First National Bank v. Nelson

DUFFY, Circuit Judge.

The issue presented on this appeal is whether the sum of $100,000 bequeathed from husband to wife, qualifies for a marital deduction under § 2056 of the Internal Revenue Code of 1954.

The Internal Revenue Service disallowed the deduction, and the question was then submitted to the District Court where both parties moved for a sum-, mary judgment. The District Court held the deduction should have been allowed and ordered a refund. This appeal followed.

Joseph A. Craig and Florence D. Hil-born entered into an antenuptial agreement dated April 12, 1946. Pursuant to this agreement, Florence Hilborn agreed to accept one third of Craig’s net distributable estate or $100,000, whichever sum was smaller, in lieu of all rights she might have in Craig’s estate.

The antenuptial agreement contained the following paragraph:

“The said Florence D. Hilborn further promises and agrees that she will keep a separate account and record of the assets and distributive share received by her from the estate of said Joseph A. Craig and a record of all income thereof and of all expenditures therefrom so that said assets and all reinvested proceeds thereof at all times may be reasonable [sic] identified. She does further agree that upon her death, she will give, devise and bequeath by proper will all of the remainder of said assets and reinvested proceeds thereof and all unex-pended income therefrom to the residuary beneficiaries of Joseph A. Craig all as provided under the terms and provisions of the last will and testament of said Joseph A. Craig.”

On October 18, 1957, Craig executed his will. The seventh paragraph thereof contained the following provision:

“Seventh: I bequeath to my wife, Florence D. Hilborn Craig, if she survives me, the net sum of One Hundred Thousand Dollars ($100,-000.00), exclusive of all charges, taxes, and deductions, pursuant to our Antenuptial Agreement entered into on the 12th day of April, 1946, by and between Joseph A. Craig and Florence D. Hilborn, wherein said Florence D. Hilborn agreed to accept such sum in lieu of any and all her rights of dower and any and all other rights, interests, dower and claims in and to the real estate or personal property of said Joseph A. Craig as his widow, as his surviving joint tenant, or as his next of kin.”

Craig died on December 30, 1958, and his will was admitted to probate on February 3, 1959.

For the purpose of this appeal, the crucial language of the will was Craig’s bequest to his wife of “The net sum of One Hundred Thousand Dollars ($100,-000.00), exclusive of all charges, taxes, and deductions, pursuant to our Ante-nuptial Agreement. * * * ” The Government’s position in this case is based upon Craig’s use of the word “pursuant,” contending the antenuptial agreement with its limiting language was thereby incorporated by reference into the will, and that such limiting language defeats the marital deduction.

The doctrine of “incorporation by reference” is recognized in Wisconsin. Estate of Brandenburg: Hillyer v. Wingert et al., 13 Wis.2d 217, 226, 108 N.W. 2d 374.

However, caution should be used in applying the doctrine as it must be clear that the testator intended to in*548corporate the document referred to. The applicable rule has often been stated. In 94 C.J.S. Wills § 163, pages 954-955, the rule is stated: “The intention of the testator to incorporate into a will a paper or document must clearly appear from the will, a mere reference thereto without evidence of such intention being insufficient. The testator’s intention to incorporate or adopt an extrinsic paper must be determined from the language of the will read in the light of the surrounding circumstances.”

In 144 A.L.R. 715 the following statement appears: “The intention of the testator to incorporate the paper or document in his will must clearly appear from the will, a mere reference thereto, without evidence of such intention, being insufficient. 28 RCL p. 112, Wills, Sec. 64 * * *. (If) Such intention is to be determined from the language of the will itself, read in the light of the circumstances surrounding the testator at the time of its execution.”

The language of Mr. Craig’s will demonstrates he intended to give his wife $100,000.00 outright, and that his reference to the antenuptial contract was merely intended to show the fulfillment of his obligation thereunder. He did not use the term “incorporate” nor did he condition the bequest on his wife’s segregating and accounting for the $100,000.00 or making specific bequests of the remainder upon her death.

Mr. Craig’s will was undoubtedly drawn by an attorney who could very easily and readily have used clear and definite words of incorporation if that had been the wish of the testator. It seems clear that Mr. Craig had no such intention.

In our view, the Government has not established that Mr. Craig intended to incorporate the antenuptial agreement into his will. It is more likely that the will referred to the antenuptial agreement only to make certain that the agreement had not been overlooked.

We conclude there is nothing in the record before us to indicate that Mr. Craig intended to restrict the bequest to his wife with any of the limiting language found in the antenuptial agreement. The bequest to testator’s wife specifically stated that it was “exclusive of all charges.”

The District Court did not find it necessary to decide the incorporation question; holding that even if the ante-nuptial agreement had been incorporated into the will, its limiting language would not disqualify the bequest from the marital deduction.

We prefer to base our decision on the fact that the testator did not intend to and, therefore, did not incorporate by reference, the antenuptial agreement into his will. As the bequest to his widow was absolute, the marital deduction should have been allowed.

The judgment of the District Court allowing a refund due to the improper disallowance of the marital deduction is

Affirmed.