HomeMy WebLinkAbout05-18-07
IN RE: ESTATE OF ETHEL M. BAIRD
Deceased
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
: ORPHANS' COURT DIVISION
: NO. 21-06-132
NOTICE OF AUDITOR'S REPORT AND RECOMMENDATION
AND NOW, this l~day of May, 2007, Notice is hereby given that the Auditor,
William A. Duncan, Esquire, hereby files the attached Auditor's written report and
recommendation regarding the Objections to the First and Final Account filed in the above-
captioned matter. Further Notice is given that the Auditor, William A. Duncan, Esquire, has
filed an application to the Court for approval of Auditor fees rendered in association with the
Auditor's services in this Estate. A copy of the Application is attached hereto.
William A. Duncan, Esquire
Auditor
To:
Thomas E. Flower, Esquire
Saidis, Flower & Lindsay
2109 Market Street
Camp Hill, P A 17011
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Thomas M. Devlin, Esquire
Office of Attorney General
Charitable Trust & Organizations Section
14th Floor, Strawberry Square
Harrisburg, P A 1 7120
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The following is the assessment of the costs of the Auditor:
William A. Duncan, Auditor
1 Irvine Row
Carlisle, PA 17013
Witness my hand and seal this
Date:
12 Y2 hours @ $175.00
Postage
Filing Fee
lOx .39
TOTAL AUDITOR COST
le~ day of
M~
$ 2,187.50
3.90
15.00
$ 2,206.40
, 2007.
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William A. Duncan, Esquire
Auditor
IN RE: ESTATE OF ETHEL M. BAIRD
Deceased
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
: ORPHANS' COURT DIVISION
: NO. 21-06-132
APPEARANCES: Thomas E. Flower, Esquire for the Executrix
Thomas M. Devlin, Esquire for the Attorney General
William A. Duncan, Esquire, Auditor
AUDITOR'S REPORT
William A. Duncan, Esquire, Auditor in the above-captioned matter, files his report as
follows:
Procedural Ristorv
1. Ethel M. Baird (the "Decedent") died testate on December 22, 2005, a resident of
Cumberland County.
2. The Decedent's Will dated November 18,2004, was admitted to probate and letters
Testamentary were granted to Alice J. Hair as Executrix (the "Executrix") , by the Register of
Wills for Cumberland County on February 10,2006.
3. After providing for a number of pre-residuary specific bequests of tangible personal
property and pecuniary legacies totaling Four Thousand Dollars ($4,000.00), the Decedent's will
left the residue of her estate to one charitable and three non-charitable beneficiaries, in specified
percentages: 20% to Grace Evangelical Church and 80% to the non-charitable beneficiaries.
4. Because the Grace Evangelical Church was no longer in existence, the Community
Evangelical Free Church and the Trinity Evangelical Congregational Church executed "Consents
to Compromise in Settlement of Cy Pres Determination of Beneficiary of Ambiguous Bequests"
agreeing to equally split the 20% residuary bequest to Grace Evangelical Church.
5. Item Fifth of Decedent's Will includes the following direction for the payment of
taxes:
"I direct that any and all inheritance, estate, and transfer taxes imposed upon my
estate passing under this Will or otherwise shall be paid out of the principal of my
residuary estate."
6. On or about August 9, 2006, the Executrix, filed a First and Final Account of the
Estate (the "Account") for the period from December 22, 2005 through August 8, 2006.
7. The Executrix proposed to pay the inheritance tax from the distributable residue of the
estate, prior to dividing the residue into shares of the specified percentages, with the following
"Explanatory Note" appended to her Account:
"Inheritance tax is proposed to be deducted prior to distribution of the residue
according to the specified percentages, pursuant to the following "pay-tax clause"
at Item Fifth of the decedent's will:
'I direct that any and all inheritance, estate and transfer taxes imposed
upon my estate passing under this Will or otherwise shall be paid out of the
principal of my residuary estate.'
"As stated by Justice Roberts in Estate of Ereig, 439 Pa. 550, 558, 267
A2d 841, 846 (Pa. 1970):
'In North Estate, 50 Pa. Dist & Co. 703 (1944), the 'pay tax' clause was
a good deal more explicit than ['all taxes shall be paid from my residuary estate'],
stating that the estate taxes were to be paid out of the corpus or principal of my
residuary estate,' obviously indicating that the taxes were to be paid before
distribution of the residuary.'"
8. The Account showed a residue of$90,345.53 after payment of Inheritance Taxes. The
amount proposed to be distributed to each of the two Churches pursuant to the Account was
$9,034.56 to each Church, representing a 20% share of$18,069.12.
