries of decedents' estates, inter sese, being content to permit local state law, whether by statute or judicial decisions, to settle such questions. Riggs v. Del Drago, 317 U.S. 95, 63 S. Ct. 109, 87 L. Ed. 106 (1942).

In the instant case, accordingly, if no special argument contra is maintainable because of the peculiar nature of the marital deduction tax law provisions, and there being no directory tax clause in the will, the routine application of the principles mentioned above would require defendant as a residuary legatee along with plaintiffs to share with them in the burden of payment of the estate tax. That would occur automatically with the payment of the tax by the executors before distribution of the net remaining residue among the devisees thereof. Such a result, moreover, would seem to accord with the intent of the testator in leaving the residuary estate to the three named beneficiaries "in equal parts share and share alike." This is language seemingly indicative of an intent that the wife and the children of the prior marriage should take exactly equal net shares in the residuum -- a result not effectuated by the ...


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