Chapter 34 - § 34.11 • FEDERAL ESTATE TAX

• Jurisdiction: Colorado

§ 34.11 • FEDERAL ESTATE TAX

The federal estate tax is a tax on the right to transmit property at death and is a charge on the whole estate to be paid by the representative.¹⁸ The federal government is not particularly interested in the thrust of the tax so long as the tax is paid, and the states may by legislation or judicial decision determine how the burden of the tax will be borne by the respective transferee of the decedent.¹⁹

Former law placed the burden of the tax on that portion of the estate that is first subject to abatement, according to the statutory order of abatement. The Code provides for equitable apportionment of the tax as prescribed by the Uniform Estate Tax Apportionment Act (incorporated into the Code).²⁰ The Act permits the will or other dispositive instrument to prescribe the method of determining the thrust of the estate tax, including the right to place the burden of the tax in accordance with the statutory order of abatement.²¹ The degree of clarity required in the instrument to avoid statutory apportionment is discussed in Estate of Kelly.²² Estate of Eakin construes the apportionment statute in the augmented estate election context.²³ If the will contains no direction, the tax will be apportioned among the beneficiaries in accordance with their respective interests,²⁴ with a number of exceptions (including exempting marital and charitable deduction transfers from apportionment) and the apportionment will be based on federal estate tax values as finally determined. The act permits the representative to withhold the share of tax of any beneficiary from his or her interest in the estate and to collect any excess over the probate interest withheld, and provides for the payment of the tax from the principal of any fund in which there are temporary and remainder interests. Each beneficiary receives the benefit of any exemption, deduction, or credit attributable to him of her.

In the 1976 edition, Mr. Parks noted that "The adoption of apportionment will have a profound effect on existing wills which have tax clauses based on the former assumption of nonapportionment . . ." and predicted that the adoption of apportionment would produce serious conflicts of law issues and constitutional issues as to the application of the act to pre-existing property holding arrangements. In the experience of the present author, however, this has not proved to be the case. In any event, the reader is referred to § 34.8 of the 1976 edition for a thorough...