9. The total Inheritance Tax paid as shown in the Account was $11,271.89, of which
$646.28 was attributable to pre-residuary bequests and paid before calculation of the residue.
10. The Attorney General filed Objections to the Account on or about August 21,2006.
The Attorney General object to the Executrix's proposed apportionment of Inheritance Tax to the
charitable residuary beneficiaries as follows:
"As a matter of law in the absence of specific language allocating the
Inheritance Taxes to all the residual beneficiaries including the charities, the
charitable percentage of bequest should be taken against the net value of the
estate after adding back the Inheritance Taxes. See, In re Estate of Pyle, 391
Pa. Super. 244, 570 A.2d 1074 (1990).
11. On or about October 10, 2006, William A. Duncan, Esquire was appointed Auditor
in the above-captioned action pursuant to Orphan's Court Rule 8.1 et. seq. The Auditor was
directed to investigate all issues related to the objections raised by the Attorney General and to
report findings of fact, conclusions of law and recommendations to the Court with respect to the
Objections William A. Duncan, Esquire accepted the appointment and received the file on or
about October 10, 2006. A copy of the Appointment of Auditor and Order of Court is attached
hereto as Exhibit" A ".
12. On or about January 9,2007, the Auditor was granted a continuance of the Audit until
May 23, 2007. A copy of the Continuance is attached hereto as Exhibit" B ".
13. The parties submitted Stipulations which are hereby entered into the Record and
attached hereto as Exhibit "C".
14. The Auditor received requested Briefs, Proposed Findings of Fact and Conclusions
of Law as to the issue raised by the Objector in this matter.
15. The Auditor files this report with the Orphans Court on this _ day of May, 2007,
together with Notice of Filing attached hereto as Exhibit" D ".
16. The Auditors costs are specified in a Bill of Costs elsewhere in this report.
Findin&s of Fact
17. The Parties hereto agreed to Stipulations of Fact, including a copy of the Will of
Ethel M. Baird which is incorporated herein by reference and attached hereto as Exhibit" E"
Statement of Issue
Whether the Testatrix's direction that the inheritance tax "shall be paid out of the
principal of my residuary estate" is sufficiently clear to overcome the statutory presumption that
residual beneficiaries are responsible for their own taxes and charitable residuary beneficiaries
are exempt from tax.
Discussion
The Attorney General relies on Estate of Pyle, 391 Pa. Super. 244, 570 A.2d 1074 (1990)
in its assertion that unless contrary intent appears [emphasis added], the taxes are to be paid
from the residuary estate. In Pyle the Court determined that the language of the Will did not
sufficiently express a "contrary intent" sufficient to overcome the statutory provision expressed
in 72 Pa.C.S.A. section 1744 which provides for the payment of inheritance tax prorata so that a
charity would bear no share of the tax on the non-charitable shares of the residuary.
The Executrix relies chiefly on In Audenreid' s Estate, 376 Pa. 31, 101 A.2d 721 CPa.
1954) which finds the charities arguing that proration is mandatory unless the will espresses a
contrary intent. The Audenreid court found the language sufficient to overcome the statutory
default, relying on North's Estate, 50 Pa. Dist. & Co. R. 703, 705.
It would appear that all parties rely on the language contained in the will to determine the
outcome of the question of whether the taxes should be paid out of the corpus or principal of the
residuary estate, prior to distribution to the residual heirs. Let us therefore examine the language
of the wills under discussion:
I direct that all estate and inheritance taxes on any property passing
under this Will or by reason of my death shall be paid out of the
residuary portion of my estate and that no beneficiary of mine
shall be called upon or required to reimburse my Executors.
Pyle at 244, 570 A.2d at 1074
I direct that all estate, inheritance, succession or similar taxes on
all legacies herein contained in my Will shall be paid from my
residuary estate and be charged to principal thereof.
Audenried at 31, 101 A.2d at 721.
I direct that any and all inheritance, estate and transfer taxes
imposed upon my estate passing under this Will or otherwise
shall be paid out of the principal of my residuary estate.
Paragraph Fifth, Will of Ethel M. Baird
Upon examination of the above paragraphs, it would seem apparent that the Baird
language mirrors that of Audenried more closely than that ~f Pyle in that the taxes are to be paid
out of the principal of the residuary estate.
The Auditor therefore declines to adopt the Pyle outcome, the outcome advocated by the
Attorney General, with regard to this case. From examination of the four comers of the
decedent's Will, the conclusion should be drawn that the language is sufficient to find that the
charitable residuary legatee should not be favored over the other residual beneficiaries. To find
otherwise would be a defeat of the testatrix's intent as to the relative sums due to each of the
residual objects of her bounty.
