Tax Apportionment

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.