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S1246................................................by JUDICIARY AND RULES
UNIFORM ESTATE TAX APPORTIONMENT ACT - Adds to existing law to adopt the
Uniform Estate Tax Apportionment Act; to define terms; to specify the rules
applicable to the apportionment by will or other dispositive instrument; to
specify statutory rules applicable when there is no controlling instrument;
to specify the rules applicable to credits and deferrals of estate taxes;
to specify conditions for advancement of tax for uninsulated property; to
provide an initial apportionment and recapture of special elective
benefits; to authorize securing payment of estate tax from property in
possession of a fiduciary; to authorize collection of estate tax by a
fiduciary; to govern the right of reimbursement; to authorize an action to
determine or enforce the provisions of this chapter; to provide uniformity
of application and construction; to provide severability; and to provide
delayed application.
01/29 Senate intro - 1st rdg - to printing
01/30 Rpt prt - to Jud
02/12 Rpt out - rec d/p - to 2nd rdg
02/13 2nd rdg - to 3rd rdg
02/19 3rd rdg - PASSED - 33-0-2
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Calabretta, Cameron, Compton, Davis, Gannon, Geddes, Goedde, Hill,
Ingram, Keough, Little, Lodge, Malepeai, Marley, McKenzie,
McWilliams, Noble, Noh, Pearce, Richardson, Schroeder, Sorensen,
Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- Darrington, Kennedy
Floor Sponsor - Marley
Title apvd - to House
02/20 House intro - 1st rdg - to Rev/Tax
02/23 Rpt out - Ref'd to Jud
03/02 Rpt out - rec d/p - to 2nd rdg
03/03 2nd rdg - to 3rd rdg
03/08 3rd rdg - PASSED - 65-3-2
AYES -- Andersen, Barraclough, Bauer, Bayer, Bedke, Bell, Black,
Block, Boe, Bolz, Bradford, Campbell, Cannon, Collins, Crow, Cuddy,
Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth, Eskridge,
Field(18), Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet,
Kellogg, Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin,
McKague, Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen,
Pasley-Stuart, Raybould, Ridinger, Ring, Ringo, Roberts, Robison,
Rydalch, Sali, Sayler, Schaefer, Shirley, Skippen, Smith(30),
Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Mr. Speaker
NAYS -- Barrett, Clark, Wood
Absent and excused -- Jones, Shepherd
Floor Sponsor - Ellsworth
Title apvd - to Senate
03/09 To enrol
03/10 Rpt enrol - Pres signed
03/11 Sp signed
03/12 To Governor
03/16 Governor signed
Session Law Chapter 54
Effective: 07/01/04
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE SENATE
SENATE BILL NO. 1246
BY JUDICIARY AND RULES COMMITTEE
1 AN ACT
2 RELATING TO APPORTIONMENT OF ESTATE TAX; REPEALING SECTION 15-3-916, IDAHO
3 CODE; AMENDING CHAPTER 3, TITLE 15, IDAHO CODE, BY THE ADDITION OF A NEW
4 PART 13, CHAPTER 3, TITLE 15, IDAHO CODE, TO PROVIDE ADOPTION OF THE UNI-
5 FORM ESTATE TAX APPORTIONMENT ACT, TO PROVIDE A SHORT TITLE, TO DEFINE
6 TERMS, TO SPECIFY THE RULES APPLICABLE TO THE APPORTIONMENT BY WILL OR
7 OTHER DISPOSITIVE INSTRUMENT, TO SPECIFY STATUTORY RULES APPLICABLE WHEN
8 THERE IS NO CONTROLLING INSTRUMENT, TO SPECIFY THE RULES APPLICABLE TO
9 CREDITS AND DEFERRALS OF ESTATE TAXES, TO SPECIFY CONDITIONS FOR ADVANCE-
10 MENT OF TAX FOR UNINSULATED PROPERTY, TO PROVIDE AN INITIAL APPORTIONMENT
11 AND RECAPTURE OF SPECIAL ELECTIVE BENEFITS, TO AUTHORIZE SECURING PAYMENT
12 OF ESTATE TAX FROM PROPERTY IN POSSESSION OF A FIDUCIARY, TO AUTHORIZE
13 COLLECTION OF ESTATE TAX BY A FIDUCIARY, TO GOVERN THE RIGHT OF REIMBURSE-
14 MENT, TO AUTHORIZE AN ACTION TO DETERMINE OR ENFORCE THE PROVISIONS OF
15 THIS ACT, TO PROVIDE UNIFORMITY OF APPLICATION AND CONSTRUCTION, TO PRO-
16 VIDE SEVERABILITY, AND TO PROVIDE DELAYED APPLICATION.