Recommendation
After due consideration of the filings of the parties, including the Account, Proposed
Distribution, Objections to same, Stipulations and Briefs of the parties and cited and relevant
legal authorities, the Auditor finds as follows
The Attorney General's objection is denied and The First and Final Account for the
Estate of Ethel M. Baird filed on August 9,2006 is confirmed in all respects. Distribution of the
residuary shall be made out of the principal remaining after payment of inheritance taxes,
auditor's fees and costs of audit, without any differentiation between charitable and non-
charitable beneficiaries as follows:
Community Evangelical Free Church
12 Y2% of residual estate
Trinity Evangelical Congregational Church 12 Y2% of residual estate
J oni Sheaffer
25% of residual estate
T eri Doyle
25% of residual estate
Alice Hair
250/0 of residual estate
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William A. Duncan, Esquire
Auditor
ESTATE OF ETHEL M. BAIRD,
Deceased
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
No. 21-06-0132
IN RE:
ORDER OF COURT
IN RE: APPOINTMENT OF AUDITOR
AND NOW, this 10th day of October, 2006, upon
consideration of the Objection to the First and Final Accounting
of Alice J. Hair, Executrix of the Estate of Ethel M. Baird and
appointed auditor.
to its Counsel, Thomas E. Flower, William A. Duncan, Esquire is
By the Court,
J.
~il 'am A. Duncan, Esquire
Irvine Roe
Carlisle, PA 17013
Auditor
Thomas E. Flower, Esquire
Saidis, Flower & Lindsay
2109 Market Street
Camp Hill, PA 17011
Community Evangelical Free Church
4501 Franklin Street
Harrisburg, PA 17111
Trinity Evangelical Congregational Church
165 N. 67th Street
Harrisburg, PA 17111
Thomas M. Devlin, Esquire
Office of Attorney General
Charitable Trust & Organizations Section
14th Floor, Strawberry Square
Harrisburg, PA 17120
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A TRUE COpy FROM RECORD
In Testimony wherof. , hereunto
set !llY hand and the seal
of said Court at Carlisle PA
ThiS~ay of ~hr~~
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IN RE:
ESTATE OF ETHEL M. BAIRD
AND NOW, this q-fl->
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: IN THE COURT OF COMMON PLEAS
: CUMBERLAND COUNTY, PENNSYLVANIA
: ORPHAN'S COURT DIVISION
: NO. 21-06-0132
ORDER
day of January, 2007, upon consideration of the Petition of
William A. Duncan, Esquire, Auditor, an extension of time is granted for filing of the Auditor's
Report. The Auditor's Report shall be filed on or before May 23, 2007. Compensation for the
Auditor is hereby set at the rate of$175.00 per hour payable by the Estate of Ethel M. Baird.
A TAUECOPY FROM RECORD
In T est;mony wherof J I hereunto
set my hand and the seal
of said Court at Carlisle, PA
Jhis~YO o.Q11
BY THE COURT,
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IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY,
PENNSYLVANIA
IN RE:
ORPHAN'S COURT DIVISION
Estate of Ethel M. Baird, Deceased
Case No. 21-06-132
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STIPULATION OF FACTS
1. Ethel M Baird (the "Decedent") died testate on December 22, 2005, a resident of
Cumberland County.
2. The Decedent's Will dated NovemlJer 18, 2004, was admitted to probate ap.d
Letters Testamentary were -granted: to'Alice,J.'Hair ,'as 'Bxectltrlx'{the ~4Executrix"), by the
Register of Wills for Cumberland County on February 10,2006. '
3. After providing for a number of pre-residuary specific bequests of tangible
personal property and pecuniary legacies totaling Four Thousand Dollars ($4,000), the
Decedent's will left the residue of her estate to one charitable and three non-charitable
beneficiaries, in specified percentages: 20% to Grace Evangelical Church and'80% to the non-
charitable beneficiaries.
4. Because the Grace Evangelical Church was no longer in existence, the
Community Evangelical Fre,e Church and the Trinity Evangelical Congregational Church
executed "Consents to Compromise in Settlement of Cy Pres Determination of Beneficiary of
Ambiguous Bequests" agreeing to equally split the 20% residuary bequest to Grace Evangelical
Church.
5. Item First of Decedent's Will includes the following direction for the payment of
taxes:
"I direct that any and all inheritance, estate, and transfer taxes imposed upon my
estate passing under this Will or otherwise shall be paid out of the principal of my
. residuary estate."
