Legal Question in Wills and Trusts in California
The Trust states that all inheritance tax is to be paid from the trust assets. There was enough money in the trust to cover the taxes and there is a residual that will be split by 5 beneficiaries. There was a bank account that was not listed in the trust and the beneficiary named on this account was one of the 5 beneficiaries. The executor claims that that the responsibility for the taxes on this account was not a part of the trust and therefore the tax amount will be deducted from the beneficiaries residual. Estate attorney claims California Probate Code Section 20110 provides that, unless the Will or Trust or federal law provides otherwise, estate taxes must be equitably prorated among the beneficiaries. My question is can the executor make such a claim when the trust does not stipulate this instead it stipulates all taxes are to be paid from the trust?
1 Answer from Attorneys
Since the bank account was not mentioned in the Trust it is not part of the Trust. Only assets mentioned and placed in the Trust are controlled by the trust instructions. Whethre the bank account is part of the assets of the Will's estate depends upon how the account was held. If it was a joint account, all that happens is that the person who dies is removed from the account and it is nor part of the Will. As to payment of taxes by the heirs in a Will, the heris do ot pay any taxes. The estate pays all the taxes, which reduces the amount the heirs get. If the estate is divided equally, then in practice the taxes are divided equally because the same reduction in assets applies to each heir.
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