17 Be It Enacted by the Legislature of the State of Idaho:
18 SECTION 1. That Section 15-3-916, Idaho Code, be, and the same is hereby
19 repealed.
20 SECTION 2. That Title 15, Chapter 3, Idaho Code, be, and the same is
21 hereby amended by the addition thereto of a NEW PART, to be known and desig-
22 nated as Part 13, Chapter 3, Title 15, Idaho Code, and to read as follows:
23 PART 13
24 UNIFORM ESTATE TAX APPORTIONMENT
25 15-3-1301. SHORT TITLE. This part may be cited as the "Uniform Estate Tax
26 Apportionment Act."
27 15-3-1302. DEFINITIONS. As use in this part:
28 (a) "Apportionable estate" means the value of the gross estate as finally
29 determined for purposes of the estate tax to be apportioned reduced by:
30 (1) Any claim or expense allowable as a deduction for purposes of the
31 tax;
32 (2) The value of any interest in property that, for purposes of the tax,
33 qualifies for a marital or charitable deduction or otherwise is deductible
34 or is exempt; and
35 (3) Any amount added to the decedent's gross estate because of a gift tax
36 on transfers made before death.
37 (b) "Estate tax" means a federal, state, or foreign tax, however
38 denominated, imposed because of the death of an individual and interest and
39 penalties associated with the tax. The term does not include an inheritance
40 tax, income tax, or generation-skipping transfer tax other than a generation-
2
1 skipping transfer tax incurred on a direct skip taking effect at death.
2 (c) "Gross estate" means, with respect to an estate tax, all interests in
3 property subject to the tax.
4 (d) "Person" has the same meaning set forth in section 15-1-201(33),
5 Idaho Code.
6 (e) "Ratable" means apportioned or allocated pro rata according to the
7 relative values of interests to which the term is to be applied. "Ratably" has
8 a corresponding meaning.
9 (f) "Time-limited interest" means an interest in property which termi-
10 nates on a lapse of time or on the occurrence or nonoccurrence of an event or
11 which is subject to the exercise of discretion that could transfer a benefi-
12 cial interest to another person. The term does not include a cotenancy unless
13 the cotenancy itself is a time-limited interest.
14 (g) "Value" means, with respect to an interest in property, fair market
15 value as finally determined for purposes of the estate tax that is to be
16 apportioned, reduced by any outstanding debt secured by the interest without
17 reduction:
18 (1) For taxes paid or required to be paid; or
19 (2) For any special valuation adjustment.
20 15-3-1303. APPORTIONMENT BY WILL OR OTHER DISPOSITIVE INSTRUMENT. (a)
21 Except as otherwise provided in subsection (c), the following rules apply:
22 (1) To the extent that a provision of a decedent's will expressly and
23 unambiguously directs the apportionment of an estate tax, the tax must be
24 apportioned accordingly regardless of whether such will is probated.
25 (2) Any portion of an estate tax not apportioned pursuant to paragraph
26 (a)(1) of this section must be apportioned in accordance with any provi-
27 sion of a revocable trust of which the decedent was the settlor which
28 expressly and unambiguously directs the apportionment of an estate tax. If
29 conflicting apportionment provisions appear in two (2) or more revocable
30 trust instruments, the provision in the most recently dated instrument
31 prevails. For purposes of this paragraph:
32 (A) A trust is revocable if it was revocable immediately after the
33 trust instrument was executed, even if the trust subsequently becomes
34 irrevocable; and
35 (B) The date of an amendment to a revocable trust instrument is the
36 date of the amended instrument only if the amendment contains an
37 apportionment provision.
