## Facts

- Daniel L. McWhorter died testate in 1972; his co-executors were The First National Bank of Atlanta and Genevieve H. McWhorter.
- The will made specific bequests and directed the remaining estate (the residue) to be divided into two equal trusts: “Part A” (marital trust) and “Part B” (family trust).
- The will’s marital-trust formula incorporated property passing to the wife that qualified for the federal marital deduction and excluded property that would not qualify.
- The will contained a tax-payment clause directing that estate taxes be paid from the residue of the estate.
- The executors computed the marital deduction as one-half of the residue before payment of estate taxes.
- The IRS assessed a deficiency, concluding that estate taxes reduced the residue as a whole (including the marital trust), so the marital deduction equaled one-half of the residue after payment of estate taxes.
- The estate paid the deficiency and sued for a refund.

## Issues

1. Whether the will required federal estate taxes to be paid from the entire residuary estate, including the marital trust property, thereby reducing the marital deduction.
2. Whether an asserted intent to obtain marital-deduction benefits could override an unambiguous direction to pay estate taxes from the residue.

## Decision

- The Fifth Circuit affirmed judgment for the United States and denied the refund.
- The court held that the will unambiguously directed payment of estate taxes from the residue, which included the marital trust.
- The marital deduction was therefore one-half of the residuary estate after reduction for estate taxes.

## Legal Principles

- Will construction under applicable state law controls the economic burden borne by a spouse’s share and thus affects the federal marital deduction.
- An unambiguous tax-payment clause charging estate taxes to the “residue” applies to all residuary property absent a clear textual basis to exempt the marital share.
- A general objective to obtain marital-deduction treatment does not, without specific language, shift estate taxes away from the marital trust.

## Conclusion

Because the will plainly required estate taxes to be paid from the residuary estate without exempting the marital trust, the spouse’s share bore part of the tax burden and the allowable marital deduction was limited to one-half of the residue after payment of estate taxes.


First Nat’l Bank of Atlanta v. United States, 634 F.2d 212 (5th Cir. 1981)