Interpretation & Construction

Tax Apportionment

Patrick v. Patrick, 182 S.W.3d 433 (Tex. App.—Austin 2005, no pet.).


Testatrix’s will provides that “[a]ll taxes * * * which may be payable by reason of my death * * * shall be charged against and paid out of my estate.” The named beneficiary on non-probate IRAs claims that Testatrix’s estate is responsible for the estate taxes triggered by inclusion of the IRAs in the taxable estate while the will beneficiaries claim that the apportionment rules of Probate Code § 322A apply. The trial court held that the apportionment rules apply and the appellate court affirmed.

The court rejected the IRA beneficiary’s claim that Testatrix’s will expressly provided otherwise as authorized under Probate Code § 322A(b)(2). The court determined that Testatrix’s use of the word “taxes” was not sufficiently specific and that she did not expressly provide for estate taxes to be paid without apportionment. The court also gave a broad interpretation to the term “estate” as not being limited to the “probate estate” but instead encompassing the “total property” Testatrix owned at the time of her death. The court also took note of a will provision expressly exempting life insurance proceeds from apportionment. This language would have been unnecessary if Testatrix had intended all non-probate assets to be exempt from apportionment.

Moral: A testator who does not want estate taxes to be apportioned must express that intent clearly. Prudent practice would be for the testator to state, “I direct that all taxes, including (but not limited to) the federal estate and generation-skipping transfer taxes, payable by reason of my death be charged against my estate regardless of whether the asset subject to tax is or is not included in my probate estate. I do not want these taxes apportioned under Texas Probate Code § 322A or any other statute or judicial decision which provides for tax apportionment.”