38 (3) If any portion of an estate tax is not apportioned pursuant to para-
39 graph (a)(1) of this section or paragraph (a)(2) of this section, and a
40 provision in any other dispositive instrument expressly and unambiguously
41 directs that any interest in the property disposed of by the instrument is
42 or is not to be applied to the payment of the estate tax attributable to
43 the interest disposed of by the instrument, the provision controls the
44 apportionment of the tax to that interest.
45 (b) Subject to subsection (c) of this section, and unless the decedent
46 expressly and unambiguously directs the contrary, the following rules apply:
47 (1) If an apportionment provision directs that a person receiving an
48 interest in property under an instrument is to be exonerated from the
49 responsibility to pay an estate tax that would otherwise be apportioned to
50 the interest,
51 (A) The tax attributable to the exonerated interest must be appor-
52 tioned among the other persons receiving interests passing under the
53 instrument, or
54 (B) If the values of the other interests are less than the tax
3
1 attributable to the exonerated interest, the deficiency must be
2 apportioned ratably among the other persons receiving interests in
3 the apportionable estate that are not exonerated from apportionment
4 of the tax.
5 (2) If an apportionment provision directs that an estate tax is to be
6 apportioned to an interest in property a portion of which qualifies for a
7 marital or charitable deduction, the estate tax must first be apportioned
8 ratably among the holders of the portion that does not qualify for a mari-
9 tal or charitable deduction and then apportioned ratably among the holders
10 of the deductible portion to the extent that the value of the nondeduct-
11 ible portion is insufficient.
12 (3) Except as otherwise provided in paragraph (4) of this subsection, if
13 an apportionment provision directs that an estate tax be apportioned to
14 property in which one (1) or more time-limited interests exist, other than
15 interests in specified property under section 15-3-1307, Idaho Code, the
16 tax must be apportioned to the principal of that property, regardless of
17 the deductibility of some of the interests in that property.
18 (4) If an apportionment provision directs that an estate tax is to be
19 apportioned to the holders of interests in property in which one (1) or
20 more time-limited interests exist and a charity has an interest that
21 otherwise qualifies for an estate tax charitable deduction, the tax must
22 first be apportioned, to the extent feasible, to interests in property
23 that have not been distributed to the persons entitled to receive the
24 interests.
25 (c) A provision that apportions an estate tax is ineffective to the
26 extent that it increases the tax apportioned to a person having an interest in
27 the gross estate over which the decedent had no power to transfer immediately
28 before the decedent executed the instrument in which the apportionment direc-
29 tion was made. For purposes of this subsection, a testamentary power of
30 appointment is a power to transfer the property that is subject to the power.
31 (d) For purposes of this section, a decedent's will, revocable trust, or
32 other dispositive instrument that contains the applicable phrase(s) set forth
33 in paragraphs (1), (2) or (3) of this subsection (or other substantially simi-
34 lar language in other dispositive instruments not listed in said paragraphs),
35 shall satisfy the part's requirement for an express and unambiguous direction
36 as to what properties are to bear or not bear the payment of those taxes.
