Unifying the Rules for Wills and Revocable Trusts in the Federal Estate Tax Apportionment Arena: Suggestions for Reform

Abstract

This Article examines the unification of the rules for wills and revocable trusts in the federal estate tax arena. The author asserts that true unification in the area of federal estate tax apportionment will be achieved only when American law places the revocable trust device, the functional equivalent of a will, on par with wills in terms of a decedent’s ability to change default apportionment rules. While virtually all states have adopted the principle of apportionment; American law has a long way to go if revocable trusts are to be placed on an equal footing with wills. Traditionally, only wills could be used to change default rules on federal estate tax apportionment, and this continues to be the rule in many states. This Article also addresses Conflict of laws issues that further complicate the area of law, considering troublesome state law conflicts, particularly whether the law of the decedent’s domicile should control on apportionment issues. The author goes on to consider various Internal Revenue Code provisions, giving special attention to the overarching question of whether these provisions conflict with state rules on apportionment. The Article concludes with the author’s suggested unifying solutions to resolve the inappropriate disparities between wills and revocable trusts in the federal estate tax apportionment area.

Keywords: revocable trusts, federal estate tax, apportionment, rules for revocable trusts, estate tax reform