Estate of Kuralt

Journalist Charles Kuralt lived in New York with his wife, Suzanna “Petie” Kuralt, but owned riverfront property in Montana where he built a cabin with longtime intimate partner Patricia Shannon. Kuralt’s will left his residuary estate to Petie and directed that the estate taxes “shall be paid without apportionment,” meaning all the taxes would be paid from the residuary under New York law. Petie filed a probate petition in New York and a proof of authority in Montana to probate the river property. Shannon produced a letter Kuralt wrote shortly before death stating he wanted her to have the property. The Montana Supreme Court found the letter was a valid holographic codicil conveying the property to Shannon. Litigation remained pending when Petie died two years later. Shannon filed a petition demanding that Kuralt’s two daughters, as co-personal representatives of Petie’s estate, pay the estate taxes on the Montana property from Kuralt’s residuary estate. The daughters argued that Shannon should pay the taxes. The daughters argued Kuralt’s gift of the property to Shannon created adverse tax consequences that contravened the dominant purpose and plan of Kuralt’s will, which was to use the marital deduction to protect Petie from tax burdens. The district court found the will language directing no apportionment controlled, meaning the daughters had to pay the estate taxes on the Montana property out of the residuary estate that passed to Petie. The daughters appealed.