6. On or about August 9, 2006, the Executrix filed a First and Final Account of the
Estate (the "Account") for the period from December 22, 2005, through August 8, 2006.
7. The Executr1x proposed to pay the inheritance tax from the distributable residue
of the estate, prior to dividing the residue into shares of the specified percentages, with the
following "Explanatory Note" appended to her Account:
"~eritance tax is proposed. to, be deducted prior to distribution of the
~esidue accqrding to the sp'ecified percentages, pursuant to:the:following "pay-tax
clause" at Item Fifth of the decedent's will:
'I direct that any and all inheritance, estate and transfer taxes imposed
upon my estate passing under this Will or otherwise shall be paid out of the
principal of my residuary estate.'
"As stated by Justice Roberts in Estate of Ereig, 439 Pa. 550, 558, 267
A.2d 841, 846 (pa. 1970):
--~-----liiNorthEstate, 50 Pa.Dist. & Co. 703 (1944), the 'pay tax' clause was a
good deal more explicit than ['all taxes shall be paid from my residuary estate'], -
stating that the estate taxes were to be paid 'out of the corpus or principal of my
residuary estate,' obviously indicating that the taxes were to be paid before
distribution of the residuary. '"
6. The Account showed a residue of $90,345.53 after payment of Inheritance Taxes.-
The amount proposed to be distributed to each of the two Churches pursuant to the Account was
$9,034.56 to each Church, representing a 20% share or $18,069.12.
7. The total Inheritance Tax paid as shown in the Account is $11,271.89, of which
$646.28 was attributable to preresiduary bequests and properly paid before calculation of the
residue.
8. The Attorney General filed Objections to the Account on or about August 21,
2006. The Attorney General objected to the Executrix's proposed apportionment of Inheritance
Tax to the charitable residuary beneficiaries, as follows:
"As a matter of law in the absence of specific language allocating the
Inheritance Taxes to all the residual beneficiaries including the charities, the
charitable percentage of bequest should be taken against the net value of the estate
after adding back the Inheritance Taxes. See, In re Estate of Pyle, 391 Pa. Super.
244, 570 A.2d 1074 (1990).
9. If the Attorney General's objections are sustained, the Inheritance Tax
attributable to the residual beneficiaries would be added to the balance for distribution
prior to calculation of the 20% charitable share of the residue, as follows:
$90,345.53 + (Balance after payment of Specific Bequests)
$10.625.61 (Inheritance Tax on non-charitable residual beneficiaries' shares)
$100,971.14 x 200/0 = $20,194.22 or $10,097.11 to each Church
Respectfully Submitted:
Respectfully Submitted:
By:
~~
THOMAS E. FLOWER, ESQUIRE
Pa. Attorney I.D. No. 83993
THOMAS W. CORBETT, JR.
Attorney General
SAIDIS, FLOWER & LINDSAY
March t3 , 2007
By: ,~-
NE BOOK COLES
- Duty Attorney General
a. Attorney LD. No. 82028
Office of Attorney General
Charitable Trusts & Organizations Section
Strawberry Square, 14th Floor
Harrisburg, Pennsylvania 17120
717-783-2853
March J!:l, 2007
2109 Market Street
Camp Hill, PA 17011
717-737-3405
IN RE: ESTATE OF ETHEL M. BAIRD
Deceased
: IN THE COURT OF COMMON PLEAS OF
: CUMBERLAND COUNTY, PENNSYLVANIA
: ORPHANS' COURT DIVISION
: NO. 21-06-132
NOTICE OF AUDITOR'S REPORT AND RECOMMENDATION
AND NOW, this
day of May, 2007, Notice is hereby given that the Auditor,
William C. Duncan, Esquire, hereby files the attached Auditor's written report and
recommendation regarding the Objections to the First and Final Account filed in the above-
captioned matter. Further Notice is given that the Auditor, William C. Duncan, Esquire, has
filed an application to the Court for approval of Auditor fees rendered in association with the
Auditor's hearing in this Estate. A copy of the Application is attached hereto.
William A. Duncan, Esquire
Auditor
To:
Thomas E. Flower, Esquire
Saidis, Flower & Lindsay
2109 Market Street
Camp Hill, PA 17011
Community Evangelical Free Church
4501 Franklin Street
Harrisburg, P A 17111
Thomas M. Devlin, Esquire
Office of Attorney General
Charitable Trust & Organizations Section
14th Floor, Strawberry Square
Harrisburg, P A 17120
Trinity Evangelical Congregational Church
165 N. 67th Street
Harrisburg, P A 17111