Suffolk. Civil action commenced in the Probate Court for the county of Suffolk on July 12, 1976. The case was reported to the Appeals Court by Yasi, J. The Supreme Judicial Court granted a request for direct review. The case was submitted on a brief.
Hennessey, C.j., Quirico, Kaplan, Wilkins, & Abrams, JJ. Quirico, J., Dissenting.
Trust, Taxation, Marital deduction trust. Devise and Legacy, Marital trust.
The opinion of the court was delivered by: Hennessey
A testator's expression of intent to obtain the maximum marital deduction necessarily implied an intent to preserve the deduction unreduced by the amount of Federal estate tax and Massachusetts inheritance tax which might otherwise be allocated to the marital trust property [124-125]; Quirico, J., Dissenting on the ground that the only real adversary in the controversy, the Internal Revenue Service, was not before the court [125-126].
On July 12, 1976, the executor of the estate of Leon W. Crockett (Crockett) commenced this action for declaratory judgment in the Probate Court for Suffolk County under G. L. c. 231A. By this action, the plaintiff sought a determination of Crockett's intent with respect to certain provisions of his will effecting the allowable amount of the Federal estate tax marital deduction. The defendants included the trustee named under the will, and all of the named beneficiaries. Additionally, a Judge of the Probate Court appointed a guardian ad litem to represent possible interested parties who were not presently ascertained or not in being. *fn1 The parties submitted a statement of agreed facts, and, after a hearing, the Judge reserved and reported the case for consideration by the Appeals Court. We granted direct appellate review.
The issue presented for our determination arises as follows. By the terms of Article Eighth, paragraph 1 of the will, Crockett directed his trustee "to appropriate a portion of estate to form a separate trust the value of which shall be exactly the sum necessary to obtain the maximum marital deduction in determining the Federal Estate Tax on my estate . . . ." *fn2 The instrument is silent, however, with respect to the apportionment of the taxes and expenses among the assets passing under the will. As a result, and because no provision in the will explicitly directs to the contrary, the Internal Revenue Service (I.R.S.) has reduced the amount of the marital deduction by the amount of Federal and State taxes said to be allocable to the marital trust property.
We are asked to determine, therefore, whether, as a matter of State law, Crockett intended to take full advantage of the marital deduction, and, if so, whether allocating a proportionate share of taxes and expenses to the trust property is consistent with that intent.
For the reasons discussed below, we conclude that, in Article Eighth, Crockett clearly expressed an intent to obtain the maximum allowable marital deduction. As we pointed out in Putnam v. Putnam, 366 Mass. 261, 268 (1974), this specific, articulated tax objective would be frustrated if we were also to attribute to the testator an intent to reduce the marital trust property by assigning it any obligation to contribute to taxes and expenses. We decide that Crockett's expression of intent to obtain the maximum marital deduction necessarily implies an intent to preserve the deduction unreduced by the amount of Federal estate tax and Massachusetts inheritance tax which might otherwise be allocated to the marital trust property.
We summarize the pertinent facts. On October 4, 1973, Leon W. Crockett died leaving a will and first codicil which were admitted to probate on November 20, 1973. *fn3 On or about July 5, 1974, and prior to our decision in Putnam v. Putnam, supra, the executor filed a Federal estate tax return which did not claim the maximum marital deduction. In this return, the executor, following then current I.R.S. practice, reduced the marital deduction by allocating a portion of Federal estate taxes and Massachusetts inheritance taxes to the marital trust property. *fn4
Prior to the I.R.S. audit, and subsequent to our ruling in Putnam, the executor recomputed the Federal estate tax to reflect the maximum marital deduction. The I.R.S. was notified of these adjustments by letter.
By an examination report dated September 4, 1975, an I.R.S. examiner determined that the Putnam decision did not apply here, and advised the executor of his determination to disallow in part the marital deduction. Additionally, the examiner changed the total amount of taxes allocated to the marital trust from $31,211.36 to $29,832.41, giving no explanation for this change and no breakdown between Federal and State taxes allocated to the marital trust property. As a result of these determinations, the examiner rejected the executor's claim of a tax overassessment in the amount of $8,573, and computed an overassessment of $398.45.
The executor filed a protest to this report and requested consideration by the Appellate Division of the Office of the Regional Commissioner of Interal Revenue. We are advised that the Appellate Division decided against the executor, and determined that the case of Putnam v. Putnam, supra, is limited to its facts.
1. In Putnam v. Putnam, 366 Mass. 261 (1974), this court resolved a question of testamentary intent where various provisions in a will clearly stated a desire to take full advantage of the allowable marital deduction, while one provision directed that certain inheritance taxes be paid from the marital trust property. In addition to considering extraneous evidence to resolve the ambiguity, we stated that "he accomplishment of identifiable tax objectives may be an aid to the interpretation of a will . . . [. T]o the extent it is reasonably consistent with the language of the will and applicable legal principles, effect should be given to that intention (citation omitted)." Id. at 268. Reading the will as a whole, we concluded in Putnam that the testator had expressed an intent to take full advantage of the marital deduction. Thus, notwithstanding an express provision in the will to the contrary, we decided ...