37 Other language may be used to direct the apportionment of the estate tax, but
38 if it is determined by a court that the direction in the will, trust, or other
39 dispositive instrument does not expressly and unambiguously direct the appor-
40 tionment of all of the estate tax with respect to all property that consti-
41 tutes the gross estate, the estate tax that is not clearly and unambiguously
42 apportioned shall be apportioned in accordance with the provisions of this
43 part. The portions of said phrase(s) set forth in parentheses indicate sug-
44 gestions or descriptions of alternate language for the word or phrase immedi-
45 ately preceding the language in parentheses which may be added, deleted, or
46 varied in the instrument. Said phrases are:
47 (1) In the case of a will, "all taxes arising as a result of my death,
48 whether attributable to assets passing under this will or otherwise, shall
49 be paid out of the residue of my probate estate (or apportioned to other
50 specifically identified assets, probate or otherwise)"; or
51 (2) In the case of a revocable trust, "all taxes arising as a result of
52 the Grantor's (Settlor's or Trustor's) death, whether attributable to
53 assets passing under this trust instrument or otherwise, shall be paid out
54 of the residue of the trust estate (or apportioned to other specifically
55 identified assets in trust or otherwise)"; or
4
1 (3) In the case of a charitable remainder trust as to assets already
2 transferred to or in the trust, "no estate taxes and state death taxes
3 shall be charged or apportioned to and paid from the assets of this chari-
4 table remainder trust" or "The (lifetime or term) annuity (unitrust)
5 interest of the Successor Recipient (Beneficiary) will take effect upon
6 the death of the Initial Recipient (Beneficiary) only if the Successor
7 Recipient (Beneficiary) furnishes the funds for payment of any federal
8 estate taxes and state death taxes for which the Trustee may be liable
9 upon the death of the Initial Recipient (Beneficiary). If the funds are
10 not furnished by the Successor Recipient (Beneficiary), the annuity
11 (unitrust) period shall terminate on the death of the Initial Recipient
12 (Beneficiary), notwithstanding any other provision in this instrument to
13 the contrary."
14 15-3-1304. STATUTORY APPORTIONMENT OF ESTATE TAXES. To the extent that
15 apportionment of an estate tax is not controlled by an instrument described in
16 section 15-3-1303, Idaho Code, and except as otherwise provided in sections
17 15-3-1306 and 15-3-1307, Idaho Code, the following rules apply:
18 (1) Subject to subsections (2), (3) and (4) of this section, the estate
19 tax is apportioned ratably to each person that has an interest in the appor-
20 tionable estate.
21 (2) A generation-skipping transfer tax incurred on a direct skip taking
22 effect at death is charged to the person to whom the interest in property is
23 transferred.
24 (3) If property is included in the decedent's gross estate because of
25 section 2044 of the Internal Revenue Code of 1986 or any similar estate tax
26 provision, the difference between the total estate tax for which the
27 decedent's estate is liable and the amount of estate tax for which the
28 decedent's estate would have been liable if the property had not been included
29 in the decedent's gross estate is apportioned ratably among the holders of
30 interests in the property. The balance of the tax, if any, is apportioned rat-
31 ably to each other person having an interest in the apportionable estate.
32 (4) Except as otherwise provided in section 15-3-1303(b)(4), Idaho Code,
33 and except as to property to which section 15-3-1307, Idaho Code applies, an
34 estate tax apportioned to persons holding interests in property subject to a
35 time-limited interest must be apportioned, without further apportionment, to
36 the principal of that property.
37 15-3-1305. CREDITS AND DEFERRALS. Except as otherwise provided in sec-
38 tions 15-3-1306 and 15-3-1307, Idaho Code, the following rules apply to cre-
39 dits and deferrals of estate taxes:
40 (1) A credit resulting from the payment of gift taxes or from estate
41 taxes paid on property previously taxed inures ratably to the benefit of all
42 persons to which the estate tax is apportioned.
43 (2) A credit for state or foreign estate taxes inures ratably to the ben-
44 efit of all persons to which the estate tax is apportioned, except that the
45 amount of a credit for a state or foreign tax paid by a beneficiary of the
46 property on which the state or foreign tax was imposed, directly or by a
47 charge against the property, inures to the benefit of the beneficiary.
48 (3) If payment of a portion of an estate tax is deferred because of the
49 inclusion in the gross estate of a particular interest in property, the bene-
50 fit of the deferral inures ratably to the persons to which the estate tax
51 attributable to the interest is apportioned. The burden of any interest
52 charges incurred on a deferral of taxes and the benefit of any tax deduction
53 associated with the accrual or payment of the interest charge is allocated
5
1 ratably among the persons receiving an interest in the property.
2 15-3-1306. INSULATED PROPERTY, ADVANCEMENT OF TAX. (a) In this section:
3 (1) "Advanced fraction" means a fraction that has as its numerator the
4 amount of the advanced tax and as its denominator the value of the inter-
5 ests in insulated property to which that tax is attributable.
