Chapter 34 - § 34.12 • CONTRIBUTIONS TO ESTATE TAX BY THIRD PERSONS

• Jurisdiction: Colorado

§ 34.12 • CONTRIBUTIONS TO ESTATE TAX BY THIRD PERSONS

A survey should be made to determine whether contributions are due from third persons because of §§ 2206 and 2207 of the Internal Revenue Code of 1954, relating to life insurance beneficiaries and takers by or in default of exercise of powers of appointment. If so, arrangements should be made for payment of the tax due the estate or for deduction from a devise to the debtor, and to reflect the offset in the schedule of distribution. The problems arising from these sections of the Internal Revenue Code should follow automatically from the application of the requirements outlined in § 34.11.

It should be noted that C.R.S. § 15-12-709 authorizes the representative to recoup from a third party the administrative expenses relating to the fixing of the amount of death taxes on nonprobate property as well as relating to the contribution required of third parties in connection with the spouse's augmented estate election. This provision is discussed in § 19.2 of this book.

In the estate of the first spouse to die, there may be a marital deduction trust provision for the surviving spouse that creates a qualified terminal interest trust (deferring the payment of taxes on the assets until the second death). Under I.R.C. § 2207A the personal representative of the second estate may collect the portion of the federal estate tax attributable to the QTIP trust assets from the QTIP trust unless the survivor's will or trust waives the contribution right. In Estate of Klarner,²⁷ the governing instrument of the survivor provided for the payment of death taxes "without apportionment and without right of contribution from any person." The Colorado Supreme Court discussed the relationship between I.R.C. § 2207A and the equitable apportionment provisions of the Uniform Estate Tax Apportionment Act, incorporated into the Colorado Probate Code at C.R.S. § 15-12-916. On the...