concurring in the result: I agree with the majority’s result. I also agree with the first half of the majority’s opinion, which concludes that, in the instant case, the relevant language in the document is not a “formula”, and thus the estate qualifies for the unlimited marital deduction. However, I disagree with the majority’s effort to discern what the testator’s intent would have been in 1978 if he had known that in 1981 the Congress was going to permit an unlimited marital deduction.
In general, subtitle A of title IV of the Economic Recovery Tax Act of 1981 (Pub. L. 97-34, 95 Stat. 172, 299-305; hereinafter sometimes referred to as ERTA) had the effect of reducing Federal estate and gift taxes. The Congress increased the unified credit (ERTA section 401), reduced estate and gift tax rates (ERTA section 402), and provided an unlimited marital deduction (ERTA section 403). The Congress provided that the unlimited marital deduction was to apply to estates of decedents dying after December 31, 1981 (ERTA section 403(e)(1)), and gifts made after that same date (ERTA section 403(e)(2)).
However, the Congress was aware that some wills and other estate-planning documents disposed of estates by incorporating in some fashion the limited marital deduction provisions of prior law. The Congress was concerned that the change it was enacting in the marital deduction provisions might cause some estates to be distributed in ways that were significantly different from what the testators had contemplated. In an attempt to deal with this problem, the Congress provided a “transitional rule” (ERTA section 403(e)(3)) as an exception to the general effective date rule.
The Congress had several choices available to it in seeking to provide an “out” for testators who had relied on the law as it existed when they planned their estates. For example, the Congress could have allowed the executor to elect whether the unlimited marital deduction or prior law should apply to the estate under his or her control. Alternatively, the Congress could have opted to create an exception dependent on a finding of the testator’s intent.
The Congress chose not to follow either approach. Instead, the Congress chose to use a relatively simple, mechanical approach based on the presence or absence of a formula clause in the relevant document. Section 403(e)(3) states, in pertinent part, as follows:
(3) If-
(A) * * *,
(B) * * * property passes * * * under a will * * * or a trust * * * which contains a formula expressly providing that the spouse is to receive the maximum amount of property qualifying for the marital deduction allowable by Federal law,
(C) the formula referred to in subparagraph (B) was not amended to refer specifically to an unlimited marital deduction * * * , and
(D) * * * ,
then the amendment made by subsection (a) [the unlimited marital deduction] shall not apply * * * .
[Emphasis added.]
Thus, the provision that the Congress enacted, by its terms focusses on whether a certain type of language appears in a certain type of document, and whether that language was “amended” in a certain way. ERTA section 403(e)(3) does not provide that if there is some other, extrinsic evidence that the testator would have wanted the new law to apply, then his or her wishes would be respected.
Furthermore, for those testators who wished to take advantage of the newer, more generous marital deduction rules, the Congress provided explicit directions in subparagraphs (B) and (C) of ERTA section 403(e)(3). Under subparagraph (B), the testator could execute a new will. Under subparagraph (C), the testator could amend the formula provision “to refer specifically to an unlimited marital deduction”.
The “formula clause” portion of ERTA section 403(e)(3)(B) deals only with the presence or the absence of a particular provision in the document. We should not begin considering other factors simply because we believe that the Congress’ intent would be better served by doing so. The Congress recognized that the changes in the law, while intended to be helpful to those involved, were likely to create problems for some; for those people it carved out this limited exception.
As we said in another context (Ridder v. Commissioner, 76 T.C. 867, 876 (1981)):
In drafting section 46(e)(3)(B), Congress could have chosen a rule based upon the benefits and burdens of ownership in light of all the relevant facts and circumstances. (See, e.g., Swift Dodge v. Commissioner, 76 T.C. 547 (1981)). But they did not. Instead, Congress decided to impose two hard-and-fast tests, one of which petitioner herein has failed. In effect, Congress chose a more easily administered approach (which, for taxpayers, provides predictability) and sacrificed some small measure of perfect equity. Not only was this choice at least arguably reasonable, it is not for us in any case to pass upon the wisdom of legislation. Nebbia v. New York, 291 U.S. 502, 537-538 (1934). See also Commissioner v. Kowalski, 434 U.S. 77, 95-96 (1977).
To the same effect, see Carlson v. Commissioner, 712 F.2d 1314, 1316 (9th Cir. 1983), affg. 79 T.C. 215 (1982).
We should respect the Congress’ choice of the triggering mechanism for application of the old law, just as we respect the Congress’ choice of the general effective date of December 31, 1981. We do not evaluate, for example, whether the Congress’ purpose could have been better served by making the unlimited marital deduction apply to the estates of decedents dying after the date of enactment (August 13, 1981), although there is no apparent explanation for why Congress chose December 31, 1981, as the cutoff date. I suggest that it is similarly bootless to speculate as to whether the Congress’ purpose would have been better served by a different formulation of the transitional rule’s limited exception.