6 (2) "Advanced tax" means the aggregate amount of estate tax attributable
7 to interests in insulated property which is required to be advanced by
8 uninsulated holders under subsection (c) of this section.
9 (3) "Insulated property" means property subject to a time-limited inter-
10 est which is included in the apportionable estate but is unavailable for
11 payment of an estate tax because of impossibility or impracticability.
12 (4) "Uninsulated holder" means a person who has an interest in
13 uninsulated property.
14 (5) "Uninsulated property" means property included in the apportionable
15 estate other than insulated property.
16 (b) If an estate tax is to be advanced pursuant to subsection (c) of this
17 section by persons holding interests in uninsulated property subject to a
18 time-limited interest other than property to which section 15-3-1307, Idaho
19 Code applies, the tax must be advanced, without further apportionment, from
20 the principal of the uninsulated property.
21 (c) Subject to section 15-3-1309(b) and (d), Idaho Code, an estate tax
22 attributable to interests in insulated property must be advanced ratably by
23 uninsulated holders. If the value of an interest in uninsulated property is
24 less than the amount of estate taxes otherwise required to be advanced by the
25 holder of that interest, the deficiency must be advanced ratably by the per-
26 sons holding interests in properties that are excluded from the apportionable
27 estate under section 15-3-1302(a)(2), Idaho Code, as if those interests were
28 in uninsulated property.
29 (d) A court having jurisdiction to determine the apportionment of an
30 estate tax may require a beneficiary of an interest in insulated property to
31 pay all or part of the estate tax otherwise apportioned to the interest if the
32 court finds that it would be substantially more equitable for that beneficiary
33 to bear the tax liability personally than for that part of the tax to be
34 advanced by uninsulated holders.
35 (e) When a distribution of insulated property is made, each uninsulated
36 holder may recover from the distributee a ratable portion of the advanced
37 fraction of the property distributed. To the extent that undistributed insu-
38 lated property ceases to be insulated, each uninsulated holder may recover
39 from the property a ratable portion of the advanced fraction of the total
40 undistributed property.
41 (f) Upon a distribution of insulated property for which, pursuant to sub-
42 section (d) of this section, the distributee becomes obligated to make a pay-
43 ment to uninsulated holders, a court may award an uninsulated holder a record-
44 able lien on the distributee's property to secure the distributee's obligation
45 to that uninsulated holder.
46 15-3-1307. APPORTIONMENT AND RECAPTURE OF SPECIAL ELECTIVE BENEFITS. (a)
47 In this section:
48 (1) "Special elective benefit" means a reduction in an estate tax
49 obtained by an election for:
50 (A) A reduced valuation of specified property that is included in
51 the gross estate;
52 (B) A deduction from the gross estate, other than a marital or char-
53 itable deduction, allowed for specified property; or
6
1 (C) An exclusion from the gross estate of specified property.
2 (2) "Specified property" means property for which an election has been
3 made for a special elective benefit.
4 (b) If an election is made for one (1) or more special elective benefits,
5 an initial apportionment of a hypothetical estate tax must be computed as if
6 no election for any of those benefits had been made. The aggregate reduction
7 in estate tax resulting from all elections made must be allocated among hold-
8 ers of interests in the specified property in the proportion that the amount
9 of deduction, reduced valuation, or exclusion attributable to each holder's
10 interest bears to the aggregate amount of deductions, reduced valuations, and
11 exclusions obtained by the decedent's estate from the elections. If the estate
12 tax initially apportioned to the holder of an interest in specified property
13 is reduced to zero, any excess amount of reduction reduces ratably the estate
14 tax apportioned to other persons that receive interests in the apportionable
15 estate.
16 (c) An additional estate tax imposed to recapture all or part of a spe-
17 cial elective benefit must be charged to the persons that are liable for the
18 additional tax under the law providing for the recapture.
