Lander Estate

207 A.2d 753, 416 Pa. 605, 1965 Pa. LEXIS 729

Opinions

Opinion by

Mr. Chief Justice Bell,

The question involved is narrow but important. Under the language of testatrix’s will, were Pennsylvania Inheritance taxes and Federal Estate taxes on her jointly-owned property, payable out of her residuary estate or by the surviving co-tenant of the jointly-owned property? The lower Court held that none of these taxes were payable out of the residuary estate.

Katherine G. Lander died on August 8, 1960, leaving a will dated February 14, 1956. Testatrix provided : “First. I direct that all

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* my just debts, funeral expenses, Federal Estate taxes and Pennsylvania Inheritance taxes be fully paid and satisfied by my Executors, as soon as conveniently may be, after my decease.”

Testatrix left personal property which was exclusively her own, amounting to approximately $50,000. She was also a joint tenant of certain personal property, which consisted almost entirely of shares of mutual funds, with a value of over $85,000, registered in the names of herself and (1) a son, and (2) a grandson, and (3) a granddaughter, and (4) a daughter-in-law, “as joint tenants with right of survivorship.”

The Pennsylvania Transfer Inheritance Tax Act of June 20, 1919, P. L. 521, as amended, 72 P.S. §2301 et seq. (which is the pertinent statute), imposes a transfer inheritance tax upon the transfer by will or by the intestate laws of any property or of any interest therein from any person dying seized or possessed thereof, with certain exceptions not herein pertinent. It is usually denominated a legacy or succession tax on the privilege of receiving the property owned by a decedent: Pickering Estate, 410 Pa. 638, 190 A. 2d 132; Hoffmann Estate, 399 Pa. 96, 160 A. 2d 237; Wright Estate, 391 Pa. 405, 138 A. 2d 102; Shugars v. Chamberlain Amusements Enterprises, Inc., 284 Pa. 200, 130 Atl. 426; see also, Cochrane’s Estate, 342 Pa. 108, 20 A. 2d 305. The tax is therefore payable by the recipient of the property unless the testatrix otherwise provides, expressly or by clear or necessary implication.* Dravo Estate, 388 Pa. 551, 131 A. 2d 351; Spangenberg Estate, 359 Pa. 353, 59 A. 2d 103; Horn Estate, 351 Pa. 131, 40 A. 2d 471; Anderson’s Estate, 312 Pa. 180, 167 Atl. 329.

We must therefore determine testatrix’s intent, which is the polestar in the construction of this will and in the solution of the questions here involved. Houston Estate, 414 Pa. 579, 201 A. 2d 592; Burleigh Estate, 405 Pa. 373, 175 A. 2d 838; Dinkey Estate, 403 Pa. 179, 168 A. 2d 337.

The language of Mrs. Lander’s will is a clear and express direction to her executor to pay all Federal Estate taxes and all Pennsylvania Inheritance taxes in full — and this direction clearly includes the Pennsylvania Inheritance taxes on her jointly-owned (ex tra-testamentary) property. To decide otherwise would be (a) to ignore the clear language of her will, or (b) to torture the language of her will into stating that the Pennsylvania Inheritance tax on jointly owned property — which never passed under or by virtue of her will and never was a part of her estate under the intestate laws — must be paid, not by her executors but by the surviving joint tenant. Cf. Cochrane’s Estate, 342 Pa. supra; Horn Estate, 351 Pa. supra; Anderson’s Estate, 312 Pa. supra; Spangenberg Estate, 359 Pa. supra.

Analogous cases confirm our construction.

We start with the general rule reiterated in Cochrane’s Estate, 342 Pa. supra, that, absent any testamentary direction to the contrary, a personal representative is liable for the payment of the Pennsylvania Inheritance tax only upon such assets as pass through his hands. In that case, Chief Justice Schaffer, speaking for a unanimous Court, said (page 112) :

“. . . Who shall pay the tax depends upon who receives the property .... The only tax which is chargeable against the personal representative is that on the assets passing through its hands, which it is required to deduct from each distributive share. For the taw on the other assets of the estate, which do not pass through its hands, the Commonwealth must look to the individuals receiving the property.”

See also to the same effect, Kritz Estate, 387 Pa. 223, 227, 127 A. 2d 720; Hunter’s Pennsylvania Orphans’ Court Commonplace Book, “Inheritance Tax,” Section 10(c); Grossman & Smith’s Pennsylvania Inheritance and Estate Tax, Section 741-1, p. 419.

