BOSTON SAFE DEPOSIT AND TRUST COMPANY, executor and trustee, vs. THE CHILDREN'S HOSPITAL & others. [Note 1]

KAPLAN, J. The testator Seward M. Paterson died on May 31, 1971, survived by his second wife. His gross estate was in excess of $13,000,000 (as estimated for Federal estate tax purposes). His will made outright cash bequests of $2,245,000 to friends and relatives, and left all his real estate and tangible personal property and some other property, valued in all at $201,482, to his widow. Two trusts were established by the will: first, a trust, funded in the amount of $170,000 (if, as happened, the testator was survived by his wife), with a life interest to the testator's sister-in-law, and the remainder to named charities; second, a "marital deduction trust" [Note 2] in the amount of $1,950,000 from which the widow was to receive the income for life (the trustee being entitled to distribute principal to her if needed for her maintenance), with a power in the widow to appoint the principal by will, the principal to pass to the same charities if she should fail to appoint. The residue of the testator's estate (after "payment of debts, expenses and taxes"), valued on the testator's Federal estate tax return at more than $6,000,000, was bequeathed outright to the same charities.

On June 6, 1974, the widow, Marion Pushie Paterson, died, and by her will exercised her power of appointment by directing that the property of the marital trust be added to the residue of her property and be held in further trusts for the benefit of her sisters, and then for the children of one of her sisters, with final distribution of the

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principal to the surviving issue of those children. The youngest of the children was born in 1930.

With respect to the disposition made by the widow under her power of appointment, we have to observe the effect of the Massachusetts inheritance tax law. Under that law, as it applies to the estates of decedents dying before January 1, 1976, [Note 3] the tax on future interests is not imposed as of the date of the decedent's death, but is rather postponed until the "right of possession accrues." G. L. c. 65, Section 7; see Angevine v. Commissioner of Corps. & Taxation, 367 Mass. 826, 828-829 (1975). Thus the inheritance taxes on the remainder after the widow's life estate, i.e., the remainder appointed by her, would not be imposed until after her death.

The present litigation was prompted by a position taken by the Internal Revenue Service. On audit of Seward Paterson's Federal estate tax return, the Service issued a notice of deficiency in the amount of $203,968.34. It asserted the view that if the property of the marital trust was to bear the Massachusetts inheritance taxes to become due on the vesting of the future interests in possession, then the marital deduction must be reduced by reason of those obligations. [Note 4] Alternatively, if the residue of the estate (which after debts, expenses, and taxes was to go to the designated charities) was to bear these inheritance taxes, then the charitable deduction claimed on the return would have to be reduced. See Int. Rev. Code of 1954, Section 2055 (c). The Service calculated that by either

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route the Federal estate tax obligation was the same (and greater than that estimated on the return).

Boston Safe Deposit and Trust Company, as executor named in Seward Paterson's will (it is also named trustee), besides petitioning the United States Tax Court for redetermination of the deficiency, commenced the present action on January 27, 1975, in the Probate Court for Middlesex County, joining the interested parties and requesting instructions as to which property shall bear the inheritance taxes on future interests in the marital trust. Meanwhile the executor retains a portion of the residue of the estate as well as all the property of the marital trust. Answers were filed by a guardian ad litem representing a minor defendant (issue of a child of the widow's sister) and persons unborn and unascertained who are or may be interested in the marital trust; by the Attorney General; and by certain of the charities sharing in the residue of the estate. A statement of agreed facts describes the situation as outlined above. A judge of the Probate Court reported the case to the Appeals Court without decision and we transferred the case here on our motion (see G. L. c. 211A, Section 10 [A]).

Article tenth [Note 5] of Seward Paterson's will provides in part

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that "income, estate, gift, inheritance, legacy, succession, transfer or like taxes which may be levied or assessed against my estate on account of any property disposed of by me herein or in my lifetime, ... or on account of any property constituting a part of my estate or state law [sic: see n.6], ... shall be paid out of the remainder of my estate." [Note 6] Technically, inheritance taxes are levied against the beneficiary rather than the estate (see Beals v. Magenis, 307 Mass. 547, 549-550 [1940]), but as the tax is paid ordinarily by the executor, administrator, or trustee (see G. L. c. 65, Section 7), language such as that quoted has been held to relieve the beneficiaries of the burden of paying inheritance taxes due upon the death of the decedent. See Ferguson v. Massachusetts Audubon Soc'y, 316 Mass. 436, 448 (1944). Thus no one in the instant case disputes that article tenth is to be construed so as to impose on the residue all the taxes due at the death of the decedent including the inheritance tax due for the wife's life estate in the marital trust. And nothing in the article suggests that a different result was intended or should be reached with regard to inheritance taxes to become due on the future interests. As to the phrase "disposed of by me," it is a settled general rule of property law that the recipients of appointed property are considered to take from the donor of the power of appointment. See Emmons v. Shaw, 171 Mass. 410, 412 (1898), and cases cited; 5 American Law of Property Section 23.3 (A. J. Casner ed. 1952). We have stated and applied the rule in the context of the inheritance tax. See Angevine v. Commissioner of Corps. & Taxation, supra at 828-829; Curtis v. Commissioner of Corps. & Taxation, 340 Mass. 169, 172 (1959). And the words "any property

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constituting a part of my estate" lead to the same result. Article tenth is thus broad enough to resolve the present dispute.