19 15-3-1308. SECURING PAYMENT OF ESTATE TAX FROM PROPERTY IN POSSESSION OF
20 FIDUCIARY. (a) A fiduciary may defer a distribution of property until the
21 fiduciary is satisfied that adequate provision for payment of the estate tax
22 has been made.
23 (b) A fiduciary may withhold from a distributee an amount equal to the
24 amount of estate tax apportioned to an interest of the distributee.
25 (c) As a condition to a distribution, a fiduciary may require the dis-
26 tributee to provide a bond or other security for the portion of the estate tax
27 apportioned to the distributee.
28 15-3-1309. COLLECTION OF ESTATE TAX BY FIDUCIARY. (a) A fiduciary respon-
29 sible for payment of an estate tax may collect from any person the tax appor-
30 tioned to and the tax required to be advanced by the person.
31 (b) Except as otherwise provided in section 15-3-1306, Idaho Code, any
32 estate tax due from a person that cannot be collected from the person may be
33 collected by the fiduciary from other persons in the following order of prior-
34 ity:
35 (1) Any person having an interest in the apportionable estate which is
36 not exonerated from the tax;
37 (2) Any other person having an interest in the apportionable estate;
38 (3) Any person having an interest in the gross estate.
39 (c) A domiciliary fiduciary may recover from an ancillary personal repre-
40 sentative the estate tax apportioned to the property controlled by the ancil-
41 lary personal representative.
42 (d) The total tax collected from a person pursuant to this part may not
43 exceed the value of the person's interest.
44 15-3-1310. RIGHT OF REIMBURSEMENT. (a) A person required under section
45 15-3-1309, Idaho Code, to pay an estate tax greater than the amount due from
46 the person under section 15-3-1303 or 15-3-1304, Idaho Code, has a right to
47 reimbursement from another person to the extent that the other person has not
48 paid the tax required by section 15-3-1303 or 15-3-1304, Idaho Code, and a
49 right to reimbursement ratably from other persons to the extent that each has
50 not contributed a portion of the amount collected under section 15-3-1309(b),
51 Idaho Code.
52 (b) A fiduciary may enforce the right of reimbursement under subsection
7
1 (a) of this section on behalf of the person that is entitled to the reimburse-
2 ment and shall take reasonable steps to do so if requested by the person.
3 15-3-1311. ACTION TO DETERMINE OR ENFORCE PART. A fiduciary, transferee,
4 or beneficiary of the gross estate may maintain an action including, but not
5 limited to, petitioning for declaratory judgment, to have a court determine
6 and enforce this part or may petition a court pursuant to section 15-3-704 or
7 15-7-201, Idaho Code, whichever is applicable.
8 15-3-1312. UNIFORMITY OF APPLICATION AND CONSTRUCTION. In applying and
9 construing this uniform act, consideration must be given to the need to pro-
10 mote uniformity of the law with respect to its subject matter among states
11 that enact it.
12 15-3-1313. SEVERABILITY. If any provision of this part or the application
13 thereof to any person or circumstance is held invalid, the invalidity does not
14 affect other provisions or applications of this part which can be given effect
15 without the invalid provision or application, and to this end the provisions
16 of this part are severable.
17 15-3-1314. DELAYED APPLICATION. (a) Sections 15-3-1303 through 15-3-1307,
18 Idaho Code, do not apply to the estate of a decedent who dies prior to January
19 1, 2005.
20 (b) For the estate of a decedent who dies on or after the effective date
21 of this act, but prior to January 1, 2005, and as to which sections 15-3-1303
22 through 15-3-1307, Idaho Code do not apply, estate taxes must be apportioned
23 pursuant to the law in effect immediately before the effective date of this
24 act.
STATEMENT OF PURPOSE
RS 13740
Idaho Code section 15-3-916 provides for the apportionment of estate
taxes among probate and non-probate assets. It was adopted as part of
the Uniform Probate Act in Idaho in 1971. It has been amended in
relatively minor ways in 1999 and 2001 by the authors of this bill. The
language in the current bill is that of the Uniform Laws Commissioners'
amendments to the Uniform Probate Act, entitled the "Uniform Estate Tax
Apportionment Act", adopted by the National Conference of Commissioners
on Uniform State Laws ("NCCUSL") at its meeting August 1-7, 2003. For
ease of reference, existing 15-3-916 is repealed in its entirety by the
bill and a new Part 13 of this portion of the Probate Code is added.
