In re Estate of Nicholas, 33 N.Y.2d 174 (1973)
When a will and codicil are construed together, a clear direction in the will against tax apportionment, specifically referenced in the codicil when substituting a beneficiary, demonstrates the testator’s intent to exempt the substituted gift from estate taxes, to be borne by the residuary estate.
Summary
This case concerns the interpretation of a will and codicil to determine whether a tax apportionment clause in the original will applied to a substituted beneficiary named in the codicil. The testatrix’s will directed that estate taxes on specific bequests be paid out of the residuary estate. A codicil substituted a new beneficiary for one who predeceased the testatrix, referencing the articles of the will containing the original bequest and tax apportionment clause. The New York Court of Appeals held that the codicil’s explicit reference to the tax apportionment clause demonstrated the testatrix’s intent that the substituted bequest also be exempt from taxes, with the taxes to be paid from the residuary estate.
Facts
Virginia T. Nicholas (testatrix) executed a will on June 10, 1965, which included bequests to Thomas J. Lynch. Article twenty-fifth of the will directed the executors to pay all transfer, inheritance, and estate taxes on these bequests from the residuary estate. The residuary estate was bequeathed to New York Protestant Episcopal City Mission Society and Federation of Protestant Welfare Agencies, Inc. Subsequently, on July 29, 1965, the testatrix executed a codicil. This codicil stipulated that if Thomas J. Lynch predeceased her, his sister, Helen L. Murphy, would receive the bequests originally intended for him. The codicil specifically referenced the articles of the will containing bequests to Lynch, including Article twenty-fifth (the tax clause), and then reaffirmed the will, as modified by the codicil.
Procedural History
The proceeding began in the Surrogate’s Court, New York County, to construe the will and codicil regarding the tax apportionment clause. The Surrogate’s Court ruled against apportionment, finding that the tax clause applied to the substituted beneficiary. The Appellate Division affirmed this decision. The case then went to the New York Court of Appeals.
Issue(s)
Whether the testatrix’s will and codicil contain a clear and unambiguous direction against apportionment of taxes for the substituted bequest, as permitted by section 2-1.8 of the Estates, Powers and Trusts Law.
Holding
Yes, because the codicil explicitly referenced the tax apportionment clause (Article twenty-fifth) of the original will when substituting Helen L. Murphy as the beneficiary. This unequivocally demonstrated the testatrix’s intent to exempt the substituted gift from estate taxes, requiring the residuary estate to bear the tax burden.
Court’s Reasoning
The court emphasized that a will and codicil are to be construed together as if both were executed simultaneously, absent a contrary intention. The codicil did not create a new bequest but rather provided a substitute for the original bequest. By explicitly referring to Article twenty-fifth (the tax apportionment clause) when substituting Helen L. Murphy for Thomas J. Lynch, the testatrix manifested a clear intent that the substituted bequest also be tax-free. The court stated that the inclusion of Article twenty-fifth “unequivocally demonstrates the testatrix’ intent to exempt the gift from tax.” The court found that to construe the will as requiring apportionment would contradict the obvious and specific intent of the testatrix as revealed through the direct reference to Article twenty-fifth in the codicil. The court determined that the statutory formula for tax apportionment did not apply because the testatrix provided explicit direction otherwise in the will and codicil.