Appeal from decree of Court of Common Pleas, Orphans' Court Division, of Allegheny County, No. 144 of 1972, in re estate of Clara G. Kleinhans.
Alexander H. Lindsay, with him Lindsay, McGinnis, McCandless & McCabe, for appellant.
John M. Duff, Deputy Attorney General, with him Donetta Ambrose, Assistant Attorney General, and Israel Packel, Attorney General, for appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Roberts. Dissenting Opinion by Mr. Justice Manderino.
On April 8, 1967, Harry Kleinhans died, leaving a will which, inter alia, divided his residuary estate
equally into two trusts. His will provided that the income of trust A would be payable to testator's wife, Clara G. Kleinhans, for life. His wife was given a general testamentary power of appointment over the principal of trust A. The income of trust B was to be paid to testator's sister for life, with the remainder to two grandsons of testator.
The first and final account was filed June 17, 1968, in the Orphans' Court of Crawford County. It was confirmed on August 16, and distribution ordered. One-half of the residue, as directed by trust B, was distributed outright to testator's grandsons, testator's sister having died in the interval. The other half was distributed to testator's executor as trustee for the widow pursuant to the terms of trust A. Although certain taxes, both federal and state, were paid out of the residue before distribution, no tax was paid on the value of either the life estate or the remainder of trust A.
Clara Kleinhans died January 7, 1972, leaving a will which was probated in Allegheny County. Testatrix exercised in favor of her estate the general testamentary power of appointment in trust A. By her will those assets would in turn be distributed to three heirs of testatrix, collaterals as to testator. No party in interest challenges that this testamentary transfer is subject to a 15% tax at the collateral rate.*fn1
An account was filed in the Orphans' Court of Allegheny County on November 21, 1972. Included was the principal of trust A, which was distributed to the estate at the termination of the widow's life tenancy. At audit the Commonwealth asserted its claim against the estate for the 15% tax.
The estate of Clara Kleinhans argued in the orphans' court that it was liable for only one-half of the 15% tax, because testator had directed that taxes be shared equally by the transferees of both trusts. In support of its argument, the estate relied upon the following provision in testator's will. "First: I direct that all my just debts and funeral expenses be fully paid and satisfied as soon as conveniently may be after my decease and further direct that all Pennsylvania inheritance tax and Federal Estate tax be paid from my residuary Estate." Rejecting the estate's argument, the orphans' court held that the full 15% tax was to be paid out of the assets ...