Matthews, Lora and Morgan.
G. Leonard Ericson died December 4, 1969 survived by his wife Helen Ericson. The couple had no children. His will, dated March 22, 1967, was admitted to probate. On March 7, 1967 Ericson had executed an irrevocable inter vivos trust and on March 9, 1967 he had executed an earlier will. The widow is the life beneficiary and Ericson's nieces and nephews and their children are remaindermen of the inter vivos trust. The corpus of this trust consisted of International Business Machines stock worth $1,096,250 when created and $1,598,722.86 on the date of his death. The estate passing under the will was valued at $2,020,620.49 on the date of his death.
Internal Revenue Service has included the inter vivos trust within Ericson's adjusted gross estate in accordance with the presumption that a trust created within three years of death is in contemplation of death. Ericson was 75 years of age and in apparent good health on March 7, 1967, and the record indicates that he expected to live for many more years.
Article IV 1(a) of the will admitted to probate, divided the residuary estate into two parts as follows:
If my wife survives me, I give and bequeath to her "Part A" of my residuary estate which shall be that fraction of my entire residuary estate which shall secure for my estate the maximum marital deduction allowable under the Federal Estate tax law. The numerator of this fraction shall be one-half of my adjusted gross estate (as defined in the Internal Revenue Code, but after excluding the value of all property passing or having passed outside this Will except joint tenancies) less the value of all property finally allowed as a marital deduction for property passing to my wife, other than property passing under this Article, and the denominator shall be the value of my entire residuary estate, all based on values as finally determined for Federal Estate Tax purposes.
The remaining fraction of my residuary estate shall be called "Trust A * * *."
The earlier will executed two weeks before the will admitted to probate and two days after the inter vivos trust contained a parenthetical phrase in the marital bequest which read, "as defined in the Internal Revenue Code," whereas the will admitted to probate contained the clause, "as defined in the Internal Revenue Code, but after excluding the value of all property passing or having passed outside this Will except joint tenancies." The two wills are otherwise identical except for a specific bequest of $1,000 to Mrs. Ericson's sister (Martha Cigolini) contained in the probated will. Neither the scrivener nor the trust officer of the executor bank could account for the inclusion of this parenthetical clause in the will.
The quoted Article IV 1(a) divided the residuary estate into two parts. Part A, the marital deduction share, went to the widow outright. Trust A, the remaining portion of the residuary estate, went to the widow for life with the remainder in further trust for the testator's nieces and nephews, the appellants herein. Article II directed that all death taxes be paid as follows:
All inheritance, estate and succession taxes (including interest and penalties thereon) payable by reason of my death shall be paid out of and be charged generally against the principal of my residuary estate other than Part A, without reimbursement from any person.
The trial judge found that the maximum marital deduction based on an adjusted gross estate, including the inter vivos trust, is $1,809,671.67; that if the inter vivos trust were excluded from the numerator of the fraction, as provided in the will, the marital deduction would be $1,010,310.25, a diminution of almost $800,000 in the widow's outright share, and the federal estate tax would be increased by about $284,000.
The record supports the trial judge's findings that Ericson lived simply, his wealth was derived from inheritance, he retained stocks which had huge accretions in value, but he had no special training, business or financial experience. He sought the assistance of Malcolm Savage, plaintiff's trust officer, for the preparation of his will. He never ...