I agree with the majority’s conclusion that, based solely upon the language of the document, the testator is within the set of testators that are to be governed by the unlimited marital deduction rules. That is, the trust language provides for the possibility that the widow would receive less than the maximum marital deduction amount and thus, (1) is not a “formula” described in ERTA section 403(e)(3), (2) the transitional rule does not apply, and (3) under the general effective date (ERTA section 403(e)(1)) the estate is entitled to the unlimited marital deduction. I also agree with our opinion in Estate of Christmas v. Commissioner, 91 T.C. 769, 776 (1988), in which we stated: “We are not free to wander outside the confines of a testamentary instrument to determine, under State law, the intent of a decedent where the language contained in that instrument causes it to fall squarely within a set of criteria established by Congress.” However, I would go beyond Christmas. The search for a testator’s hypothetical intent as to a matter almost certainly not contemplated by the testator — -i.e., what the testator would have wanted to do if the Congress were to change the estate tax in a certain way — is not within the scope of ERTA section 403(e)(3)(B), whether or not that search is confined to the testamentary instrument. In the instant case, the majority’s examination of whether the testator intended to provide more or less of his estate to his widow, as opposed to his other beneficiaries, is contrary to the text of the statute. I also believe that such consideration will give rise to additional litigation. Furthermore, as demonstrated by the discussion by the majority and by the dissent, it is generally difficult to ascertain what a testator would have intended if he or she had considered the possibility of this particular legislative change in the marital deduction limitation.
Other opinions in this area of the law also have focussed in part on testators’ intent. In some instances, testimony was offered and admitted in order to present a complete record, on the basis of which the court could make factual findings of such intent. I now believe that the courts erred in going down that path. I adopt for myself, and commend to my colleagues, the words of Justice Frankfurter, dissenting in Henslee v. Union Planters Bank, 335 U.S. 595, 600 (1949), as follows:
Wisdom too often never comes, and so one ought not to reject it merely because it comes late. * * *Hamblen and Whalen, JJ., agree with this concurring opinion. WELLS, J.,
concurring: I agree with the majority’s refusal to apply the transitional rule to petitioner. Like Judge Chabot, however, I also believe that, we should address squarely the question of whether evidence of testamentary intent — outside the confines of the marital deduction clause itself — may be considered in deciding whether such clause is a “formula” under section 403(e)(3)(B) of ERTA. I would answer that question in the affirmative. I fail to see the “wisdom” in ignoring such evidence of the testator’s intent in the face of Congressional intent “to preserve rather than defeat the testator’s intent.” Estate of Bruning v. Commissioner, 888 F.2d 657, 659 (10th Cir. 1989); Liberty National Bank & Trust Co. v. United States, 867 F.2d 302, 304 (6th Cir. 1989). See also Estate of Neisen v. Commissioner, 89 T.C. 939, 942-943 (1987), affd. per curiam 865 F.2d 162 (8th Cir. 1988).
Although the majority concludes that the clause in question is not one which provides that the decedent’s spouse “is to receive” the maximum marital deduction amount (majority op. at 299), the majority does not end its opinion with such express holding but continues with a discussion of the decedent’s overriding intent vis-á-vis his spouse. I believe that such discussion, without an explicit recognition of its contribution to the majority’s conclusion, obfuscates this Court’s stated interpretation of the transitional rule. Moreover, in view of the legislative purpose of the transitional rule, we need not couch our discussion of intent as dicta but should incorporate such discussion into our holding herein.
Section 403(e)(3)(B) of Economic Recovery Tax Act of 1981 (ERTA), Pub. L. 97-34, 95 Stat. 172, is not clear. The transitional rule does not tell us what types of marital deduction clauses are encompassed by the rule, hence the confusion in the cases thus far. As I see it, we have two options in applying the ambiguous provision: we can either attempt to “force” some clarity on the statute judicially, or we can look to the overriding purpose and spirit of the statute in applying it to individual cases. In Estate of Bruning v. Commissioner, T.C. Memo. 1988-5, we opted for the first choice. In that opinion, we stated that Congress was concerned in section 403(e)(3)(B) only with “clauses under which the amount of property transferred to the surviving spouse is determined solely by reference to the maximum marital deduction.” 54 T.C.M. 1469, 1471, 57 P-H Memo T.C. par. 88,005 at 32. (Emphasis supplied.) In essence, we added the word “solely” to section 403(e)(3)(B) in Estate of Bruning, creating a bright line test for its application.1 Neither the Tenth Circuit in affirming Estate of Bruning nor any other subsequent opinions cited by the majority, however, have limited the analysis of section 403(e)(3)(B) to that bright line test. Instead, the trend in the cases has been to emphasize the legislative purpose of the transitional rule, “to preserve rather than defeat” testamentary intent.
