Clancy Will Binds Kids |With Estate-Tax Burden

     (CN) — A state appeals court in Maryland has ruled the novelist Tom Clancy’s children must bear the brunt of the estate tax burden assessed with the execution of his will.
     Clancy, who died in October 2013 of an undisclosed illness, was known for his espionage thrillers set during and after the Cold War. Some of his best known novels, which also found their way to the big screen, include The Hunt for Red October, Patriot Games, Clear and Present Danger and The Sum of All Fears.
     Clancy is survived by his second wife, Alexandra Clancy, and their daughter Alexis, as well as by his first wife, Wanda King, and their four adult children Michelle Bandy, Christine Blocksidge, Kathleen Clancy and Thomas Clancy III.
     In his will, Clancy’s directed that his $83 million dollar estate be split between three trusts: a marital trust for the benefit of his wife; a family trust for the benefit of his first wife and all five of his children; and another trust for the benefit of his four adult children, as well as his grandchildren.
     In September 2014, a dispute over which trust should shoulder the total estimated $15.7 million estate tax due erupted when second wife Alexandra retained her own counsel to dispute the personal representative’s conclusion that the second trust, the Family Trust, should pay $5.7 million of the taxes due, while the remaining $10 million should be split between the Children’s Trusts.
     Her claim was the will and its two codicils provide that the Family Trust qualifies for the estate marital tax deduction, as does the Marital Trust, and should not pay any estate tax. Clancy’s first wife Wanda and her four children disagreed, prompting them to file a lawsuit against Alexandra in Maryland’s Orphans’ Court in Baltimore City.
     Alexandra filed a motion for declaratory judgment seeking a determination that the Family Trust was not obligated to pay estate taxes.
     A hearing was held in December 2014, with Chief Judge Lewyn Scott Garret issuing a memorandum and order that determined a second codicil amending the will just before Clancy’s death barred the personal representative from requiring the Family Trust to pay estate taxes.
     He said the will’s Savings Claus, amended by the second codicil, constituted a “valid interpretive aid savings clause,” and that “it is a clear expression of the testator’s intent to have the Family Trust qualify for the marital deduction.”
     The plaintiffs brought the case to the Court of Appeals of Maryland where a seven-judge panel affirmed, 4-3, the Orphan Court’s decision.
     Writing for the panel majority, Judge Lynne Battaglia said, in part, that Clancy’s overall intention was to lessen the tax burden on all of his beneficiaries, but that a double taxation that would occur under one interpretation of the will would undermine that intention.
     “[W]ere the Family Trust to bear the burden of federal estate taxes, at the time of Mr. Clancy’s death, the corpus of that trust would be subject to imposition of federal estate taxes twice, at the time of Mr. Clancy’s death as well as when Mrs. Clancy died. “
     Battaglia continued: “The establishment of the QTIP (Qualified Terminable Interest Property) Trust in Mr. Clancy’s will insures that the younger child will have to pay estate taxes when Mrs. Clancy dies. Certainly, as each party agrees, Mr. Clancy intended to minimize the impact of federal estate taxes in the entirety of his will, an intent that would be eviscerated by double taxation.”
     In conclusion, the majority said that “the property conveyed in the Family Trust as identified in Mr. Clancy’s will and second codicil cannot be burdened by the payment of federal estate taxes.”
     Chief Judge Mary Ellen Barbera, and Appeals Judges Clayton Green and Robert McDonald were the dissenting judges.
     “In essence, the majority opinion, without explanation, reads the second codicil as expressing Mr. Clancy’s intent that the distribution of his estate maximize the marital deduction at all costs,” McDonald wrote in part. “There is simply no basis for this interpretation. The second codicil provides that the estate must receive ‘the benefit of the marital deduction as hereinbefore set forth,’ not ‘the benefit of the maximum marital deduction,’ so the text provides no support to the majority opinion’s reading.”

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