The charities, which seek to throw the burden of the future inheritance taxes on the trust property itself, argue that the testator might not have viewed the property he was giving over to his widow with a power of appointment as property that he was disposing of. Cf. Beals v. State St. Bank & Trust Co., 367 Mass. 318, 325-326 (1975). The will, however, was drawn by a lawyer and deals with technical matters left to the lawyer's expression. And if the phrase on which the charities focus might itself be susceptible of a narrowing interpretation, the phrase referring to "any property constituting a part of my estate" is not so malleable. Indeed, the whole of article tenth has a deliberately broad sweep that appears to evidence a design that the residue bear the taxes.

This interpretation seems strengthened by article fourth which establishes the marital deduction trust. The article states in part: "I intend that the property of this trust shall be available for the marital deduction allowed by the federal estate tax law applicable to my estate, and all questions relative to this trust shall be resolved accordingly ...." [Note 7] The Internal Revenue Service in fact is claiming

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that the marital deduction must be reduced if the marital trust property bears the future inheritance taxes; and article fourth says almost in terms that the latter "question" shall be so "resolved" as to preserve that deduction in full. This reinforces our proposition that the inheritance taxes are to be met out of the residue, even though there are oddities, possibly unforeseen by the draftsman, in that result. [Note 8]

Other features of the will are not inconsistent. Article thirteenth provides in part that "[t]axes, expenses and other liabilities of the trusts hereunder shall be charged to the trusts to which they relate." [Note 9] Superficially this

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might seem to charge the inheritance taxes on future interests to the trust property. But if this rather perfunctory provision was to have that effect, it is hard to see why it would not also require imposing on the trust a share of all estate and inheritance taxes. Such a construction would render meaningless the command of article tenth. But the conflict disappears if we read the language of article thirteenth to refer only to those taxes incident to the operation of the trust, for example, property or capital gains taxes on assets held by the trust. [Note 10] And, of course, the will must be so interpreted as to harmonize its provisions if that is possible. See Tucci v. DiGregorio, 358 Mass. 493, 495-496 (1970); Sears v. Childs, 309 Mass. 337, 344 (1941).

An argument may be advanced based on an omission from the will. The will provides for payment outright of the residue; had there been an intention that the residue bear the future taxes, one might have expected an instruction to the executor to prepare in some way for payment of those taxes. What is suggested is a provision for the retention of a reserve, though it is argued that even that might prove an inadequate expedient because the maximum exposure

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would be hard to estimate: the size of the corpus at the time of future imposition of taxes could not be predicted accurately.

The unworkability of an estate plan may be a factor throwing light on whether a will should be interpreted to create such a plan. See Prescott v. St. Luke's Hosp., 280 Mass. 229, 233 (1932). But we think it is easy to exaggerate the difficulties that might arise in following the provision of article tenth that the inheritance taxes be paid from the residue. [Note 11] The executor and trustee, being neutral on the issue before the court, makes no comment on the supposed difficulties. [Note 12] It has paid out the bulk of the residue, retaining what it feels to be an adequate reserve, and we conceive that by making parallel investments of the trust property and reserve it could be reasonably assured that the trust property would not grow disproportionately to the reserve. Although the executor was not explicitly given power by the will to compromise taxes on the future interests (see G. L. c. 65, Section 14), the liability of the residue for the taxes could be settled by agreement or otherwise. We are inclined to think that the omission of the will to deal expressly with the question, while regrettable, can be overcome. See In re Smith, 85 Misc. 636, 649 (Sur. Ct.), rev'd in part on other grounds, 167 App. Div. 131 (N.Y. 1914) (directing retention of reserve).

Although the reported cases are not in complete agreement (and much naturally turns on the individual facts and the particular language), there are cases in other

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jurisdictions holding that rather general clauses casting taxes on the residue, appearing in wills of donors of powers of appointment, are to be construed according to their terms so as to burden the residue with future taxes due with respect to the appointed property. See In re Duryea, 277 N.Y. 310 (1938); In re Smith, supra; In re Batroff's Estate, 32 Pa. D. & C.2d 447, 449-450 (D.C. Montgomery County 1963). But cf. Union & New Haven Trust Co. v. Sullivan, 142 Conn. 685 (1955); Page v. Wright, 342 Ill. App. 352 (1950). See generally Annot., 69 A.L.R.3d 122, 235-240 (1976).

In the particular circumstances of the case, we hold that a judgment should enter instructing the executor that the residue is the source from which the State inheritance taxes on the future interests are to be paid.

So ordered.