A good description of the general purpose of the revised act is contained
in the NCCUSL Prefatory Note to the 2003 Revision of the Uniform Estate
Tax Apportionment Act, which states:
The Internal Revenue Code places the primary responsibility for
paying federal estate taxes on the decedent's executor and empowers,
but does not direct, the executor to collect from recipients of
certain non-probate transfers included in the taxable estate a
prorated portion of the estate tax attributable to those types of
property. In the absence of specific contrary directions of the
decedent, the Code generally provides as to other transfers that
taxes are to be borne by the persons who would bear that cost if the
taxes were paid by the executor prior to distributing the estate.
The determination of who should bear the ultimate burden of the
estate taxes is left to state law.
If a state does not have a statutory apportionment law, the burden
of the estate taxes generally will fall on residuary beneficiaries
of the probate estate. This means that recipients of many types of
nonprobate assets (such as beneficiaries of revocable trusts and
surviving joint tenants) may be exonerated from paying a portion of
the tax. Also, it generates a risk that residual gifts to the spouse
or a charity may result in a smaller deduction and a larger tax. A
number of states have adopted legislation apportioning the burden
of estates taxes among the beneficiaries.
The National Conference of Commissioners on Uniform State Laws'
original Uniform Estate Tax Apportionment Act, completed in 1958,
was superseded in 1964 by a revision later incorporated into the
Uniform Probate Code as UPC 3-916, a section that was slightly
changed in 1982. The project to replace the 1964 Act and the Uniform
Probate Code section with an updated version was announced at the
Conference's 1999 annual meeting, but did not get underway until the
first meeting of the drafting committee in November of 2000. The
current Act was approved and recommended for enactment in all states
at the annual meeting of the National Conference of Commissioners
on Uniform State Laws in August 2003.
The Act continues to advance the principle of the 1964 Act that the
decedent's expressed intentions govern apportionment of an estate
tax. Statutory apportionment applies only to the extent there is no
clear and effective decedent's tax burden direction to the contrary.
Under the statutory scheme, marital and charitable beneficiaries
generally are insulated from bearing any of the estate tax, and a
decedent's direction that estate tax be paid from a gift to be
shared by a spouse or charity with another is construed to locate
the tax burden only on the taxable portion of the gift. The Act
provides relief for persons forced to pay estate tax on values
passing to others whose interests, though contributing to the tax,
are unreachable by the fiduciary. The Act also addresses the
allocation of the burden incurred because of several federal
transfer tax provisions that did not exist when the 1964 Act was
adopted.
The Act contains substantial Official Comments by NCCUSL, which will be
distributed along with this Bill, and which will be placed in the Idaho
Code if this bill is enacted, which explain the operation of the Act in
great detail and provide numerous examples of the application of the Act,
using specific mathematical figures. The Act has been modified from the
original NCCUSL act only to the extent necessary to properly integrate
with other Idaho law, or where additional or alternate language would
clarify the Act. In section 15-3-1303, a new paragraph d was added to
the original NCCUSL act, using language in part from the NCCUSL Official
Comments to section 15-3-1303, to provide "safe harbor" apportionment
language for various documents.
The existing language of section 15-3-916 is now inadequate to provide
for many situations in which estate tax needs to be apportioned and is
causing either manifest unfairness in the apportionment of estate taxes,
or expensive and lengthy litigation to determine the proper
apportionment.
FISCAL NOTE
This bill will have no fiscal impact. As of January 1, 2005, the
essential effective date of this Act, Idaho's pick up estate tax will
have completely expired and only federal estate tax will be apportioned
by this statute.
CONTACT:
Name: Robert L. Aldridge
Phone: (208) 336-9880
STATEMENT OF PURPOSE/FISCAL NOTE S 1246