By: Martin M. Shenkman, CPA, MBA, JD
The widow of Colonel Sanders’ estate left charitable bequests to two colleges. The will was silent as to which beneficiaries should pay estate taxes. Kentucky law does not exempt charitable beneficiaries from paying their allocable share of estate taxes. So, since the will was silent, the charities had to kick in their share. This is generally not the intended result because there is a “spoiler” effect when a charity has to pay tax. The bequests to the charity are tax deductible, but these deductions are reduced if dollars are allocated to the tax man. Without a clear direction in the will, the estate was left to whatever the state law default rules were. Since the tax authorities are not chicken, you should crow until your lawyer drafts it right. Taxpayers frequently do not want to bother with many of the administrative details (“boilerplate”) of their estate plans and documents, but ignoring details does not get the results you want. Hael v. Moore, Nos. 2005-CA-001895-MR & 2006-CA-000662-DG, 2008 (Ky. Ct. App. 1/4/08).
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