2-1.8 Apportionment of federal and state estate or other death taxes;
fiduciary to collect taxes from property taxed and transferees
(a) Whenever it appears in any appropriate action or proceeding that a fiduciary has paid or may be required to pay an estate or other death tax, under the law of this state or of any other jurisdiction, with respect to any property required to be included in the gross tax estate of a decedent under the provisions of any such law (hereinafter called "the tax"), the amount of the tax, except in a case where a testator otherwise directs in his will, and except where by any instrument other than a will (hereinafter called a "non-testamentary instrument") direction is given for apportionment within the fund of taxes assessed upon the specific fund dealt with in such non-testamentary instrument, shall be equitably apportioned among the persons interested in the gross tax estate, whether residents or non-residents of this state, to whom such property is disposed of or to whom any benefit therein accrues (hereinafter called "the persons benefited") in accordance with the rules of apportionment herein set forth, and the persons benefited shall contribute the amounts apportioned against them.
(b) Unless otherwise provided, when a disposition is made by which any person is given an interest in income or an estate for years or for life or other temporary interest in any property or fund, the tax apportionable against such temporary interest and the remainder limited thereon is chargeable against and payable out of the principal of such property or fund without apportionment between such temporary interest and remainder. The provisions of this paragraph apply although the holder of the temporary interest has rights in the principal, but do not apply to a common law annuity.
(c) Unless otherwise provided in the will or non-testamentary instrument, and subject to paragraph (d-1) of this section:
(1) The tax shall be apportioned among the persons benefited in the proportion that the value of the property or interest received by each such person benefited bears to the total value of the property and interest received by all persons benefited, the values as finally determined in the respective tax proceedings being the values to be used as the basis for apportionment of the respective taxes.
(2) Any exemption or deduction allowed under the law imposing the tax by reason of the relationship of any person to the decedent, the fact that the property consists of life insurance proceeds or the charitable purposes of the gift shall inure to the benefit of the person bearing such relationship or receiving such insurance proceeds or charitable gift, as the case may be.
(3) Any deduction for property previously taxed and any credit for gift taxes paid by the decedent shall inure to the benefit of all persons benefited and the tax to be apportioned shall be the tax after allowance of such deduction or credit.
(4) Any interest resulting from the late payment of the tax shall be apportioned in the same manner as the tax and shall be charged wholly to principal.
(5) Any discount allowed for prepayment of the tax shall be credited wholly to the principal of the funds contributing the moneys used for prepayment in proportion to the contribution made.
(d) Subject to subparagraphs (1), (2) and (3) of this paragraph, any direction as to apportionment or non-apportionment of the tax, whether contained in a will or a non-testamentary instrument, relates only to the property passing thereunder, unless such will or instrument provides otherwise.
(1) Any such direction in a will which is later in date than a prior non-testamentary instrument and which contains a contrary direction shall govern provided that the later will specifically refers to the direction in such prior instrument.
(2) Any such direction in a non-testamentary instrument which is later in date than a prior will or non-testamentary instrument and which contains a contrary direction shall govern provided that the later instrument specifically refers to the direction in such prior will or instrument.
(3) Any such direction provided in a non-testamentary instrument only relates to the payment of the tax from the property passing thereunder and such direction shall not serve to exonerate such non-testamentary property from the payment of its proportionate share of the tax, even if otherwise directed in that non-testamentary instrument.
(d-1)(1)(A) If any part of the gross tax estate consists of property the value of which is includible in the gross tax estate by reason of 2044 of the Internal Revenue Code of 1986 as from time to time amended, the decedent's estate shall be entitled to recover from the person receiving the property the amount by which the total tax under article twenty-six of the tax law which has been paid exceeds the total tax under such article which would have been payable if the value of such property had not been included in the gross tax estate.
(B) Clause (A) of this subparagraph shall not apply if the decedent specifically directs otherwise by will.
(2) For the purposes of this paragraph, if there is more than one person receiving the property, the right of recovery shall be against each such person.
(3) In the case of penalties and interest attributable to additional taxes described in subparagraph (1) of this paragraph, rules similar to subparagraphs (1) and (2) of this paragraph shall apply.
(e) In all cases in which any property required to be included in the gross tax estate does not come into the possession of the fiduciary, he is authorized to, and shall recover from the persons benefited or from any person in possession of such property the ratable amounts of the tax and any interest payable by the persons benefited. The surrogate may direct the payment thereof to the fiduciary and may charge such payments against the interests of the persons benefited in any assets in the possession of the fiduciary or any other person. If the fiduciary cannot recover the amount of the tax and interest apportioned against a person benefited, such amount may be charged in such manner as the surrogate determines.
(f) No fiduciary is required to pay over or distribute to any person other than the fiduciary charged with the duty to collect and pay the tax any fund or property with respect to which the tax is or may be imposed until the amount of the tax apportioned or which may be apportioned against such fund or property and any interest due from the persons entitled thereto is paid or, where the tax has not been determined or apportionment made, unless and until adequate security for such payment is furnished to the fiduciary making such payment or distribution.
(g) The surrogate shall make such preliminary, intermediate or final decrees or orders in the proceeding, as he shall deem advisable, tentatively or finally apportioning the tax and any interest, directing the fiduciary to collect the apportioned amounts from the property or interests in his possession of any persons against whom such apportionment has been made and directing all other persons against whom the tax and any interest are apportioned or from whom any part of the tax and any interest may be recovered to make payment of such apportioned amounts to such fiduciary; and if it is ascertained in such proceeding that the property in the possession of the fiduciary, otherwise payable to a person liable for any part of the tax and interest, is insufficient to discharge the liability of such person, the surrogate may direct that the balance of the apportioned amount due shall be paid to the fiduciary by such other person. If, in the course of the proceeding, it is ascertained that more than the ratable amount of the tax and interest due from any person has been paid by him or in his behalf the surrogate may direct an appropriate reimbursement of the overpayment.
(h) If the surrogate apportions any part of the tax against any person interested in non-testamentary property or apportions the tax among the respective interests created by any non-testamentary instrument, he may, in his discretion, assess against such property or interests, an equitable share of the expense in connection with the determination of the tax and the apportionment thereof. Whenever an attorney renders services to the estate or to its personal representative resulting in the exclusion from the gross taxable estate of any non-testamentary property or interests created by any non-testamentary instrument, the surrogate may, in his discretion, assess against such property or interests an equitable share of the compensation for such legal services rendered to the estate or to its personal representative in proportion to the benefit received by such property or interests from such services, unless the decedent's will or the non-testamentary instrument contains a direction that no portion of the tax shall be apportioned against such non-testamentary property or against interests created by any non-testamentary instrument. The surrogate may retain jurisdiction of any proceeding until the purposes of this section have been accomplished.
Last modified: February 3, 2019