Matter of Estate of Kirby

498 N.E.2d 64, 1986 Ind. App. LEXIS 3000

• Court: Indiana Court of Appeals
• Decided: October 7, 1986
• Docket: 1-1285A329
• Status: Published

Opinions

ROBERTSON, Presiding Judge.

Raymond Hartman and James Drew, co-personal representatives of the estate of James Theodore Kirby (Kirby) appeal the judgment of the probate court which directs the representatives to pay all estate and inheritance taxes from the probate estate.

We affirm.

Kirby executed his last will and testa ment on August 3, 1988. The will disposed of two parcels of real estate known as the Hart Farm and the Bennett Farm, as well as other real and personal property. To Kirby's son, James Wallace Kirby, and his daughter, Zita May Kirby Shelton, Kirby bequeathed the Hart Farm. Another son, Wasen Cleon Kirby was to receive the Bennett Farm. The real property had been conveyed to the James Theodore Kirby Trust in October 1982. The terms of the Kirby Trust were nearly identical to those of the will, directing that upon Kirby's death, the trustees were to convey the Hart Farm to James Wallace and Zita May, and the Bennett Farm was to be conveyed to Wasen. A codicil executed on October 18, 1983, revoked the gift of the Bennett Farm to Wasen, but no instrument altered the terms of the Kirby Trust. Upon Kirby's death, the trustees of the Kirby Trust conveyed the Hart and Bennett Farms according to the terms of the trust. Those parcels were not inventoried as assets of Kirby's probate estate. The remainder of Kirby's will designated various relatives and friends as legatees of the residuary estate, which was to be divided into five equal parts. The only probate assets were those which passed to the residuary estate.

Drew and Hartman, as co-personal representatives of Kirby's estate, brought a petition to "Construe Will and For Directions in Administration," asking for directions relating to the estate's responsibility for payment of estate and inheritance taxes. After examining the will, the probate court directed the co-personal representatives to pay all taxes out of the probate estate of Kirby, without apportioning the federal estate tax among all the persons receiving property constituting the taxable estate.

The estate appeals, presenting a single issue: whether the testator Kirby provided in his will that federal estate and Indiana inheritance taxes be paid from the residue of Kirby's probate estate?

Federal estate tax is a debt of the estate. Indiana Department of State Revenue v. Estate of Cohen (1982) Ind. App., 486 N.E.2d 8382. Indiana law provides for an equitable apportionment of federal estate tax imposed on a decedent's estate under the federal revenue code at IND.CODE 29-2-12-2 (1982):

Unless a decedent shall otherwise direct by will, the federal estate tax imposed upon decedent's estate, shall be apportioned among all of the persons, heirs and beneficiaries of decedent's estate who receive any property which is includable in the total gross estate of said decedent for the purpose of determining the amount of federal estate tax to be paid by said estate ...

Federal estate taxes due on Kirby's estate must be apportioned among his probate and non-probate assets unless by his will, he directed otherwise. Pleska v. Zakutansky, (1984) Ind. App., 459 N.E.2d 745. The core question presented by this appeal is whether Kirby's will directs that federal taxes be paid out of the residuary estate, thereby rendering 1.C. 29-2-12-2 inapplicable.

In Kirby's will, Item V follows the specific bequests of the Hart and Bennett farms alluded to above, as well as the direction contained in Item IV that the remainder of real and personal property be reduced to cash. The first line of Item V reads:

After the payment of all expenses, taxes, fees, Court costs and bequests, as herein-above set forth, I direct that the balance and residue of my estate be divided into five (5) equal parts.

The probate court found that the first line of Item V is "clear and unambiguous" and provides that the residuary legatees receive their bequests subject to payment of all taxes, including federal estate taxes. We agree with the probate court that Item V is unambiguous, and that the federal estate taxes should not be apportioned.

The estate urges us to consider Pleska v. Zakutansky, supro controlling. In Ples-ka, the court of appeals found that the provision of Pleska's will directing that "all estate and inheritance taxes be paid out of the corpus of [the] estate" created an ambiguity which the court resolved by ascertaining the testator's intent as indicated by other provisions in the will. The court resolved the ambiguity in favor of apportionment. Id. at 749. The Kirby estate's argument that the clause in Pleska was a "more specific provision" than that in Item V is simply unavailing in the face of the unambiguous language contained in Item V of the Kirby will. We likewise see no ambiguity in the phrase "all ... taxes." Certainly Kirby's failure to enumerate the taxes does not render the clause ambiguous.

Similarly, we hold that Kirby's will sufficiently directs that Indiana inheritance tax be paid out of the residuary estate. Generally, the inheritance tax is levied on the distributee's share. Indiana Department of State Revenue, supra. It is generally not paid from the residue of the estate unless the will so directs. Id., at 837. Consistent with our reasoning with respect to federal estate taxes, we hold that Item V of the Kirby will plainly directs that all taxes including Indiana inheritance tax, be paid before the residue is determined and divided.

Judgment affirmed.

NEAL, J., concurs. RATLIFF, J., dissents with separate opinion.