Pfeufer v. Cyphers, Personal Representative of the Estate of James Russell Hoffman (Ct. of Appeals)

Filed March 19, 2007 -- Opinion by Judge Robert Bell

Issue: Whether a will directing the P.R. to pay estate taxes "without apportionment" required the P.R. to deduct the estate taxes prior to distribution where some legatees were to be taxed and others were exempt.

Held: The P.R. must deduct the taxes prior to distribution, effectively splitting the taxes among all legatees even though some were tax-exempt. Interestingly, the Court found that there are no cases expressly stating the standard of review for legal determinations of an Orphans' Court. In this matter, the Court of Appeals saw "no need to deviate from the standard of review that we have applied to interpretations and conclusions of law by courts of general jurisdiction."

Facts: James Russell Hoffman ("Decedent") died leaving a will instructing the P.R. to pay all estate taxes from the estate without apportionment. This is in contrast to Md. Code Ann. Tax-General 7-203(b), which exempts certain family members of the decedent from inheritance tax. In this case, three of the four legatees were family members exempt from taxation. The P.R. initially paid the inheritance taxes owed by the fourth legatee from the entire estate, so that, effectively, each legatee paid 1/4 of the taxes due by the one non-exempt legatee. Subsequently, the P.R. reversed herself and deducted the entire tax due from the share of the one non-exempt legatee. The Orphans' Court for Montgomery County affirmed the decision of the P.R.

The Court of Appeals reversed, holding that a will is to be construed to effectuate the intent of the testator. In this case, the Court found, the will was clear and should be effectuated by not apportioning the estate tax.

The full opinion is available in PDF.