In Estate of Bruning, the Tenth Circuit (affirming the Tax Court) stated that:
To determine whether the limitation of section 403(e)(3) applies, the will and trust must be examined to determine decedent’s intent at the time of execution of the will. * * *
*******
Congress desired to carry out a decedent’s intent. If it can be discerned from the will that decedent would have desired the unlimited marital deduction permitted by ERTA, the limitation was not intended to apply.
[888 F.2d at 659-660].
The Sixth Circuit in Liberty National Bank & Trust Co. v. United States (which was cited by the Tenth Circuit in Estate of Bruning) similarly reasoned that “To determine whether the transitional rule * * * applies to limit decedent’s marital deduction, the will must be examined to determine the testator’s intent.” 867 F.2d at 304. See also Estate of Christmas v. Commissioner, 91 T.C. 769, 776 (1988) (characterizing Estate of Neisen as involving the testator’s intent and failing to mention the bright line test adopted in Estate of Bruning); Estate of Bauersfeld v. Commissioner, T.C. Memo. 1988-224 (failing to mention the “solely by reference to” standard of Estate of Bruning). I agree with the Tenth Circuit’s and Sixth Circuit’s focus on testamentary intent. Consideration of intent harmonizes with the spirit and purpose of the transitional rule.
A refusal to consider evidence of the testator’s intent in deciding whether a “formula” exists may lead to troublesome results. For example, in Estate of Blair v. Commissioner, T.C. Memo. 1988-296 (on appeal, 10th Cir., Jan. 22, 1990), the evidence of record contained an affidavit made by the testator’s attorney which stated that the attorney had advised the testator with respect to the ERTA transitional, rule. The affidavit indicated that the testator had decided not to amend his trust because he apparently felt it was not necessary in light of its “language which would leave only the unified credit in his estate.” The attorney’s advice and the testator’s perceived reaction were not considered by the Court, which found the trust provision to be unambiguous.2 If the transitional rule is truly concerned with preserving the testator’s intent in the face of a change in the law, such evidence should be critical to its application.3 A testator’s informed decision to leave his will or trust “as is” notwithstanding the ERTA transitional rule — and his reason for doing so (i.e., desire to limit the bequest to the spouse, or alternatively, belief that the clause in question was not covered by such rule) would constitute direct evidence of the testator’s actual intent rather than a “hypothetical intent as to a matter * * * not contemplated by the testator.” (See Judge Chabot’s concurring opinion at 310.)
While it may be true that a search for testamentary intent in applying the ERTA transitional rule will give rise to some additional litigation, such consideration should not be determinative. Moreover, further litigation concerning testamentary intent may be preferable to further litigation over the legal question of “what constitutes a maximum marital deduction formula” within the meaning of section 403(e)(3)(B), a question for which I believe there is no clear answer.
Because the totality of facts found by the majority in the instant case, including those that bear on the decedent’s intent, indicate that the decedent did not intend to limit the amount of the bequest to his spouse, I would conclude that the decedent’s estate is not a member of the class that Congress “intended to exclude from the unlimited marital deduction.” Estate of Christmas v. Commissioner, supra at 777-778. Accordingly, I concur in the majority’s result.
SWIFT, J., agrees with this concurring opinion.
We found support for our position by focusing attention on the phrase “is to receive” in sec. 403(e)(3)(B), as done by the majority in the first part of its opinion in the instant case.
Unlike the instant case, in which the majority’s discussion of testamentary intent is confined to “the language and operation of the trust” itself (majority op. at 300), Estate of Blair v. Commissioner, T.C. Memo. 1988-296, (on appeal, 10th Cir., Jan. 22, 1990), involved the additional issue of the admissibility of “extrinsic” evidence of intent (that is, evidence outside the four corners of the testamentary instrument). The opinion in Estate of Blair, citing the State law rule against admitting extrinsic evidence to vary the language of an “unambiguous” instrument, disagreed with the taxpayer’s claim that the instrument in question was ambiguous. The taxpayers had based that claim on the meaning of various terms when used in a community property estate plan. Estate of Blair does not address the question of whether evidence of advice from an attorney regarding the transitional rule might in itself disclose an ambiguity in a testamentary instrument. See also Estate of Bruning v. Commissioner, 888 F.2d 667, 659 (10th Cir. 1989) (citing Colorado law regarding intent in an “unambiguous” will); Liberty National Bank & Trust Co. v. United States, 867 F.2d 302, 304 (6th Cir. 1989) (the laws of Kentucky control the construction of the will).
Our opinion in Estate of Blair preceded the decisions of the Sixth and Tenth Circuits, respectively, in Liberty National Bank & Trust Co. v. United States, supra, and Estate of Bruning v. Commissioner, supra.