While precedents are usually of little value in the construction of a will, because the language in every will is almost always slightly or substantially different—Henry Estate, 413 Pa. 478, 198 A. 2d 585; Burleigh Estate, 405 Pa. supra; Newlin Estate, 367 Pa. , 80 A. 2d 819—the will in Horn Estate, 351 Pa. supra, is so very similar to Mrs. Lander’s will that it confirms our interpretation and indeed is a controlling precedent. In Horn Estate, the Court said (pages 135, 136) :

“. . . [Mr. Horn’s will provided] ‘1. I direct the payment of my just debts, the expense of probating my estate, and all inheritance and State taxes, as well as real estate, personal property taxes thereon, and all administration expenses, and all taxes of any character, to be paid out of my estate before the payment of the legacies and bequests and diveses [sic] hereinafter made.’ Appellant contends that the word ‘before’ means ‘prior in time’, and hence the clause merely directs the executors to pay taxes before distribution as they are already required to do under the present law (Act of 1919, P. L. 521, amended by Act of 1923, P. L. 1078, 72 PS 2352; Act of 1937, P. L. 2762, 20 PS 844). Under appellant’s view the effect is the same as though the paragraph had been omitted entirely from the will. Such interpretation is forced and unnatural. A will should be read in the ordinary and grammatical sense of the words employed: Bender v. Bender, 226 Pa. 607, 613, 75 A. 859; Long v. Stout, 305 Pa. 310, 316, 157 A. 607. A construction of a will which renders every word operative is to be preferred to one which makes some words and sentences idle and nugatory: Byrne’s Estate, 320 Pa. 513, 519, 181 A. 500; Calder’s Estate, 343 Pa. 30, 21 A. 2d 907 . . . the obvious meaning is that . . . ‘the testatrix intended and directed that all transfer inheritance taxes and estate taxes upon all legacies and bequests should be paid out of the residuary estate by her executors.’ ”

Pennsylvania Inheritance taxes and Federal Estate taxes are basically very different.

In Pickering Estate, 410 Pa., supra, the Court said (pages 646, 647) : “. . . In Shugars v. Chamberlain Amusements Enterprises, Inc., 284 Pa. 200, supra, the Court said (page 205) : ‘When the Commonwealth adopted an enlarged policy of taxation in 1917, a new class of property or rights was subjected to governmental burdens. Though commonly called a direct inheritance tax, yet, under the Act of 1919, the thing taxed was the right of succession [to] or the privilege of receiving at death the property possessed by a decedent either by will or under the intestate laws.’

“See to the same effect: Wright Estate, 391 Pa. 405, 138 A. 2d 102; Coxe’s Estate, 181 Pa. 369, 37 A. 517; Van Beil’s Estate, 257 Pa. 155, 101 A. 316; Knight’s Estate, 261 Pa. 537, 104 A. 765.

“On the other hand, it is well settled that the Federal Estate tax is not a legacy tax or a succession tax on the privilege of receiving the property possessed by a decedent; instead it is a tax on the privilege of transmission of decedent’s property (i.e., the statutory net estate of the decedent), which is payable out of the estate as a whole: Biggs v. Del Drago, 317 U.S. 95; Helvering v. St. Louis Trust Co., 296 U.S. 39; Chase National Bank v. United States, 278 U.S. 327; Commissioner v. Clise, 122 F. 2d 998; Wright Estate, 391 Pa., supra.

. It is “death duties,” as distinguished from a legacy or succession tax. It does not tax the interest to which the legatees and devisees succeed on death, but the interest which ceased by reason of death; what is imposed is an excise upon the transfer of an estate upon death of the owner, [citing U.S. cases] . . .’ ”

With respect to Federal Estate taxes, the Internal Bevenue Code of 1954, §2002, requires that all taxes which are imposed upon a decedent’s statutory net estate shall be paid by the executor. There is no provision in that Act for apportionment. However, Pennsylvania’s Estate Tax Apportionment Act of August 24, 1951, P. L. 1405, 20 P.S. §881 et seq., as amended, provides for an equitable apportionment of Federal Estate taxes, unless the testator expressly or by clear or necessary implication otherwise directs. Hoffmann Estate, 399 Pa., supra; Stadtfeld Estate, 359 Pa. 147, 58 A. 2d 478.

When testatrix provided that “all my Federal Estate taxes and Pennsylvania Inheritance taxes be fully paid by my Executors,” it is clear that she did not provide or intend one meaning and one plan for payment of Pennsylvania Inheritance taxes and a different meaning, plan and intent with respect to payment of Federal Estate taxes. When, as we have seen, she clearly intended Tier executors and not the survivor of her jointly-owned (extra-testamentary) property to pay the Pennsylvania Inheritance taxes thereon in full, it is unreasonable and under her language impossible to find that she intended the survivor of said jointly-owned property to pay the Federal Estate taxes thereon.

Order reversed, and case remanded for disposition in accordance with this Opinion; costs to be paid by appellee.

Italics throughout, ours.

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Under the Act of June 15, 1961, P. L. 373, §718; Act of July 26, 1963, P. L. 325, §2, 72 PS §2485-718, it is provided, with certain exceptions not here pertinent, that the inheritance tax upon the transfer of property which passes by will and certain other transfers, is payable out of the residuary estate, in the absence of a contrary intent appearing in the will (or in other instruments of transfer).