Rosen v. Wells Fargo Bank Texas, 114 S.W.3d 145 (Tex. App.—Austin 2003, no pet.).
Testator’s will provided for all transfer taxes to “be paid out of
the residue of my estate without apportionment.” However, there was no
residuary property. Consequently, a dispute arose over whether (1) other
probate assets should shoulder the transfer tax burden or (2) transfer
taxes should be apportioned under Probate Code § 322A. The probate court
ordered that all transfer taxes be paid solely from the probate assets.
The appellate court reversed. The lack of a residuary estate negated
Testator’s direction and thus the default apportionment provisions of
Probate Code § 322A still apply. Thus, the probate assets qualifying for
the marital deduction did not incur any estate tax burden and the
taxable non-probate assets bore the entire estate tax liability.
A strong dissent argued that Testator actually had a residuary estate
which passed under the marital trust provisions of the will. In
addition, it was clear that Testator was extremely concerned with
transfer taxes being paid “without apportionment” as well as with having
them paid out of the residuary. The majority, in effect, ignored
Testator’s desires not to have taxes apportioned merely because the
named gift was insufficient.
Moral: A testator who wishes probate assets to bear the transfer tax
burden must expressly indicate that even non-residuary probate assets
are to be used to pay taxes.