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.”